Basis Established for Introducing 'MinGan Venture MoFund'

The legal basis for establishing 'private venture mother funds,' where private investment companies such as small and medium enterprise startup investment firms or asset management companies form mother funds to invest in venture funds, has been established. This opens a channel for private capital inflow as the venture and startup sectors face difficulties due to government reductions in mother fund budgets and an investment winter.

The Ministry of SMEs and Startups announced on the 11th that the amendment to the "Venture Investment Promotion Act," aimed at advancing the venture investment ecosystem and expanding private capital inflow, was approved at the Cabinet meeting. A mother fund is a fund established by the government to invest in funds rather than individual companies, aiming to reduce investment risk and secure stable returns. Until now, the mother fund was formed by Korea Venture Investment Corp under the Ministry of SMEs and Startups, which then invested in individual venture funds. However, going forward, private entities can create mother funds without government funds. This is because a legal basis for forming 'private venture mother funds' (private re-indirect venture investment associations) has been created.

The entities eligible to form private venture mother funds include venture capital firms, new technology business finance companies, and asset management companies. The Ministry of SMEs and Startups plans to specify detailed requirements regarding the formation entities so that venture capitalists with experience and capabilities in managing large-scale funds and the ability to recruit investors can participate.

Additionally, to expand investment in ventures and startups, a certain proportion of the total capital must be mandatorily invested in venture investment associations. To prevent the proliferation of small-scale funds, the enforcement decree will also stipulate the minimum size for forming associations.

Furthermore, the current limit on holding listed stocks, which is 20% of the venture investment association's capital, will be raised to a maximum of 40%. Autonomy in fund management will also be expanded by allowing investments in private equity funds and new technology business investment associations to enable diversified investments focused on profitability.

The Ministry of SMEs and Startups will gather opinions from the industry and experts before the amended Venture Investment Act takes effect to revise subordinate statutes. Tax incentives will also be prepared to encourage active formation of private venture mother funds, including tax and income deductions for investors, exemption of value-added tax on management fees, and capital gains tax exemption on stock transfers of startup and venture companies by associations.

Minister Lee Young of the Ministry of SMEs and Startups stated, “The introduction of private venture mother funds allows the private sector to play the role of mother funds, which will be an opportunity to increase private capital inflow into the venture investment market. We will make every policy effort to revitalize the entire venture and startup ecosystem.”

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