"Ran Until Feet Sweated"... Behind the Scenes of the Multiple Voting Rights Act Processing

Im Jeong-uk, Director of the Ministry of SMEs and Startups, "A Result of Public-Private Cooperation"
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A Long-Standing Demand of the Venture Industry... Implementation in November Upon Plenary Session Approval

On the 30th, a full meeting of the Legislation and Judiciary Committee is being held at the National Assembly in Yeouido, Seoul. Photo by Hyunmin Kim kimhyun81@

"The government and the private sector worked tirelessly together."

The bill to introduce multiple voting rights shares, a long-standing wish of the venture industry (the amendment to the Venture Business Act), has finally seen the light of day after more than three years. This is because the bill was passed at the plenary meeting of the National Assembly's Legislation and Judiciary Committee on the 26th. Once it passes the plenary session, the multiple voting rights system will be implemented starting this November. Lim Jeong-wook, Director of the Startup Venture Innovation Office at the Ministry of SMEs and Startups, said it was an achievement made possible by the combined efforts of the public and private sectors. On the 27th, Director Lim shared, "The ministers, vice ministers, and staff in charge all worked with one heart," adding, "Private organizations such as the Korea Venture Business Association and Korea Startup Forum also visited lawmakers' offices one by one to persuade them." They even prepared anticipated questions and answers to persuade lawmakers who had opposed the bill. There was also a strong sense of urgency that "this time, it must pass."

◆ Bill passage in sight after 3 years... Already introduced overseas = Multiple voting rights shares refer to shares that grant two or more voting rights per share. They are used as a means of defending management rights to prevent venture company founders from being swayed by external capital. This can reduce threats of management rights infringement or hostile mergers and acquisitions (M&A) during large-scale capital fundraising. The United States, China, the United Kingdom, and India?all countries ranked 1st to 4th in unicorns (unlisted companies valued at over 1 trillion KRW)?operate multiple voting rights systems.

In March 2021, the issue of multiple voting rights resurfaced when Coupang was listed on the New York Stock Exchange. This was because, when submitting the registration statement for listing, Chairman Kim Beom-seok held Class B shares that had 29 times more voting rights than Class A shares. There was also analysis that one reason Coupang chose to list in the U.S. was because of the multiple voting rights system. Some venture companies judged that listing on the U.S. stock market was more attractive than the domestic market and considered U.S. listings. As competition among stock exchanges to attract listed companies intensified, concerns arose that excellent companies might be lost to overseas stock markets.

◆ Bill submitted regardless of party... Failed due to concerns over 'chaebol succession' = Until now, bills to introduce multiple voting rights were proposed regardless of party affiliation. The bills were first introduced in June 2020 by Yang Kyung-sook of the Democratic Party of Korea and in August of the same year by Lee Young of the United Future Party (People Power Party). The government also submitted a bill in 2020. After Coupang's listing, in May 2021, Kim Byung-wook of the Democratic Party and in November of the same year, Yoon Young-seok of the People Power Party submitted bills again. However, since December 2021, the bills have been stalled for a long time in the Legislation and Judiciary Committee. This was due to claims by some lawmakers and civic groups that the system could be abused as a tool for chaebol conglomerate succession, causing repeated failures to pass. Representative figures opposing the introduction of multiple voting rights include Park Joo-min of the Democratic Party and Cho Jung-hoon of the Transition Korea party, both members of the Legislation and Judiciary Committee.

The recent downturn in the venture market also contributed to the easing of opposition. Due to domestic and international economic uncertainties, money was not circulating in the venture investment market, necessitating measures to revitalize investment. Not only did companies find it harder to receive investments, but overall corporate values declined, increasing concerns that even if investments were received, the founder's shares would shrink.

◆ Strict conditions imposed on issuing multiple voting rights shares = The Ministry of SMEs and Startups stated that various safeguards have been put in place to prevent multiple voting rights from being used as a tool for chaebol succession. They have established stringent requirements for issuing multiple voting rights shares. The bill allows multiple voting rights of up to 10 votes per share for founders of unlisted venture companies, but the founder must be the incorporator, a director of the company, and the largest shareholder, and issuance requires the consent of 75% of shareholders. Additionally, shares must be converted to common stock in cases of inheritance, transfer, or inclusion in a large business group; the duration is limited to a maximum of 10 years; and shares must be converted to common stock three years after listing.

Director Lim said, "Recently, many excellent venture companies have emerged, and the domestic venture investment market has matured," expressing a low likelihood of the bill being abused. However, the final hurdle remains: the bill must pass the National Assembly plenary session. Officials believe there will be no major issues, as the introduction of multiple voting rights has been a common national agenda for both the Moon Jae-in and Yoon Suk-yeol administrations. Director Lim said, "We will not let our guard down," adding, "We will pop the champagne only after the bill passes the plenary session." The plenary session begins today (the 27th) at 2 p.m.

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