Financial Services Commission Doubles Crowdfunding Issuance Limit from 1.5 Billion to 3 Billion Won Annually

[Asia Economy Reporter Park Jihwan] Financial authorities are doubling the annual issuance limit for crowdfunding, which has been used as a funding channel for innovative companies, from 1.5 billion KRW to 3 billion KRW. The eligible industries will also be expanded to include all sectors except for certain fields such as finance and insurance, real estate, and entertainment.

On the 21st, the Financial Services Commission announced that it will hold a legislative notice period from the 22nd until December 1st for the amendment of the Enforcement Decree of the Capital Markets Act and the Financial Investment Business Regulations reflecting these changes. This is a follow-up measure to the 'Crowdfunding Development Plan' announced by the FSC in June to enable crowdfunding to be more widely used as a means of financing for innovative companies.

According to the legislative notice, the issuance limit for funding using stocks will be significantly increased from 1.5 billion KRW to 3 billion KRW annually. The bond issuance limit will remain at 1.5 billion KRW, but to encourage repayment, the limit will be restored by the amount repaid even after issuing 1.5 billion KRW.

An FSC official explained, "There was a limitation that the utilization of companies with high growth potential and large funding needs was restricted due to the issuance limit of securities through crowdfunding," adding, "It is expected that startups and venture companies will be able to secure sufficient funds through crowdfunding by expanding the limit."

The eligible businesses will be expanded from the current limited sectors such as cultural industries, new technology development, and industrial property creation to all sectors where crowdfunding is possible. Project investments through crowdfunding will be allowed in all fields except for certain industries such as finance and insurance, real estate, and entertainment, so that crowdfunding can be utilized in a wider variety of areas in the future.

Regarding equity restrictions, the current requirement that small and medium enterprises hold at least 70% of the profit shares will be relaxed to 50% or more. The FSC explained that the share of profit ownership by SMEs was lowered to facilitate joint projects with mid-sized companies and others.

The registration maintenance requirements for crowdfunding intermediaries (online small investment brokerage firms) will be strengthened. Currently, the fulfillment of the intermediary’s capital maintenance requirement (maintaining at least 70% of 500 million KRW in capital) is evaluated at the end of each fiscal year, and if not met, expulsion is deferred for one year. The improvement plan aims to establish a sound market order and strengthen investor protection, changing the timing of the capital maintenance requirement evaluation to monthly and shortening the expulsion deferral period to six months in case of non-compliance.

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