Parent Fund, the “Priming Water” of Venture Investment, to Have Its Lifespan Extended in 10-Year Increments

Extension Possible with General Assembly Approval
Mandatory Investment Period Extended from 3 to 5 Years
Excessive Joint Liability for Third Parties Prohibited

The Cabinet has approved a measure allowing the “parent fund” to extend its lifespan in 10-year increments. With this change making permanent operation virtually possible, there are rising expectations for stable investment even in sectors such as artificial intelligence (AI) and deep tech, where generating short-term profits is challenging.

Hansung Sook, Minister of the Ministry of SMEs and Startups, explained the major policy promotion plan for 2026 at the Ministry of SMEs and Startups press room in the Government Sejong Complex on the 17th. Photo by Yonhap News

On December 23, the Ministry of SMEs and Startups announced that the Cabinet had approved the amendments to the “Venture Investment Promotion Act,” the “Special Act on Fostering Venture Businesses,” and the partial amendment to the enforcement decree of the Special Act on Fostering Venture Businesses.

With this reform, the lifespan of the parent fund can now be extended in 10-year increments with the approval of the general assembly of its members. Since its introduction in 2005, the parent fund was limited to a 30-year lifespan and was scheduled to terminate automatically in 2035. This change resolves concerns both inside and outside the industry regarding potential investment gaps.

The fund’s recovery resources and investment status must now be reported regularly to the National Assembly. The Ministry of SMEs and Startups, together with relevant ministries, will establish a new parent fund management committee to enhance transparency. In addition, the range of statutory funds eligible to participate in venture investment will be expanded to include pension funds and public funds, among other entities, to ensure greater investment freedom.

The mandatory investment period has been extended from three to five years, creating a more stable investment environment. The previous requirement for “40% of all funds managed by general partners and 20% of individual funds” will be eased to “40% of all funds managed by general partners.” The requirement to invest at least 60% of committed capital in venture investment funds has also been relaxed, now allowing investment in either venture investment funds or individual investment funds.

Acts that impose excessive joint liability on third parties will also be prevented. The amendment to the Special Act on Fostering Venture Businesses provides a legal basis for designating an annual “Venture Business Week.”

The enforcement decree amendment will significantly increase the limit for issuing stock options below market value from 500 million won to up to 2 billion won. This is intended to help cash-strapped ventures and startups reduce the burden of cash compensation while securing key talent, and to strengthen long-term incentive structures that allow employees to share in the company’s growth prospects. A Ministry of SMEs and Startups official explained, “For a full-fledged improvement of the stock option system, further legislative amendments will be needed in addition to the enforcement decree revision.”

This reform is a follow-up legislative measure to the “Comprehensive Plan for Becoming a Top Four Global Venture Powerhouse” announced by the government on December 18. The amendments to the Venture Investment Promotion Act and the Special Act on Fostering Venture Businesses are scheduled to be promulgated on December 30 following Cabinet approval. Most key provisions, except for the improvement of the joint liability system for venture investment, will take effect six months after promulgation. The amendment to the enforcement decree of the Special Act on Fostering Venture Businesses will take effect immediately upon promulgation on December 30.

Minister Hansung Sook stated, “This legal and institutional reform demonstrates that the ‘Comprehensive Plan for Becoming a Top Four Global Venture Powerhouse’ is now beginning to take effect. We will accelerate efforts to ensure the new systems are implemented in the field through cooperation with the National Assembly and relevant ministries, and will proceed with follow-up legislative tasks without delay.”