CHAPTER I GENERAL PROVISIONS
The purpose of this Act is to prescribe matters necessary for venture investment with the aim of promoting investment in startups, small and medium enterprises, venture businesses, etc. and fostering the venture investment industry, thereby contributing to the balanced development of the national economy by laying the foundation for a robust growth of small and medium enterprises, etc. <Amended on Dec. 28, 2021>
The terms used in this Act are defined as follows: <Amended on Dec. 28, 2021; Apr. 18, 2023; Jun. 20, 2023>
| 1. | The term “investment” means any of the following: |
| (a) | The acquisition of stocks, unsecured convertible bonds, unsecured exchangeable bonds, or unsecured bonds with warrant of a stock company; |
| (b) | The acquisition of equity of a private limited company or a limited liability company; |
| (c) | The acquisition of an equity interest in a business operated in a manner that a small or medium enterprise develops or produces, while maintaining accounting independence from other businesses, in accordance with Ordinance of the Ministry of SMEs and Startups; |
| (d) | The acquisition of an equity interest through a contract on conditional acquisition of an equity interest with no maturity date for repayment of the invested amount and with no interest, satisfying the requirements prescribed by Ordinance of the Ministry of SMEs and Startups; |
| (e) | Signing of a simple agreement for future equity which meets the requirements prescribed by Ordinance of the Ministry of SMEs and Startups and under which unsecured convertible bonds are issued; |
| (e) | Other methods similar to those referred to in items (a) through (e) and determined and publicly notified by the Minister of SMEs and Startups; |
| 2. | The term “venture investment” means an investment in startups, small or medium enterprises, venture businesses, or any other persons determined and publicly notified by the Minister of SMEs and Startups; |
| 7. | The term “professional individual investor” means a person registered under Article 9 as an individual engaging in venture investment; |
| 8. | The term “individual investment association” means an association registered under Article 12 as an association organized by individuals, etc. mainly for the purposes of venture investment and distribution of gains from such investment; |
| 9. | The term “accelerator” means a corporation or a non-profit corporation registered under Article 24 that mainly engages in the business of providing specialized incubation services for, and making investment in, early stage startups; |
| 10. | The term “venture investment company” means a company registered under Article 37 as a company engaging mainly in venture investment; |
| 11. | The term “venture investment association” means an association organized by venture investment companies, etc. for the purpose of venture investment and the distribution of gains from such investment and is registered under Article 50 or 63-2; |
| 12. | The term "private venture fund of funds" means an association registered under Article 63-2, which is organized mainly for the purpose of investing in other venture investment associations; |
| 13. | The term "venture debt" means an arrangement wherein institutions offer loans according to the methods prescribed in Article 70-2 to corporations in exchange for the right to purchase equity shares in the corporations under Article 418 (2) of the Commercial Act. |
| Article 3 (Scope of Application) |
This Act shall apply to venture investment: Provided, That this Act shall not apply to cases prescribed by Presidential Decree as those significantly contrary to economic order or morals, such as the gambling industry.
| Article 4 (Boosting of Balanced Investment between Regions) |
The Minister of SMEs and Startups shall establish and implement policies for alleviating unbalanced venture investment between regions and for boosting balanced venture investment between regions.
| Article 5 (Implementation of Projects for Assistance in Facilitating Venture Investment) |
The Minister of SMEs and Startups may implement projects for the following activities or may establish and implement policies necessary to promote smooth business operations by persons whose purpose is to engage in venture investment pursuant to this Act and to facilitate venture investment:
| 1. | Establishing infrastructure for the promotion of the venture investment industry and the facilitation of venture investment; |
| 2. | Analyzing domestic and international trends and conditions of venture investment; |
| 3. | Assisting in the enhancement of performance in venture investment; |
| 4. | Training professionals in venture investment, including professional individual investors; |
| 5. | Attracting foreign investment and expanding international exchange. |
| Article 6 (Fact-Finding Surveys) |
| (1) | The Minister of SMEs and Startups may conduct a fact-finding survey on the current status of, performance in, venture investment in order to establish and implement efficient policies for boosting venture investment. |
| (2) | The Minister of SMEs and Startups may request the following persons to provide information or present their opinions, etc. if necessary for conducting a fact-finding survey under paragraph (1). The persons so requested shall comply with the request, unless a compelling reason exists not to do so: |
| 1. | The head of a central administrative agency; |
| 2. | The head of a local government; |
| 4. | The head of the Korea Venture Investment Corporation under Article 66; |
| 5. | The heads of other institutions determined by Presidential Decree. |
| Article 7 (Establishment and Operation of Integrated Management System) |
The Minister of SMEs and Startups may establish and operate an integrated management system in order to provide comprehensive information on venture investment and to measure and manage the performance in venture investment systematically.
CHAPTER II INDIVIDUAL INVESTMENT AND PROFESSIONAL INDIVIDUAL INVESTORS
| Article 8 (Implementation of Projects for Boosting Investment by Individuals) |
The Minister of SMEs and Startups may implement projects for the following activities in order to boost venture investment by individuals: <Amended on Dec. 28, 2021>
| 1. | Search for, and training of, skilled individual investors; |
| 2. | Assistance in exchange of information between individual investors; |
| 3. | Assistance in exchange between individual investors and small and medium enterprises, startups, venture businesses, etc.; |
| 4. | Other projects that the Minister of SMEs and Startups deems necessary for boosting venture investment by individuals. |
| Article 9 (Registration of Professional Individual Investors) |
| (1) | Any person who intends to qualify for the application of this Act as an individual engaging in venture investment shall register as a professional individual investor with the Minister of SMEs and Startups. The same shall also apply where such person intends to change any important matter determined by Ordinance of the Ministry of SMEs and Startups, among the registered matters. |
| (2) | A person who intends to register as a professional individual investor under paragraph (1) shall meet the requirements prescribed by Presidential Decree in terms of investment performance, experience, qualifications, etc. |
| (3) | Except as provided in paragraphs (1) and (2), matters necessary for the procedures and methods for the registration of professional individual investors and the registration of changes and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. |
| Article 10 (Professional Individual Investors’ Obligation to Invest) |
| (1) | A professional individual investor shall invest at least the amount determined and publicly notified by the Minister of SMEs and Startups in the following persons every three years based on the date of registration: <Amended on Dec. 28, 2021> |
| 4. | Other persons determined and publicly notified by the Minister of SMEs and Startups as similar to those referred to in subparagraphs 1 through 3. |
| (2) | Matters regarding the detailed standards, methods, etc. for the computation of the amount of investment by a professional individual investor under paragraph (1) shall be prescribed by Presidential Decree. |
| Article 11 (Revocation of Registration of Professional Individual Investors) |
If a professional individual investor falls under any of the following subparagraphs, the Minister of SMEs and Startups may revoke the registration of such professional individual investor: Provided, That in cases falling under subparagraph 1, the Minister of SMEs and Startups must revoke the registration:
| 1. | If a professional individual investor files for registration or registration of changes under Article 9 (1), by fraud or other improper means; |
