'Up to 10 per week' Multiple Voting Rights Passed in National Assembly Plenary Session

Debate Among Discussants Remains 'Tense' in the Plenary Session
Duration of Validity Reduced to 3 Years Upon Listing

The bill to introduce multiple voting rights shares, long considered a wish of the venture industry, passed the National Assembly plenary session on the 27th. This allows founders of unlisted ventures and startups to issue shares with up to 10 voting rights per share.

On the same day, the National Assembly held a plenary session and passed the "Partial Amendment to the Special Act on the Promotion of Venture Businesses," which implements the multiple voting rights share system, with 173 votes in favor, 44 against, and 43 abstentions out of 260 members present.

On the 27th, the National Assembly plenary session is approving the amendment to the Special Measures Act on Fostering Venture Businesses. (Photo by Yonhap News)

Multiple voting rights shares refer to shares that have two or more voting rights per share. Since venture and startup founders face a high risk of management control threats when their equity is diluted during investment attraction, this system is classified as a kind of defense mechanism that enables stable company management. Countries such as the United States and the United Kingdom, which have unlisted "unicorn" companies valued at over 1 trillion won, operate multiple voting rights.

The amendment was initiated by the Ministry of SMEs and Startups in 2020, marking the start of the introduction process, but it was stalled in the National Assembly for over two years due to opposition from some lawmakers. The reasons included that the multiple voting rights share system violates the Commercial Act, which stipulates one voting right per share, and concerns that it could be abused for illegal succession by large corporations.

During the plenary session, proponents and opponents engaged in intense debate. Oh Ki-hyung, a Democratic Party lawmaker opposing multiple voting rights shares, criticized, "If the founder has 10 voting rights per share while external investors have only one, even though they invested the same 10,000 won, would that help attract investment? Our country's stock company system is based on one share, one voting right, a fundamental principle established 60 years ago and maintained until now. This new system is an exception that changes that principle."

Ryu Ho-jeong, a Justice Party lawmaker, also pointed out, "It is like the state issuing citizenship that allows one person to cast 10 votes in a public election. The issue is not only the differential voting rights but also the fact that general shareholders cannot buy these shares even if they want to from the start, which is truly unfair."

On the other hand, Choi Hyung-doo, a People Power Party lawmaker supporting the multiple voting rights share system, explained, "Startups and venture companies are founded based on advanced technology or innovative ideas and are icons of innovation leading the free market economy. An economy without innovation will eventually lead to inheritance, stagnation, and obsolescence. For venture companies to grow, they must continuously attract investment, but when the company value plummets, founders and innovators hesitate to invest due to management instability caused by their reduced equity."

Han Mu-kyung, also from the People Power Party, said, "It is not that those with capital should not have voting rights, but it is necessary to give founders who have poured youth and passion into growing the company some opportunity to maintain management rights even if their capital is small. Above all, issuing multiple voting rights shares is the shareholders' prerogative. Even if the founder meets all legal requirements, they cannot decide to issue shares alone; the consent of most shareholders is essential," raising her voice in support of multiple voting rights shares.

Multiple voting rights shares can be issued when the founder's voting rights fall below 30% due to investment attraction. Approval from 75% of the total issued shares at the shareholders' meeting is required. The maximum duration of multiple voting rights shares is 10 years, reduced to 3 years upon listing. After the duration expires, multiple voting rights shares convert to common shares. They also convert to common shares upon inheritance, transfer, donation, or resignation of the founder holding the multiple voting rights shares.

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