Fair Trade Commission Holds Industry Meeting on Allowing CVC Establishment within Holding Companies

Amendment to the Fair Trade Act to Allow General Holding Companies to Own CVCs

[Sejong=Asia Economy Reporter Kwon Haeyoung] The Fair Trade Commission held a meeting on the 4th regarding the amendment of the Fair Trade Act that allows the establishment of corporate venture capital (CVC) within the holding company system.

This meeting, attended by large and mid-sized holding companies and the venture industry, was organized to gather industry opinions on the proposed amendment to the Fair Trade Act, which mainly allows general holding companies to own CVCs and relaxes regulations on venture holding companies.

CVC refers to a venture capital company whose major shareholder is a corporate entity, primarily investing in ventures through fund formation. A venture holding company is a holding company where the proportion of venture companies in the total value of subsidiary stocks is 50% or more, investing in ventures by directly acquiring and owning shares (equity) of venture companies.

The Fair Trade Commission amended the Fair Trade Act at the end of last year to encourage companies to actively invest in ventures by ▲allowing general holding companies to establish and own CVCs, which was previously prohibited, while establishing safeguards due to the relaxation of the separation between finance and industry, and ▲relaxing behavioral restrictions so that venture holding companies can invest more freely (abolishing the 5% limit on acquiring non-affiliated company stocks, and adding small and medium enterprises with an R&D ratio of 5% or more to the scope of subsidiaries besides venture companies).

This year, through the revision of enforcement ordinances, the Commission plans to ▲extend the grace period for affiliate inclusion of small and medium venture companies invested in by CVCs and venture holding companies from 7 years to 10 years, and ▲ease the asset criteria for establishing venture holding companies from 500 billion KRW or more to 30 billion KRW or more.

The Korea Venture Business Association stated, "Venture companies still heavily rely on government policy funds, and the proportion of funding through VC and angel investments remains low," adding, "We hope that this amendment to the Fair Trade Act will enable large and mid-sized companies to actively engage in venture investment."

Yook Seong-kwon, Director of the Corporate Group Division at the Fair Trade Commission, said, "Allowing general holding companies to own CVCs is the first case of relaxing the principle of separation between finance and industry, which has been strictly observed since the holding company system was permitted in the late 1990s," and added, "We ask for the industry's active interest and cooperation so that this improvement in the CVC and venture holding company-related system can contribute to the original purpose of revitalizing venture investment."

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