| 2. | If a professional individual investor ceases to meet the requirements for registration under Article 9 (2); |
| 3. | If a professional individual investor fails to observe the obligation to invest, in violation of Article 10; |
| 4. | If a professional individual investor pretends to have paid an investment or makes an investment by fraud or other improper means. |
CHAPTER III INDIVIDUAL INVESTMENT ASSOCIATION
| Article 12 (Organization and Registration of Individual Investment Associations) |
| (1) | An association that intends to qualify for the application for this Act as an association organized with funds contributed mutually by a person falling under any of the following subparagraphs and the persons prescribed by Ordinance of the Ministry of SMEs and Startups shall register as an individual investment association with the Minister of SMEs and Startups. The same shall also apply when such association intends to change any important matter prescribed by Ordinance of the Ministry of SMEs and Startups, among the registered matters: |
| 2. | Any of the following persons meeting the criteria prescribed by Presidential Decree in terms of the purpose of investment, the equity amount, etc.: |
| (c) | Any other person engaging in assistance in the establishment of small and medium enterprises or in venture investment and determined and publicly notified by the Minister of SMEs and Startups. |
| (2) | An association that intends to register as an individual investment association under paragraph (1) shall meet the requirements prescribed by Presidential Decree in terms of the total partners’ equity amount, the number of partners, the term of existence, etc. |
| (3) | An individual investment association shall comprise at least one operating partner with unlimited liability for the association’s debts as its operating officer and limited partners with limited liability only up to the value of their shares of equity. An operating partner, in such cases, shall be a person falling under any subparagraph of paragraph (1) and shall meet the requirements prescribed by Presidential Decree. |
| (4) | None of the following persons shall become an operating partner referred to in paragraph (3): <Newly Inserted on Jun. 20, 2023> |
| 1. | A minor, a person under adult guardianship, and a person under limited guardianship; |
| 2. | A person declared bankrupt and not yet reinstated; |
| 3. | A person for whom five years have not yet passed since his or her imprisonment without labor or heavier punishment declared by a court was completely executed (including where the execution thereof is deemed completely executed) or exempted; |
| 4. | A person who is under suspension of the execution of his or her imprisonment without labor or heavier punishment declared by a court; |
| 5. | A person for whom five years have not passed since his or her sentence of a fine or heavier punishment declared by a court for violating the Act on the Regulation of Conducting Fund-Raising Business without Permission or any other finance-related statute or regulation prescribed by Presidential Decree was completely executed (including where the execution thereof is deemed completely executed) or exempted; |
| 7. | A person who was a general partner of an individual investment association, the registration of which was revoked pursuant to Article 22 and for whom five years have not passed since the registration of the individual investment association was revoked; |
| 8. | A person for whom five years have not passed since he or she was removed or dismissed from office pursuant to Article 22 (3) 1, who falls under paragraph (1) 1 or 2 (referring to cases where he or she serves as an executive officer); |
| 9. | A person whose debts in commercial transactions, including financial transactions overdue for at least three months without good cause exceed 10 million won. |
| (6) | Each partner of an individual investment association may pay the full amount for his or her share of equity in lump sum or in installments, as provided by bylaws of the association. <Amended on Jun. 20, 2023> |
| (7) | Except as provided in paragraphs (1) through (6), matters necessary for the procedures and methods for the registration of individual investment associations and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. <Amended on Jun. 20, 2023> |
| Article 13 (Individual Investment Associations’ Obligation to Invest) |
| (1) | An individual investment association shall use an amount at not less than the ratio prescribed by Presidential Decree within 50 percent of its total partners’ equity, for investment in startups and venture businesses until three years elapse after the date of its registration. <Amended on Dec. 28, 2021> |
| (2) | Notwithstanding paragraph (1), an individual investment association whose operating partner is an accelerator under Article 12 (1) 2 (a) shall use the fund at not less than the investment ratio under paragraph (1) for investment in early stage startups. <Amended on Dec. 28, 2021> |
| (4) | Except as provided in paragraphs (1) through (3), matters regarding the detailed standards, methods, etc. for the determination of the investment ratio of individual investment associations shall be prescribed by Ordinance of the Ministry of SMEs and Startups. |
| Article 14 (Execution of Business Operations of Individual Investment Associations) |
| (1) | Each operating partner shall execute business operations of the individual investment association with due care as a good manager. |
| (2) | No operating partner shall perform any of the following acts while conducting business operations of the individual investment association: Provided, That this shall not apply to cases prescribed by Presidential Decree, where such act is unlikely to undermine the soundness of asset management by the individual investment association: <Amended on Dec. 28, 2021> |
| 1. | Using property of the individual investment association for his or her own benefit or a third party’s benefit; |
| 2. | Taking out a loan, guaranteeing a payment, or offering an asset as security; |
| 4. | Acquiring or possessing the real property other than the real property for business purposes within the range prescribed by Presidential Decree (hereinafter referred to as “real property for non-business purposes”), such as a business incubator defined in Article 53 (1) of the Support for Small and Medium Enterprise Establishment Act: Provided, That the same shall not apply where the real property for non-business purposes is acquired as a result of exercising a security right; |
| 5. | Other acts prescribed by Presidential Decree as those that undermine the purpose of establishment. |
| (3) | Where an operating partner has acquired real property for non-business purposes by exercising a security interest under the proviso of paragraph (2) 4, he or she shall dispose of such real property within the period prescribed by Ordinance of the Ministry of SMEs and Startups, not exceeding a maximum of one year. |
| (4) | An operating partner may entrust part of business operations of the individual investment association to limited partners under an agreement with the individual investment association. |
| Article 15 (Management and Operation of Property of Individual Investment Associations) |
| (1) | If the property of an individual investment association reaches or exceeds the scale determined and publicly notified by the Minister of SMEs and Startups, the operating partner of such individual investment association shall preserve and manage the property in accordance with the following subparagraphs: |
| 2. | Where the operating partner intends to change the trust business entity, it shall obtain approval from the general meeting of partners. |
| (2) | If necessary for the management of property of an individual investment association under paragraph (1), the operating partner shall give instructions to the trust business entity on the acquisition, disposal, etc. of property of the individual investment association, and the trust business entity shall acquire, dispose of, or otherwise manage the property in accordance with the operating partner’s instructions. |
| Article 16 (Annual Reporting by Individual Investment Associations) |
An operating partner shall submit an annual report to the Minister of SMEs and Startups within three months after the end of each business year in accordance with Presidential Decree: Provided, That if there is no change in the investment performance for the previous year or if the size of the individual investment association is not larger than that prescribed by Ordinance of the Ministry of SMEs and Startups, it may submit the data prescribed by Ordinance of the Ministry of SMEs and Startups in lieu of the annual report.
