Designation of Private 'Venture Verification Agencies' in the Second Half of This Year... Enforcement Decree Passed at Cabinet Meeting

Source: Ministry of SMEs and Startups

[Asia Economy Reporter Kim Daeseop] The Enforcement Decree of the Special Measures for the Promotion of Venture Businesses Act, which includes transferring the venture business verification tasks from public institutions to the private sector, passed the Cabinet meeting on the 4th. The Ministry of SMEs and Startups plans to designate 'Venture Verification Agencies' through a public contest in the second half of this year.

This amendment to the Enforcement Decree was made to organize detailed standards, procedures, and methods following the revision of the Special Measures for the Promotion of Venture Businesses Act through the National Assembly in February this year. The new venture business verification system will be implemented from February 12 next year. The Ministry of SMEs and Startups plans to complete the necessary arrangements this year to promote the revamped system, including the formation of the Venture Business Verification Committee, design of evaluation models, and establishment of computerized work systems.

The main amendments to the Enforcement Decree of the Special Measures for the Promotion of Venture Businesses Act include ▲establishing requirements for private venture verification agencies ▲extending the validity period of venture business verification ▲expanding the scope of venture investors ▲and expanding the institutions eligible for startup leave for venture business founders.

First, the review and issuance of verification certificates, which were separately conducted by the existing three venture verification agencies (Korea Technology Finance Corporation, Small and Medium Business Corporation, and Korea Venture Capital Association), will be integrated into one private venture verification agency. The subject of venture business verification will shift from public institutions (Kibo, SBC) to private venture verification agencies and committees.

The requirements for private venture verification agencies are defined as private non-profit corporations under the Civil Act that have continuously performed venture business support-related tasks for more than three years through dedicated organizations and have at least 20 regular employees (including at least 5 professionals).

In particular, the validity period of venture business verification has been extended from 2 years to 3 years. The scope of venture investors has also been expanded by adding 8 new categories to the existing 13. The newly added categories are ▲startup planners (accelerators) ▲crowdfunding ▲agricultural and food investment associations ▲industry-academia-research cooperation technology holding companies ▲public research institute advanced technology holding companies ▲new technology startup specialized companies ▲Korea Technology Finance Corporation ▲and Korea Credit Guarantee Fund.

Additionally, for researchers taking leave to start a venture business, local government-funded research institutes in the science and technology field have been added to the institutions eligible for startup leave. The expansion of institutions eligible for startup leave will take effect from May 12 this year.

According to the Special Measures for the Promotion of Venture Businesses Act, the requirements for venture businesses are that they must be small and medium enterprises and fall under one of three types: ▲guarantee/loan ▲research and development ▲venture investment. Currently, the venture business verification system classifies and verifies businesses into these three types. The guarantee/loan and research and development types are verified by the Small and Medium Business Corporation and Korea Technology Finance Corporation. The verification agency for the venture investment type is the Korea Venture Capital Association.

So far, the public institution-centered venture business verification system has greatly contributed to the quantitative expansion of venture businesses but has shown limitations in sustainable growth. In particular, there has been continuous criticism that it is heavily concentrated on the guarantee/loan type (about 87%) and that many companies are only nominally venture businesses.

Source: Ministry of SMEs and Startups

Accordingly, the guarantee/loan type has been abolished, and the Special Measures for the Promotion of Venture Businesses Act was revised in February to have the Venture Business Verification Committee, composed of private experts, evaluate 'innovation and growth potential' for venture verification. The Ministry of SMEs and Startups has prepared a private-led venture business verification system reform based on opinions from the media, companies, the National Assembly, and research projects, and has legalized it through this Enforcement Decree.

According to the Special Measures for the Promotion of Venture Businesses Act, the venture verification agency plays the role of operating the venture business verification system by establishing and operating the Venture Business Verification Committee. The venture verification agency performs administrative tasks such as accepting verification applications, issuing verification certificates, managing venture business information and providing statistics, and responding to system consultation and guidance. It also supports review tasks such as holding the Venture Business Verification Committee meetings and submitting agenda items for deliberation.

The Minister of SMEs and Startups may designate an institution or organization that meets the requirements prescribed by Presidential Decree, such as professional personnel and dedicated organizations, as a venture verification agency to efficiently perform venture business verification tasks.

According to the Ministry of SMEs and Startups, the number of domestic venture businesses has steadily increased since surpassing 30,000 in 2015, reaching 37,216 as of March this year. By type, they are distributed as guarantee/loan (86.2%), research and development (7.2%), and venture investment (6.3%). Venture businesses receive various supports such as corporate tax and income tax reductions, expanded guarantee limits by Kibo, preferential limits on policy funds from the Ministry of SMEs and Startups, and reductions in acquisition tax and property tax within venture business promotion zones.

Park Yongsun, Director of Venture Innovation Policy at the Ministry of SMEs and Startups, said, "We hope that the reform of the venture business verification system will be a turning point toward a new venture ecosystem where companies with excellent innovation and high growth potential can be recognized as venture businesses."

This content was produced with the assistance of AI translation services.