Operation of 'Venture Investment' Unfair Practice Reporting Center... "Administrative Sanctions and Investigation Requests"
[Asia Economy Reporter Kim Daeseop] The Ministry of SMEs and Startups announced on the 22nd that it will operate the 'Venture Investment Misconduct Reporting Center' to prevent unfair investment practices by venture capital companies (hereinafter referred to as venture capital firms).
The reporting center will begin operations on the 23rd and plans to block unfair damages to venture and startup companies. According to the Ministry, venture and startup companies often lack bargaining power in the venture investment market, making it difficult to attract investment and potentially placing them in unfair positions in their relationships with investors.
During a regular inspection of venture capital firms conducted by the Ministry in 2019, unfair practices were confirmed, such as venture capital firm A demanding principal guarantees from startup company B as a condition for investment. Accordingly, the Ministry and Korea Venture Investment, which have authority over the management and supervision of venture capital firms, have established an online reporting system on their websites and will also operate an online reporting center on the Startup Net to improve accessibility for startups.
Venture and startup companies that have suffered unfair damages during the investment process can report through online, in-person visits, or mail. Upon receiving a damage report, the Ministry and Korea Venture Investment will promptly verify the facts through document reviews and on-site investigations.
If unfair practices are confirmed, administrative actions (such as corrective orders or cancellation of venture capital firm registration) will be taken, and if strict punishment is necessary, requests for investigation by law enforcement agencies will also be made.
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Furthermore, to help venture and startup companies easily identify and report unfair practices by venture capital firms, representative cases of venture investment misconduct are provided on the website so that types of unfair practices can be recognized.
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