Venture Investment Partnership Allows Sale of Investee Equity to Major Investors and Affiliates
Relaxation of Regulations to Promote Venture Investment and M&A
Venture Investment Funds Now Allowed to Sell Shares to Major Investors and Affiliates
It is now permitted for venture investment funds to sell shares of invested companies to major investors or affiliated companies. This means that corporate venture capital (CVC) affiliated with large conglomerates can sell shares of invested companies to group affiliates. The move aims to promote follow-up investments and mergers and acquisitions (M&A) in ventures and startups.
The Ministry of SMEs and Startups announced that the amendment to the Enforcement Decree of the "Act on the Promotion of Venture Investment," which relaxes the conditions for selling shares of investee companies held by venture investment funds, was approved at the Cabinet meeting on the 25th and will be enforced immediately upon promulgation.
The main point of this amendment is to allow venture investment funds to sell shares of invested companies to the fund's major investors and affiliated companies. Previously, even if the transaction was in the interest of the venture investment fund, selling shares of investee companies to the fund's major investors or affiliated companies required the consent of all members. The Ministry of SMEs and Startups explained that the relaxation of sale conditions reflects voices from the field calling for regulatory easing to promote follow-up investments and M&A in ventures and startups.
However, to prevent attempts by CVCs to sell shares to affiliates at undervalued prices for the benefit of the group rather than as investors, conditions such as sale prices that are disadvantageous to the venture investment fund compared to ordinary transactions are excluded from the scope of permitted sales.
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Oh Young-joo, Minister of SMEs and Startups, said, “Through this amendment to the enforcement decree, we expect a diversification of investment recovery channels and rapid follow-up investments and M&A in ventures and startups. We will do our best to ease investment regulations so that the venture investment market can leap to the world’s highest level.”
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