| Article 17 (Withdrawal of Operating Partner from Individual Investment Association) |
An operating partner may withdraw from an individual investment association only in any of the following cases:
| 1. | Where the operating partner is unable to continue business operations due to the revocation of registration under this Act or any other statute or any other reason; |
| 2. | Where the operating partner is bankrupt; |
| 3. | Where all partners consent to the withdrawal; |
| 4. | Where the operating partner who is a natural person is dead; |
| 5. | Other cases determined and publicly notified by the Minister of SMEs and Startups. |
| Article 18 (Dissolution of Individual Investment Associations) |
| (1) | If any of the following events occurs, an individual investment association shall be dissolved: <Amended on Jun. 20, 2023> |
| 1. | The expiration of the term of existence; |
| 2. | The withdrawal of all limited partners; |
| 3. | The withdrawal of all operating partners; |
| 4. | Cases where all operating partners are unable to continue business operations due to the revocation of registration under this Act or other statutes or any other reason; |
| 5. | Other events prescribed by Presidential Decree. |
| (2) | If an event referred to in paragraph (1) 3 or 4 occurs to an individual investment association, the individual investment association may continue to exist by appointing one of its limited partners as an operating partner or by admitting a person falling under any subparagraph of Article 12 (1) to the individual investment association as an operating partner in accordance with Presidential Decree, with all limited partners’ consent thereto, within three months from the date such event occurs. |
| (3) | Where an individual investment association is dissolved, its operating partner shall become a liquidator: Provided, That any person other than the operating partner may be appointed as a liquidator, as provided by bylaws of the association. |
| (4) | If debts exceed the amount of the total partners’ equity at the time of dissolution of an individual investment association, operating partners shall jointly pay the debts. |
| Article 19 (Reporting on Results of Liquidation and Cancellation of Registration) |
| (1) | When the liquidator under Article 18 (3) completes the liquidation process, he or she shall report the results thereof to the Minister of SMEs and Startups, without delay, in accordance with Ordinance of the Ministry of SMEs and Startups. |
| (2) | Upon receipt of the report under paragraph (1), the Minister of SMEs and Startups shall proceed with the cancellation of registration of the individual investment association, without delay. |
| Article 20 (Protection of Property of Individual Investment Associations) |
Notwithstanding Article 704 of the Civil Act, when a creditor to a partner of an individual investment association exercises a claim against the partner, the creditor may exercise the claim only up to the amount of the partner's investment in the individual investment association.
| Article 21 (Appropriation of Profit of Individual Investment Associations) |
An individual investment association may pay bonus to its operating partners in proportion to the profit from investment, as provided by bylaws of the association, and matters regarding the method, etc. for the determination of the return on investment for the purpose of paying bonus shall be prescribed by Presidential Decree.
| Article 21-2 (Disclosure by Individual Investment Associations) |
| (1) | An operating partner shall, where the total amount of investment of all the individual investment associations managed by the operating partner is at least the amount prescribed by Presidential Decree, disclose the following matters: |
| 1. | An annual report for each fiscal year of each individual investment association; |
| 2. | Other documents on the operation of individual investment associations, which are determined and publicly notified by the Minister of SMEs and Startups. |
| (2) | Matters necessary for the timing, method, etc. of the disclosure under paragraph (1) and others shall be determined and publicly notified by the Minister of SMEs and Startups. |
[This Article Newly Inserted on Jun. 20, 2023]
| Article 22 (Revocation of Registration of Individual Investment Association) |
| (1) | If an individual investment association or its operating partner falls under any of the following subparagraphs, the Minister of SMEs and Startups may revoke the registration of the individual investment association, issue an order to suspend its business operations for not more than six months, or take corrective measures against, issue a warning to, or suspend assistance for, the association under this Act for not more than three years: Provided, That in cases falling under subparagraph 1, the Minister of SMEs and Startups shall revoke the registration: <Amended on Jun. 20, 2023> |
| 1. | If the individual investment association or its operating partner files for registration or registration of changes under Article 12 (1), by fraud or other improper means; |
| 2. | If the individual investment association or its operating partner ceases to meet the requirements for registration under Article 12 (2); |
| 3. | If the operating partner ceases to meet the requirements that the operating partner shall meet under the latter part of Article 12 (3); |
| 4. | If the individual investment association or its operating partner solicits partners, in violation of Article 12 (5); |
| 5. | If the individual investment association fails to observe its obligation to invest, in violation of Article 13; |
| 6. | If the operating partner violates Article 14 in executing business operations; |
| 7. | If the operating partner violates Article 15 in managing and operating property; |
| 8. | If the operating partner fails to submit an annual report, in violation of Article 16; |
| 9. | If the operating partner refuses, obstructs, or evades the ascertainment and inspection under Article 72 or fails to report or submits a false report; |
| 10. | If the registration of all operating partners is revoked or canceled under this Act or any other statute; |
| (2) | If an individual investment association falls under any subparagraph (excluding subparagraph 1) of paragraph (1), the Minister of SMEs and Startups may take any of the following measures against its operating partner: <Amended on Jun. 20, 2023> |
| 1. | Full or partial suspension of business operations for not more than six months; |
| 2. | An order to take corrective measures; |
| (3) | If any operating partner (limited to an operating partner under Article 12 (1) 2; hereafter in this paragraph the same shall apply) of an individual investment association falls under any subparagraph (excluding subparagraph 1) of paragraph (1) and impairs or is likely to impair robust operation of the individual investment association, the Minister of SMEs and Startups may require the operating partner to take any of the following measures against its executive officers and employees (limited to executive officers and employees involved in the relevant duties): |
| 1. | Removal or dismissal from office; |
| 2. | Suspension of performance of duties for not more than six months; |
| (4) | Matters regarding the detailed guidelines, procedures, etc. for the administrative dispositions or measures, etc. required under paragraphs (1) through (3) shall be determined and publicly notified by the Minister of SMEs and Startups. |
| Article 23 (Application Mutatis Mutandis of the Commercial Act to Individual Investment Associations) |
| Article 24 (Registration of Accelerators) |
| (1) | Any person who engages in any of the following businesses and intends to qualify for the application of this Act shall register as an accelerator with the Minister of SMEs and Startups; The same shall also apply when the person intends to modify any important matters prescribed by Ordinance of the Ministry of SMEs and Startups, such as corporate name and location, among the registered matters: <Amended on Dec. 28, 2021> |
| 1. | The selection of, and specialized incubation services for, early stage startups; |
| 2. | Investment in early stage startups; |
| 3. | The organization of individual investment associations or venture investment associations and the execution of business operations therefor; |
| 4. | A business determined by the Minister of SMEs and Startups as incidental to any of the businesses referred to in subparagraphs 1 through 3. |
| (2) | A person who intends to file for registration as an accelerator shall meet all the following requirements: <Amended on Jun. 20, 2023> |
| 1. | The person shall meet the following applicable requirement: |
| (a) | If the person is a company under the Commercial Act: Its capital shall be at least 100 million won; |
| (b) | If the person is a non-profit corporation under the Civil Act, etc.: The value of the property contributed for the business under Articles 25 and 26 shall not be less than the amount prescribed by Presidential Decree. In such cases, the non-profit corporation shall separate accounts of revenue and expenditure of the relevant business from those of its other businesses in accordance with Article 113 of the Corporate Tax Act in order to clearly record the revenue and expenditure for the relevant business; |
