"Breath of Life for Venture Companies"... 'Multiple Voting Rights Act' Passed in National Assembly Plenary Session (Comprehensive)

Among 260 Jaeseok, 173 in Favor
Venture Founders' Stable Management Protection
Issuance Requirement Regulations... Preventing Misuse

On the 27th, the partial amendment bill of the Local Tax Basic Act was passed at the plenary session held at the National Assembly. Photo by Hyunmin Kim kimhyun81@

The amendment to the Venture Business Act, which allows unlisted venture companies to issue multiple voting right shares, passed the National Assembly plenary session on the 27th.

The voting results recorded 173 in favor, 44 against, and 43 abstentions out of 260 members present.

Once the amended Venture Business Act is enforced, unlisted venture companies will be able to issue multiple voting right shares granting up to 10 votes per share to founders. By utilizing multiple voting rights, founders can focus on managing the company without concerns about dilution of their equity ratio during large-scale investment attraction. [Related article="Ran tirelessly"... Behind the scenes of the multiple voting rights law passage]

However, strict conditions have been set to prevent abuse of multiple voting right shares. Issuance of multiple voting right shares is only allowed ▲when the founder's voting rights fall to 30% or less due to investment attraction, and ▲with the consent of 75% of the total issued shares at the shareholders' meeting.

The duration of the issued multiple voting right shares is up to 10 years, and it is reduced to 3 years upon listing. Multiple voting right shares will be converted into common shares after the expiration of the duration.

[Image source=Yonhap News]

Multiple voting right shares held by founders will be immediately converted into common shares upon inheritance, transfer, gift, or resignation from the board. They will also be immediately converted into common shares if included in a large business group, blocking their use by conglomerates.

Companies issuing multiple voting right shares must report important matters to the Ministry of SMEs and Startups. The ministry will publicly disclose the reported matters in the official gazette.

Violations of reporting obligations may result in fines of up to 5 million KRW, and in cases of false issuance, criminal penalties such as imprisonment of up to 10 years or fines up to 50 million KRW may be imposed.

Minister Lee Young of the Ministry of SMEs and Startups stated, "Multiple voting rights are actively used not only in the United States, a strong venture nation, but also in China, India, and others," adding, "It will relieve the dilemma faced by venture companies caught between attracting investment and instability of management rights."

He also said, "It is significant that high-growth venture companies can grow in Korea with the power of our capital market, not in countries like the United States where multiple voting rights exist."

The amended Venture Business Act will be promulgated after government transmission and Cabinet approval, and will take effect six months from the date of promulgation.

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