Ministry of SMEs and Startups Introduces Multiple Voting Rights for Unlisted Ventures... 'Easier Defense of Management Rights'

Insert 'Common Stock Conversion' Condition to Prevent Strengthening of De Facto Control Through Evasive Means

Procedure for Issuing Multiple Voting Rights. Table = Ministry of SMEs and Startups

[Asia Economy Reporter Kim Heeyoon] With the confirmation of the introduction plan for multiple voting rights shares (hereinafter referred to as multiple voting rights) for unlisted venture companies, high-growth venture companies now have a path to conduct stable business activities such as attracting large-scale investments without concerns about defending management rights. The venture and startup industry expects that this government decision will activate large-scale investments in the future, creating an ecosystem where companies can grow into unicorns.

The Ministry of SMEs and Startups announced the 'Plan to Introduce Multiple Voting Rights Shares for Unlisted Venture Companies' at the '17th Emergency Economic Central Countermeasures Headquarters Meeting' held on the 16th, chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki.

Multiple voting rights refer to a system that allows major shareholders or management to exercise more voting rights than the actual shares they hold. With the introduction of this system, issuing golden shares that can exercise absolute veto power on shareholders' meeting resolutions with just one share becomes possible.

Minister Park Young-sun of the Ministry of SMEs and Startups judged that multiple voting rights are necessary because they can serve as a foundation for venture company founders to maintain management rights while attracting large-scale investments, and has been promoting their introduction.

The Ministry of SMEs and Startups stated, "Multiple voting rights will be allowed to be issued with up to 10 voting rights per share, with the consent of more than three-quarters of shareholders, in cases where the founder of an unlisted venture company faces threats to management rights due to investment attraction."

Under current law, issuing multiple voting rights shares is basically impossible in Korea, so founders and venture entrepreneurs have been reluctant to attract investments for corporate growth due to concerns about losing management rights. This has been an obstacle for promising startups to grow into unicorn companies (companies valued at over 1 trillion won). The industry has continuously advocated for the introduction of multiple voting rights, and now the introduction plan has been announced.

The Ministry of SMEs and Startups plans to prepare a revision bill to the Special Act on the Promotion of Venture Businesses allowing the introduction of multiple voting rights for unlisted venture companies and submit it to the National Assembly in December this year.

The industry expressed regret over restrictions such as the scope of application, requirements, and duration. A venture capital (VC) official said, "For domestic venture companies, multiple voting rights need to be maintained even after listing to provide fundamental support," adding, "Since founders and early members are often the core of the company's value, restrictions on duration or conversion conditions after listing should be relaxed to be effective."

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