| (c) | If the person is a cooperative, social cooperative, or other relevant entity under the Framework Act on Cooperatives or a small and medium enterprise cooperative under the Small and Medium Enterprise Cooperatives Act (hereafter in this Article referred to as “cooperative or other relevant entity”): The value of the property invested in the business falling under Articles 25 and 26 shall not be less than the amount prescribed by Presidential Decree. In such cases, the cooperative or other relevant entity shall separate accounts of revenue and expenditure of the relevant business from those of its other businesses in accordance with Article 113 of the Corporate Tax Act in order to clearly record the revenue and expenditure of the relevant business; |
| 2. | An executive officer referred to in the items of subparagraph 1 (referring to a person who performs duties equivalent to those of an executive officer where there is no executive officer; hereafter in this Chapter, the same shall apply) shall not fall under any of the following: |
| (a) | A minor, a person under adult guardianship, or a person under limited guardianship; |
| (b) | A person declared bankrupt and not yet reinstated; |
| (c) | A person in whose case five years have not passed since his or her imprisonment without labor or heavier punishment declared by a court was completely executed or exempted (including cases where the execution of such sentence is deemed to have been completed); |
| (d) | A person who is under suspension of the execution of imprisonment without labor or heavier punishment declared by a court; |
| (e) | A person in whose case five years have not passed since his or her sentence of a fine or heavier punishment declared by a court for a violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission or any other finance-related statute or regulation prescribed by Presidential Decree was completely executed (including cases where such sentence is deemed to have been completely executed) or exempted; |
| (g) | A person who was an executive officer at the time of cancellation of registration, where the ground for the revocation of registration under Article 36 had existed before the cancellation of registration under Article 35, (limited to a person prescribed by Presidential Decree as a person who is directly or equivalently responsible for the ground for the revocation of registration under Article 36) and in whose case five years have not passed since he or she was notified of the grounds for the revocation of registration of the accelerator or seven years have not passed since such cancellation of registration; |
| (h) | A person who was an executive officer of the accelerator whose registration was revoked under Article 36 (limited to a person prescribed by Presidential Decree as a person who is directly or equivalently responsible for the grounds for the revocation of registration under Article 36) and in whose case five years have not passed since the date of revocation of registration of the accelerator; |
| (i) | A person in whose case five years have not passed since he or she was removed or dismissed from office under Article 36 (2) 1; |
| 3. | The business plan, etc. for performing the business falling under Articles 25 and 26 shall meet the standards prescribed by Ordinance of the Ministry of SMEs and Startups; |
| 4. | The person shall have full-time professionals and facilities that meet the standards prescribed by Presidential Decree; |
| 5. | The person shall have a system for preventing conflicts of interest between the accelerator and investors and between a particular investor and other investors. |
| (3) | Notwithstanding paragraph (2), different requirements for capital, specialized full-time personnel, etc. may be prescribed for accelerators who intend to organize venture investment associations in accordance with Presidential Decree. |
| (4) | Except as provided in paragraphs (1) through (3), matters necessary for the procedures and methods for the registration of accelerators and the registration of changes and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. |
| Article 25 (Specialized Incubation Services for Early Stage Startups) |
An accelerator shall select persons eligible for assistance from among early stage startups by the methods prescribed by Presidential Decree, and provide assistance with the following activities (hereinafter referred to as “specialized incubation services”) to them: <Amended on Dec. 28, 2021>
| 1. | The development of business models; |
| 2. | The development of technologies and products; |
| 3. | The provision of facilities and space; |
| 4. | Other activities prescribed by Ordinance of the Ministry of SMEs and Startups. |
[Title Amended on Dec. 28, 2021]
| Article 26 (Accelerators’ Obligation to Invest) |
| (1) | An accelerator shall use an investment amount in early stage startups at least at the ratio prescribed by Presidential Decree, as long as it does not exceed 50 percent of its total investment, until the date which is three years after the date of its registration: Provided, That such obligation to invest under the main clause shall not apply where a person who falls under Article 50 (1) 2, 4, or 5 concurrently serves as an accelerator and he or she shall organize and operate a venture investment association under the proviso of Article 51 (2) until the date which is three years after registration as an accelerator. <Amended on Dec. 28, 2021; Jun. 20, 2023> |
| (2) | An accelerator shall keep the obligation to invest under paragraph (1) even after the date which is three years after registration, and if the accelerator fails to keep the obligation due to the recovery of investment, business normalization, or any other reason recognized by the Minister of SMEs and Startups, the Minister of SMEs and Startups may give him or her a grace period not exceeding one year for the performance of the obligation. <Amended on Jun. 20, 2023> |
| (3) | Except as provided in paragraphs (1) and (2), matters necessary for the detailed guidelines, methods, etc. for the determination of the accelerators’ investment ratio shall be prescribed by Presidential Decree. |
| Article 27 (Restrictions on Acts of Accelerators) |
| (1) | No accelerator shall do any of the following acts: Provided, That the same shall not apply to cases prescribed by Presidential Decree as those where it is unlikely to undermine the soundness of asset management by an accelerator: |
| 2. | Acquiring or owning real property for non-business purposes: Provided, That the same shall not apply where real property for non-business purpose is acquired as a result of exercising a security interest; |
| 3. | Other acts prescribed by Presidential Decree as those that undermine the purpose of establishment of an accelerator. |
| (2) | Where an accelerator acquired real property for non-business purposes by exercising a security interest under the proviso of paragraph (1) 2, it shall dispose of such real property within the period prescribed by Ordinance of the Ministry of SMEs and Startups, not exceeding one year. |
| (3) | Notwithstanding paragraphs (1) and (2), Article 39 shall apply to the restrictions on acts of accelerators who concurrently run a venture business. <Newly Inserted on Jun. 20, 2023> |
| Article 28 (Restrictions on Acts of Large Shareholders of Accelerator) |
| (1) | Any large shareholder (referring to a partner prescribed by Presidential Decree) of an accelerator and his or her affiliated persons (hereafter in this Article referred to as “large shareholder, etc.”) shall not do any of the following acts with intent to obtain benefit for the large shareholder, etc. themselves against the accelerator’s interest: |
| 1. | Demanding that the accelerator provide data or information not disclosed to the outside in order to exercise undue influence: Provided, That the same shall not apply to the exercise of a right under Article 466 of the Commercial Act; |
| 2. | Exercising undue influence on the investment activities and management of the accelerator, in collusion with other shareholders, on condition of giving an economic interest or other benefit in return; |
| 3. | Demanding that the accelerator commit an offense; |
| 4. | Demanding that the accelerator make a transaction with large shareholders, etc. themselves or a third party on condition significantly unfavorable to the accelerator with regard to interest, fees, security, etc., as compared with normal terms and conditions of transactions; |
| 5. | Other acts prescribed by Presidential Decree as similar to the activities referred to in subparagraphs 1 through 4. |
| (2) | Where it is found that any large shareholder, etc. of an accelerator has violated paragraph (1), the Minister of SMEs and Startups may request the accelerator or the large shareholder, etc. to submit necessary data. In such cases, the persons so requested shall comply, unless a compelling reason exists not to do so. |
