Up to 10 Voting Rights Allowed Per Share for Unlisted Ventures

18th Emergency Economic Central Countermeasures Headquarters Meeting
"Venture Companies to Retain Multiple Voting Rights Even as Mid-sized Companies"
"Restrictions on Exercising Audit Appointment/Dismissal and Director Compensation"

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is delivering opening remarks at the 18th Emergency Economic Central Countermeasures Headquarters meeting held on the 16th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Kwangho Lee, Chulhyun Kim, Heeyoon Kim] The plan to introduce multiple voting rights shares (hereinafter referred to as multiple voting rights) for unlisted venture companies has been finalized. Issuance will be allowed with a limit of 10 voting rights per share. The venture and startup industries expect that this will create an ecosystem where large-scale investments can be activated and companies can grow into unicorns.

On the 16th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated in his opening remarks at the 18th Emergency Economic Central Countermeasures Headquarters (Economic Central Headquarters) meeting, "In the second half of June’s economic policy direction, it was decided to allow unlisted venture companies to issue multiple voting rights shares so that founders of venture companies can attract large-scale investments and grow their companies without concerns about dilution of management rights." He added, "The government has prepared this detailed introduction plan after gathering opinions from the industry and experts."

Multiple voting rights shares are shares with multiple voting rights. They are already permitted in many OECD member countries such as the United States, the United Kingdom, and France. Recently, Asian countries experiencing a venture startup boom, including Hong Kong, Singapore, and China, have also introduced and are operating such systems. In Hong Kong, after allowing multiple voting rights in April 2018, Xiaomi was listed with a multiple voting rights structure in July of the same year.

Regarding the specific introduction plan, Deputy Prime Minister Hong explained, "Multiple voting rights will be allowed to be issued up to 10 voting rights per share with the consent of more than three-quarters of shareholders when the founder of an unlisted venture company faces threats to management rights due to investment attraction." Furthermore, even if the venture company grows into a mid-sized company, if it maintains multiple voting rights and goes public, the multiple voting rights will expire after a three-year grace period to ensure that multiple voting rights sufficiently support corporate growth. Regulations will also be established to prevent abuse of multiple voting rights as a means of illicitly strengthening control. Deputy Prime Minister Hong emphasized, "The exercise of multiple voting rights will be restricted in matters such as auditor appointment and dismissal, and director remuneration, and multiple voting rights will naturally expire in cases of inheritance or transfer of shares or when the company becomes part of a large corporation." The government plans to prepare a revision bill of the 'Special Measures for the Promotion of Venture Businesses Act' containing these details and submit it to the National Assembly within this year.

With the finalization of the multiple voting rights introduction plan, it is expected that high-growth venture companies will be able to attract large-scale investments without concerns about dilution of management rights during their growth into unicorn companies. Under current law, issuing multiple voting rights shares is basically impossible in Korea, so founders and venture entrepreneurs have been reluctant to attract investments due to concerns about losing management rights, which has been an obstacle to the growth of promising startups into unicorn companies. This has been the reason the industry has continuously advocated for the introduction of multiple voting rights.

The industry also has high expectations as this has been a matter they have steadily requested. According to a survey conducted by the Small and Medium Business Research Institute in April last year targeting a total of 209 venture companies, 184 companies, or 88.04%, responded that the introduction of multiple voting rights shares is necessary. Choi Su-jeong, head of the Institutional Innovation Research Office at the Small and Medium Business Research Institute, evaluated, "Having one more option for growth is very positive from the company’s perspective," adding, "If the founder shows trust and a willingness to continue innovating, multiple voting rights will be a mechanism that allows the innovation model to continue in the future."

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