Government Struggles to Find 'Supplementary Measures' Amid Policy Allowing Limited Holding of Parent Company CVCs

On the 11th, a forum on revitalizing corporate venture capital CVC, hosted by the Democratic Party's COVID-19 National Crisis Overcoming Committee, was held at the National Assembly. Photo by Yoon Dong-ju doso7@

[Sejong=Asia Economy Reporter Joo Sang-don] The government is focusing on preparing supplementary measures for the 'limited ownership plan of corporate venture capital (CVC) by general holding companies' announced in the second half economic policy direction (Ha-gyeong-jeong) earlier this month. The government plans to announce the holding company CVC allowance plan next month, which will include certain safeguards regarding funding methods, investment targets, and equity issues.

On the 22nd, a government official stated, "The Ministry of Economy and Finance, the Fair Trade Commission, the Ministry of SMEs and Startups, and other related departments are discussing supplementary measures for large conglomerate holding companies' ownership of CVCs," adding, "Various opinions are being reviewed, and the finalized plan is scheduled to be announced next month."

Previously, the government stated through Ha-gyeong-jeong that it would review the 'limited ownership plan of CVCs by general holding companies.' The Ministry of Economy and Finance is the most proactive department regarding the limited allowance of CVCs. On the 17th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, appeared at the National Assembly's Planning and Finance Committee plenary session and emphasized, "This is a plan to allow general holding companies to own CVCs to further promote venture startups," and added, "It will be permitted within the scope that does not disrupt the major principle of the separation of financial and industrial capital." Kim Yong-beom, the first vice minister of the Ministry of Economy and Finance, also reiterated on the 19th at the 3rd Innovation Growth Public-Private Council held at the Korea Trade Insurance Corporation that "CVCs will be allowed on a limited basis."

The Fair Trade Commission holds a negative stance, arguing that limited allowance of CVCs could be abused for preferential treatment of affiliated companies or illicit succession. In a business report submitted to the Democratic Party members of the National Assembly's Political Affairs Committee, the Fair Trade Commission expressed concerns that "allowing large conglomerates to own CVCs could lead to the head families appropriating private gains through internal transactions and preferential treatment of affiliated companies or abusing it for illicit management succession." It further conveyed the position that "while preserving the original purpose of expanding venture investment through large conglomerate funds, measures are needed to prevent governance deterioration, such as restricting CVCs' external funding functions."

As safeguards for large conglomerate holding companies' ownership of CVCs, plans under consideration include not allowing external capital participation during funding and utilizing 100% parent company capital, as well as requiring the holding company to own 100% of the CVC's equity. Regarding investment targets, measures being examined include prohibiting investments in companies where the head family holds equity to prevent CVCs from becoming a means of preferential treatment, or banning other financial business operations even if the holding company owns the CVC.

An anonymous government official said, "The supplementary measures are still at the working-level discussion stage, so it is difficult to express support or opposition to any specific plan," adding, "At the very least, a direction for the supplementary measures will emerge by early next month."

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