| Article 29 (Standards for Accelerators' Management Soundness) |
| (1) | An accelerator shall meet the standards prescribed by Presidential Decree for the management soundness. |
| (2) | The Minister of SMEs and Startups may inspect the current status of management by an accelerator in order to ensure management soundness. |
| (3) | If the Minister of SMEs and Startups finds that an accelerator fails to meet the standards under paragraph (1) or that it is impracticable for an accelerator to maintain management soundness, as a result of an inspection on the current status of management under paragraph (2), the Minister of SMEs and Startups may require the accelerator to take measures necessary to improve management, such as an increase of its capital, etc. and restriction on the distribution of profit. |
| Article 30 (Prohibition of Use of Information Relating to Accelerator’s Duties) |
None of the following persons (including persons in whose case one year has not passed since they ceased to fall under any of subparagraphs 1 through 5, but excluding financial investment business entities under the Financial Investment Services and Capital Markets Act) shall use information that may have a significant influence on investors’ investment decisions, which is not made public by disclosure by an individual investment association under Article 21-2, by an accelerator under Article 32, or by a venture investment association under Article 61 (hereafter in this Article referred to as “information relating to duties”) for his or her own benefit or a third party’s benefit without good cause: <Amended on Dec. 29, 2020; Jun. 20, 2023> | 1. | A person who obtained information related to duties as an executive officer, an employee, or an agent of an accelerator (including affiliates defined in subparagraph 12 of Article 2 of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as “affiliates”); hereafter in subparagraph 2 the same shall apply); |
| 2. | A person who obtained information relating to duties as a major shareholder of an accelerator prescribed by Presidential Decree in the course of exercising his or her right; |
| 3. | A person who obtained information relating to duties as a person with authority for permission, authorization, guidance, or supervision or other authority over an accelerator under a statute or regulation; |
| 4. | A person who obtained information relating to duties as a person who executed, or is negotiating, a contract, with an accelerator in the course of executing, negotiating, or performing the contract; |
| 5. | A person who obtained information relating to duties as an agent (if the person is a corporation, including its executive officers, employees and agents), an employee of, or any other person employed by, a person falling under any of subparagraphs 2 through 4 (if the person falling under any of subparagraphs 2 through 4 is a corporation, it refers to any of its executive officers and employees); |
| 6. | A person who received information relating to duties from a person falling under any of subparagraphs 1 through 5 (including persons in whose case one year has not passed since they ceased to fall under any of subparagraphs 1 through 5). |
| Article 31 (Annual Reporting by Accelerators) |
An accelerator shall submit an annual report to the Minister of SMEs and Startups within three months after the end of each business year in accordance with Presidential Decree.
| Article 32 (Disclosure by Accelerators) |
| (1) | An accelerator shall disclose the following matters: <Amended on Jan. 3, 2023> |
| 1. | Organization and human resources: |
| 2. | Finance and profit and loss; |
| 3. | The organization of individual investment associations or venture investment associations and the performance of operation of such associations; |
| 4. | Details of the measures required to take for the improvement of management under Article 29 (3) and of orders received to suspend business operations or to take corrective measures or warnings received under Article 36 (1); |
| 5. | The average amount of investment in early stage startups; |
| 6. | The current status of specialized incubation services for early stage startups prescribed by Presidential Decree. |
| (2) | Matters regarding the timing, method, etc. of the disclosure under paragraph (1) shall be determined and publicly notified by the Minister of SMEs and Startups. |
| Article 33 (Succession to Rights and Obligations of Accelerator upon Business Transfer) |
| (1) | Where an accelerator transfers its business or is divided and merged and the transferee or the corporation established through the division and merger or the corporation surviving the division and merger intends to succeed to the previous status of the accelerator, the transferee or such corporation shall report the fact to the Minister of SMEs and Startups within 30 days from the date of transfer or the date of division and merger in accordance with Ordinance of the Ministry of SMEs and Startups. |
| (2) | Upon receipt of a report under paragraph (1), the Minister of SMEs and Startups shall accept the report if he or she finds that the report conforms to this Act after review of its contents. |
| (3) | When the report under paragraph (1) is accepted, the transferee or the corporation established through a division and merger or surviving the division and merger shall succeed to the previous status of the accelerator on the date of transfer or the date of division and merger. |
| Article 34 (Public Announcement of Registration of Accelerators) |
When any of the following events occurs with respect to an accelerator, the Minister of SMEs and Startups shall announce details of such event through the Official Gazette and post the details on the website:
| 1. | When an accelerator is registered under the former part of Article 24 (1); |
| 2. | When the registration is canceled under Article 35 (2); |
| 3. | When the registration is revoked under Article 36 (1). |
| Article 35 (Cancellation of Registration of Accelerators) |
| (1) | If it is impossible or impracticable for an accelerator to engage in a business referred to in any subparagraph of Article 24 (1), such accelerator may apply for the cancellation of registration in accordance with Ordinance of the Ministry of SMEs and Startups. |
| (2) | Upon the receipt of an application from an accelerator for the cancellation of registration under paragraph (1), the Minister of SMEs and Startups shall proceed with cancellation of registration, without delay. |
| Article 36 (Revocation of Registration of Accelerators) |
| (1) | If an accelerator falls under any of the following subparagraphs, the Minister of SMEs and Startups may revoke the registration of the accelerator, issue an order to suspend its business operations for not more than six months, or take corrective measures against, issue a warning to, or suspend assistance for, the accelerator under this Act for not more than three years: Provided, That in cases of subparagraph 1, the Minister of SMEs and Startups shall revoke the registration: <Amended on Jun. 20, 2023> |
| 1. | If the accelerator files for registration or registration of changes under Article 24 (1), by fraud or other improper means; |
| 2. | If the accelerator ceases to meet the requirements for registration under Article 24 (2) or (3): Provided, That the same shall not apply where an accelerator had an executive officer falling under any item of Article 24 (2) 2 but terminated the cause of revocation within three months from the date on which such cause occurred; |
| 3. | If the accelerator fails to select persons eligible for assistance or to provide specialized incubation services to persons eligible for assistance, in breach of the method prescribed according to Article 25; |
| 4. | If the accelerator fails to observe the accelerator’s obligation to invest, in violation of Article 26; |
| 5. | If the accelerator fails to observe the obligation to refrain from doing prohibited acts, in violation of Article 27; |
| 6. | If any large shareholder of the accelerator does an act referred to in any subparagraph of Article 28 (1) with intent to obtain his or her own benefit, in violation of that paragraph; |
| 7. | If the accelerator executes business operations, in violation of Article 14 or 52, as an operating partner of an individual investment association or a venture investment association; |
| 8. | If the accelerator fails to take the measures required under paragraph (2). |
| 9. | If the accelerator fails to take the measures required under Article 29 (3); |
| 10. | If the accelerator fails to make a disclosure under Article 32or makes a false disclosure; |
| 11. | If the accelerator refuses, obstructs, or evades the ascertainment and inspection under Article 72 or fails to report or submits a false report. |
| (2) | If the Minister of SMEs and Startups finds that an accelerator falls under any subparagraph (excluding subparagraph 1) of paragraph (1) and undermines, or is likely to undermine, robust operation of the accelerator, the Minister of SMEs and Startups may require the accelerator to take any of the following measures to the accelerator’s executive officers and employees (limited to executive officers and employees involved in the relevant duties): |
