SMEs Ministry Raises Corporate Investment Limit for Regional Private Investment Associations

Corporate Investment Limit Raised for Regional Startup Funds
Up to 49% Allowed for Local Government Contributions
Simplified Procedures for Venture Investment Association Conversion

On August 5, the Ministry of SMEs and Startups announced that the revised Enforcement Rules of the Act on Promotion of Venture Investment, which raise the corporate investment limit for private investment associations focusing on early-stage regional startups, will take effect from this day.

A private investment association is a fund mainly established by individuals and others through mutual investment, with the purpose of investing in startups and venture companies. However, when a fund is established by an accelerator, up to 30% of the fund's capital can be contributed by corporations, considering the accelerator's investment expertise and management capabilities, to allow for a larger fund size.

This amendment aims to enhance the autonomy of fund management by raising the corporate investment limit to 40% of the fund's capital when an accelerator forms a private investment association to invest in early-stage startups located in the regions. Taking into account that the proportion of investments in non-metropolitan companies by private investment associations funded by local governments is about twice as high as that of all private investment associations, the amendment also allows local governments or local public enterprises to contribute up to 49% of the fund's capital if they invest at least 20% in the private investment association.

The Ministry of SMEs and Startups expects that this policy improvement will help expand the size of private investment associations investing in early-stage startups outside the metropolitan area, thereby alleviating the funding difficulties these companies face in their early growth stages.

Meanwhile, the amendment also establishes the legal basis for converting an existing new technology business investment association into a venture investment association when a venture capital company becomes the surviving entity through a merger or acquisition with a new technology business finance company. While a venture investment association must apply for registration with the Ministry of SMEs and Startups within 14 days after its inaugural meeting, considering that a new technology business investment association is already established, the amendment allows registration as a venture investment association with the unanimous consent of all existing members, without requiring dissolution and re-establishment, thereby increasing the convenience of fund management.

Han Seongsook, Minister of SMEs and Startups, stated, "With this amendment, we expect more active capital inflows to private investment associations investing in non-metropolitan areas and an expansion of investment in regional early-stage startups." She added, "We will continue to rationally improve investment regulations and actively support efforts to invigorate the regional venture ecosystem."

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