The South Korean National Assembly passed the “Act on Special Measures for the Promotion of Venture Businesses,” allowing unlisted venture companies to issue multiple voting stocks. The legislation, under discussion for over two years, was approved in a plenary session and will be promulgated after a Cabinet meeting’s resolution.
When the revised Venture Business Act is implemented, unlisted venture companies will be able to issue multiple voting stocks with up to 10 voting rights per share to the founder, in the event that the founder’s share of voting rights drops below 30% due to investment attraction.
The amendment to the Venture Business Act requires a special resolution requiring the consent of 3/4 of the total number of issued stocks at the general shareholders’ meeting before the company can amend its articles of incorporation and issue multiple voting stocks. The duration of issued multiple voting stocks is up to 10 years, which is reduced to 3 years upon listing. The stocks with multiple voting rights are converted into common stock upon expiration.
The new legislation includes a voting rights restriction device to prevent abuse of multiple voting stocks and establishes a plan for transparent operation.Companies issuing multiple voting stocks must report important matters to the Ministry of SMEs and Startups, as well as keep and disclose issuance details at their head offices and branches.
Minister Young Lee of the Ministry of SMEs and Startups stated that multiple voting shares are a system actively employed in the United States, a venture powerhouse, as well as in China and India. He added that the new legislation fosters an environment where high-growth venture companies can leverage the power of South Korea’s capital market.
The passing of the legislation is expected to encourage more entrepreneurs to start their own companies in South Korea, leading to more innovation and economic growth in the country. The Korea Startup Forum has welcomed the passing of the bill, emphasizing the necessity of introducing multiple voting rights for startup founders.
The Korean Startup Forum highlighted that as the domestic startup industry strives to overcome crises by pursuing continuous innovation despite global investment contraction, this bill offers hope for revitalizing diminished investments, enabling startups to achieve steady growth and development.