| 1. | Removal or dismissal from office; |
| 2. | Suspension of performance of duties for not more than six months; |
| (3) | Matters regarding the detailed guidelines and procedures for the administrative dispositions, etc. under paragraphs (1) and (2) shall be determined and publicly notified by the Minister of SMEs and Startups. |
CHAPTER V INVESTMENT COMPANIES FOR ESTABLISHMENT OF SMALL AND MEDIUM ENTERPRISES
| Article 37 (Registration of Venture Investment Companies) |
| (1) | A person who engages in any of the following business activities and intends to qualify for the application of this Act shall register as a venture investment company with the Minister of SMEs and Startups. The same shall also apply where such person intends to modify any important matters prescribed by Ordinance of the Ministry of SMEs and Startups, such as corporate name and location, among the registered matters: <Amended on Dec. 28, 2021; Jun. 20, 2023> |
| 1. | Investment in startups; |
| 3. | Investment in venture businesses; |
| 4. | The organization of venture investment associations and the execution of business operations therefor; |
| 5. | Overseas investment by the methods determined and publicly notified by the Minister of SMEs and Startups, such as the acquisition of stocks or equity interests in foreign enterprises; |
| 6. | Investment in businesses that small and medium enterprises develop or produce and operate in a manner of maintaining accounting independence from other businesses; |
| 7. | Investment in persons determined and publicly notified by the Minister of SMEs and Startups as similar to the persons referred to in subparagraphs 1 through 6; |
| 8. | A business determined by the Minister of SMEs and Startups as incidental to any of the businesses referred to in subparagraphs 1 through 7. |
| (2) | A person who intends to file for registration as a venture investment company under paragraph (1) shall meet all the following requirements: <Amended on Jun. 20, 2023> |
| 1. | The person shall be a stock company, limited company, or limited liability company under the Commercial Act, or a corporation established under Article 66 and the amount of its capital and the ratio of loans to its capital shall meet the requirements prescribed by Presidential Decree; |
| 2. | None of its executive officers (in cases of a stock company or a corporation established under Article 66, referring to executive officers, and in cases of a limited company or limited liability company, referring to members) shall fall under any of the following items. Items (j) and (k) shall apply only to its representative director, chief executive officer, or operating partner: |
| (a) | A minor, a person under adult guardianship, or a person under limited guardianship; |
| (b) | A person declared bankrupt and not yet reinstated; |
| (c) | A person in whose case five years have not passed since his or her imprisonment without labor or heavier punishment sentenced by a court was completely executed or he or she was discharged from such imprisonment (including cases where the execution of such sentence is deemed to have been completed); |
| (d) | A person who is under suspension of the execution of imprisonment without labor or heavier punishment sentenced to him or her by a court; |
| (e) | A person in whose case five years have not passed since the complete execution of, or the exemption from, a fine or heavier punishment sentenced to him or her for a violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission or any other finance-related statute or regulation prescribed by Presidential Decree (including cases where such sentence is deemed to have been completely executed); |
| (g) | A person who was an executive officer at the time the registration was canceled, where the cause of the revocation of registration under Article 49 had existed before the cancellation of registration under Article 48, (limited to a person prescribed by Presidential Decree as a person who is directly or equivalently responsible for the cause of the revocation of registration under Article 49) and in whose case five years have not passed since he or she was notified of the cause of the revocation of registration of the investment venture company or seven years have not passed since the date of cancellation of such registration; |
| (h) | A person who was an executive officer of the venture investment company whose registration was revoked under Article 49 (limited to a person prescribed by Presidential Decree as a person who is directly or equivalently responsible for the cause of the revocation of registration under Article 49) and in whose case five years have not passed since the date of revocation of registration of the venture investment company; |
| (i) | A person in whose case five years have not passed since he or she was removed or dismissed from office under Article 49 (2) 1; |
| (j) | A person prescribed by Presidential Decree among persons who have not paid obligations by the agreed date for financial or commercial transactions; |
| (k) | A large shareholder (referring to an investor prescribed by Presidential Decree; hereafter in this Chapter the same shall apply) or an executive officer or employee of another venture investment company; |
| 3. | A large shareholder shall not have any criminal record of having been punished for a violation of this Act or any finance-related statute or regulation and shall have social credit as prescribed by Presidential Decree; |
| 4. | The person shall have full-time professionals and facilities that meet the standards prescribed by Presidential Decree; |
| 5. | The person shall have a system for preventing conflicts of interest between the venture investment company and investors and between an investor and other investors. |
| (3) | If a person who was not a large shareholder and does not have social credit referred to in paragraph (2) 3 becomes a large shareholder by acquiring new shares, such person shall not exercise the voting right for the acquired shares. |
| (4) | The Minister of SMEs and Startups may order the large shareholder who acquired shares for which the large shareholder is not allowed to exercise voting right under paragraph (3) to dispose of such acquired shares within a prescribed period not exceeding six months. |
| (5) | Except as provided in paragraphs (1) through (4), matters necessary for the procedures and methods for the registration of venture investment companies and the registration of changes and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 38 (Venture Investment Companies' Obligation to Invest) |
| (1) | The amount that a venture investment company shall use, out of its total assets managed by it (referring to its capital and the aggregate of investments in all venture investment associations managed by it), for the businesses referred to in Article 37 (1) 1 through 4, 6 and 7 until three years after the date of its registration shall be equal to at least the ratio prescribed by Presidential Decree as long as it does not exceed 50 percent of its total assets. <Amended on Jun. 20, 2023> |
| (2) | A venture investment company shall maintain the compulsory investment ratio under paragraph (1) even after three years from the date of its registration, but if a venture investment company fails to maintain the investment ratio under paragraph (1) due to the recovery of investment, business normalization, or other reason recognized by the Minister of SMEs and Startups, the Minister of SMEs and Startups may give a grace period not exceeding one year for the performance of the obligation to invest. <Amended on Jun. 20, 2023> |
| (3) | Except as provided in paragraphs (1) and (2), matters necessary for the detailed guidelines, methods, etc. for determining the investment ratio of venture investment companies shall be prescribed by Presidential Decree. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 39 (Restrictions on Acts of Venture Investment Companies) |
| (1) | No venture investment company shall perform any of the following acts: Provided, That the same shall not apply to cases prescribed by Presidential Decree as those where the quality of asset management of a venture investment company is unlikely to be impaired: <Amended on Jun. 20, 2023> |
| 2. | Acquiring or owning real property for non-business purposes: Provided, That the same shall not apply where real property for non-business purposes is acquired as a result of exercising a security interest; |
| 3. | Other acts prescribed by Presidential Decree as those that undermine the purpose of establishment of the venture investment company. |
| (2) | Where a venture investment company acquired real property for non-business purposes by exercising a security interest under the proviso of paragraph (1) 2, it shall dispose of such real property within the period prescribed by Ordinance of the Ministry of SMEs and Startups not exceeding one year. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 40 (Restrictions on Acts of Large Shareholders of Venture Investment Companies) |
| (1) | A large shareholder of a venture investment company and his or her affiliated persons prescribed by Presidential Decree (hereafter in this Article referred to as “large shareholder, etc.”) shall not perform any of the following acts with intent to benefit the large shareholder, etc. themselves and against the interests of the venture investment company: <Amended on Jun. 20, 2023> |
| 1. | Demanding that the venture investment company provide data or information not disclosed to the outside in order to exercise undue influence: Provided, That the same shall not apply to the exercise of the right under Article 466 of the Commercial Act; |
| 2. | Exercising undue influence on the investment and other management activities of the venture investment company, in collusion with other shareholders, on condition of giving economic benefits and other benefits in return; |
| 3. | Demanding that the venture investment company commit an offense; |
| 4. | Demanding that the venture investment company make a transaction with the large shareholder, etc. themselves or a third party on conditions significantly unfavorable to the venture investment company in terms of interest, fees, security, etc., as compared with normal terms and conditions of transactions; |
| 5. | Other acts prescribed by Presidential Decree as similar to those referred to in subparagraphs 1 through 4. |
| (2) | Where it is found that any large shareholder, etc. of a venture investment company violated paragraph (1), the Minister of SMEs and Startups may request the venture investment company or the large shareholder, etc. to submit necessary data. In such cases, the persons requested to submit data shall comply with the request, unless there is a compelling reason not to do so. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 41 (Standards for Management Soundness of Venture Investment Companies) |
| (1) | A venture investment company shall meet the standards prescribed by Presidential Decree for the management soundness. <Amended on Jun. 20, 2023> |
| (2) | The Minister of SMEs and Startups may inspect the current state of management of a venture investment company in order to secure the management soundness thereof. <Amended on Jun. 20, 2023> |
| (3) | If the Minister of SMEs and Startups finds that a venture investment company fails to meet the standards under paragraph (1) or that it is impracticable for a venture investment company to maintain the management soundness, as a result of an inspection of the current status of management under paragraph (2), the Minister of SMEs and Startups may require the venture investment company to take measures necessary to improve its management, such as an increase of its capital, etc. and restriction on the distribution of profit. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 42 (Prohibition of Use of Information Relating to Duties of Venture Investment Companies) |
Any of the following persons (including persons in whose case one year has not passed since they ceased to fall under any of subparagraphs 1 through 5, but excluding financial investment business entities under the Financial Investment Services and Capital Markets Act) shall not use information that can seriously affect investors’ investment decisions and that has not been disclosed through disclosure by a venture investment company under Article 45 or by a venture investment association under Article 61 (hereafter in this Article referred to as “information relating to duties”) for his or her own benefit or a third party’s benefit without good cause: <Amended on Jun. 20, 2023> | 1. | A person who obtained information relating to duties as an executive officer, an employee, or a representative of the venture investment company (including its affiliates; hereafter in subparagraph 2 the same shall apply); |
| 2. | A person who obtained information relating to duties as a major shareholder of the venture investment company prescribed by Presidential Decree in the course of exercising his or her right; |
| 3. | A person who obtained information relating to duties as a person who has authority for permission, authorization, direction, or supervision, or other authority over the venture investment company under a statute or regulation; |
| 4. | A person who obtained information relating to duties as a person who executed, or is negotiating, a contract with the venture investment company in the course of executing, negotiating, or performing the contract; |
| 5. | A person who obtained information relating to duties as a representative (if the person is a corporation, including its executive officers, employees and representatives), an employee of, or any other person employed by, a person falling under any of subparagraphs 2 through 4 (if the person falling under any of subparagraphs 2 through 4 is a corporation, it refers to any of its executive officers and employees); |
| 6. | A person who received information relating to duties from a person falling under any of subparagraphs 1 through 5 (including persons in whose case one year has not passed since they ceased to fall under any of subparagraphs 1 through 5). |
[Title Amended on Jun. 20, 2023]
| Article 43 (Issuance of Bonds by Venture Investment Companies) |
A venture investment company may issue bonds under the Commercial Act up to 20 times its capital and total reserves in order to raise funds necessary for its business operations. <Amended on Jun. 20, 2023> [Title Amended on Jun. 20, 2023]
| Article 44 (Annual Reporting by Venture Investment Companies) |
A venture investment company shall submit an annual report to the Minister of SMEs and Startups within three months after the end of each business year as prescribed by Presidential Decree. <Amended on Jun. 20, 2023>
[Title Amended on Jun. 20, 2023]
| Article 45 (Disclosure by Venture Investment Companies) |
| (1) | A venture investment company shall disclose the following matters: <Amended on Jun. 20, 2023> |
| 1. | Organization and personnel; |
| 2. | Finance and profit and loss; |
| 3. | The organization of venture investment associations and the performance of operation of such associations; |
| 4. | Details of the measures required to take for the improvement of management under Article 41 (3) and of orders received to suspend business operations or to take corrective measures or warnings received under Article 49 (1). |
| (2) | Matters necessary for the timing, method, etc. of the disclosure under paragraph (1) shall be determined and publicly notified by the Minister of SMEs and Startups. |
[Title Amended on Jun. 20, 2023]
| Article 46 (Succession to Rights and Obligations of Venture Investment Companies by Business Transfer) |
| (1) | Where a venture investment company transfers its business or is divided and merged and the transferee or the corporation established through the division and merger or the corporation surviving the division and merger intends to succeed to the previous status of the venture investment company, the transferee or such corporation shall report the fact to the Minister of SMEs and Startups within 30 days from the date of transfer or the date of division and merger as prescribed by Ordinance of the Ministry of SMEs and Startups. <Amended on Jun. 20, 2023> |
| (2) | Upon the receipt of the report under paragraph (1), the Minister of SMEs and Startups shall accept the report if he or she finds as a result of his or her review of its contents that the report conforms to this Act. |
| (3) | When the report under paragraph (1) is accepted, the transferee or the corporation established through a division and merger or surviving the division and merger shall succeed to the previous status of the venture investment company on the date of transfer or the date of division and merger. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 47 (Public Announcement of Registration of Venture Investment Companies) |
When any of the following events occurs with respect to a venture investment company, the Minister of SMEs and Startups shall make a public announcement of the details of such event in the Official Gazette and post the details on the website, without delay: <Amended on Jun. 20, 2023>
| 1. | When registration is made under the former part of Article 37 (1); |
| 2. | When the registration is canceled under Article 48 (2); |
| 3. | When the registration is revoked under Article 49 (1). |
[Title Amended on Jun. 20, 2023]
| Article 48 (Cancellation of Registration of Venture Investment Companies) |
| (1) | If it is impossible or impracticable for a venture investment company to engage in a business referred to in any subparagraph of Article 37 (1), such venture investment company may apply for the cancellation of its registration as prescribed by Ordinance of the Ministry of SMEs and Startups. <Amended on Jun. 20, 2023> |
| (2) | Upon receipt of an application from a venture investment company for the cancellation of registration under paragraph (1), the Minister of SMEs and Startups shall cancel the registration, without delay. <Amended on Jun. 20, 2023> |
[Title Amended on Jun. 20, 2023]
| Article 49 (Revocation of Registration of Venture Investment Companies) |
| (1) | If a venture investment company falls under any of the following subparagraphs, the Minister of SMEs and Startups may revoke the registration of the venture investment company, issue an order to suspend its business operations for not more than six months, or take corrective measures against, issue a warning to, or suspend assistance for, the company under this Act for not more than three years: Provided, That in cases falling under subparagraph 1, the Minister of SMEs and Startups shall revoke the registration: <Amended on Jun. 20, 2023> |
| 1. | If the venture investment company files for registration or registration of changes under Article 37 (1), by fraud or other improper means; |
| 2. | If it is impracticable for the venture investment company to engage in the business under Article 37 (1) due to a cause attributable thereto; |
| 3. | If the venture investment company ceases to meet the requirements for registration under Article 37 (2): Provided, That the same shall not apply where the venture investment company had an executive officer (in cases of a stock company or a corporation established under Article 66, referring to an executive officer, and in cases of a limited company or limited liability company, referring to a member) falling under any item (items (j) and (k) shall apply only to its representative director, chief executive officer, or operating partner) of Article 37 (2) 2 but terminated the cause of revocation within three months from the date such cause occurred; |
| 4. | If the venture investment company fails to continue to make investments under Article 37 (1) 1 through 4, 6 and 7 for at least one year in accordance with Article 38 (1), until the lapse of three years after its registration, without good cause: Provided, That the same shall not apply where the venture investment company has performed all matters prescribed by Presidential Decree; |
| 5. | If the venture investment company fails to observe its obligation to invest, in violation of Article 38; |
| 6. | If the venture investment company fails to observe the obligation to refrain from doing prohibited acts, in violation of Article 39; |
| 7. | If any large shareholder of the venture investment company performs an act referred to in any subparagraph of Article 40 (1) with intent to obtain his or her own benefit, in violation of that paragraph; |
| 8. | If the venture investment company executes business operations in violation of Article 52 as an operating partner of a venture investment association; |
| 11. | If the venture investment company fails to take the measures required under paragraph (2); |
| 12. | If the venture investment company fails to comply with the request under Article 41 (3); |
| 13. | If the venture investment company fails to make a disclosure under Article 45 or makes a false disclosure; |
| 14. | If the venture investment association obstructs or evades the ascertainment and inspection under Article 72 or fails to report or submits a false report; |
| (2) | If the Minister of SMEs and Startups finds that a venture investment company falls under any subparagraph (excluding subparagraph 1) of paragraph (1) and undermines, or is likely to undermine, robust operation thereof, the Minister of SMEs and Startups may request the venture investment company to take any of the following measures against its executive officers and employees (limited to executive officers and employees involved in the relevant duties): <Amended on Jun. 20, 2023> |
| 1. | Removal or dismissal from office; |
| 2. | Suspension of performance of duties for not more than six months; |
| (3) | Matters necessary for the detailed guidelines and procedures for the administrative dispositions, etc. under paragraphs (1) and (2) shall be determined and publicly notified by the Minister of SMEs and Startups. |
[Title Amended on Jun. 20, 2023]
CHAPTER VI VENTURE INVESTMENT ASSOCIATIONS
| Article 50 (Organization and Registration of Venture Investment Associations) |
| (1) | A fund that intends to qualify for the application of this Act, as an association organized with mutual investment by a person falling under any of the following subparagraphs and other persons, shall register as a venture investment association with the Minister of SMEs and Startups. The same shall also apply when such association intends to change any important matter prescribed by Ordinance of the Ministry of SMEs and Startups, among the registered matters: <Amended on Jun. 20, 2023> |
| 1. | An accelerator meeting the requirements under Article 24 (3); |
| 2. | A venture investment company; |
| 3. | The Korea Venture Investment Corporation under Article 66; |
| 4. | A new technology venture capitalist defined in subparagraph 14-3 of Article 2 of the Specialized Credit Finance Business Act or a specialized new technology venture financing company under subparagraph 14-4 of that Article (hereinafter referred to as “new technology venture capitalist or other relevant entity”); |
| 5. | A company meeting all the requirements prescribed by Presidential Decree with respect to the total partners’ equity amount, specialized human resources, etc. as a limited company or a limited liability company under the Commercial Act; |
| 6. | A foreign investment company recognized by Minister of SMEs and Startups to meet all the following requirements necessary for the organization of venture investment associations: Provided, That a foreign investment company shall be deemed to meet all the following requirements if it organizes a venture investment association with a person falling under any of subparagraphs 1 through 5: |
| (a) | It shall meet all physical and human resources requirements equivalent to those of venture investment companies in terms of domestic branches, specialized human resources, etc.; |
| (b) | It shall have a high international credit rating and a feasible business plan; |
| 7. | Other persons determined and publicly notified by the Minister of SMEs and Startups. |
| (2) | An association that intends to register as a venture investment association under paragraph (1) shall meet the requirements prescribed by Presidential Decree with respect to the total partners' equity amount, the number of partners, the term of existence, etc. |
| (3) | A venture investment association shall comprise at least one operating partner who shall have unlimited liability for the association’s debts as an operating officer of the association and limited partners with limited liability only up to the value of their respective shares of equity. An operating partner in such cases shall be a person falling under any subparagraph of paragraph (1), and a person prescribed by Ordinance of the Ministry of SMEs and Startups may become an operating partner jointly with a person falling under paragraph (1) 1 through 6. |
| (4) | Notwithstanding the former part of paragraph (3), a publicly placed investment association organized under Article 63 shall have only one operating partner. |
| (5) | An operating partner of a venture investment association shall not be replaced by another person referred to in any subparagraph of paragraph (1) while the operation of the venture investment association. |
| (6) | Each partner of a venture investment association may pay the full amount for his or her share of equity in a lump sum or in installments, as provided by bylaws of the association. |
| (7) | Except as provided in paragraphs (1) through (6), matters regarding the procedures and methods for the registration of venture investment associations and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. |
| Article 51 (Venture Investment Associations’ Obligation to Invest) |
| (1) | A venture investment association (excluding the venture investment associations whose operating partner is the Korea Venture Investment Corporation under Article 66) shall make an investment at not less than the following investment ratio in the business specified in Article 37 (1) 1 through 3, 6 and 7 until three years elapse after the date of its registration: |
| 1. | The ratio prescribed by Presidential Decree, not exceeding 50 percent of the aggregate of the total partners’ equity in all venture investment associations operated by the same operating partner; |
| 2. | The ratio prescribed by Presidential Decree, not exceeding 40 percent of the total partners' equity in each venture investment association. |
| (2) | Notwithstanding paragraph (1), a venture investment association whose operating partner is an accelerator under Article 50 (1) 1 shall invest an amount at not less than the ratio prescribed in subparagraphs of paragraph (1) in early stage startups: Provided, That where a person who falls under Article 50 (1) 2, 4, or 5 concurrently serves as an accelerator, at least one of the venture investment associations operated by the relevant operating partner shall invest at a ratio prescribed in any subparagraph of paragraph (1) in an early stage startup. <Amended on Dec. 28; 2021; Jun. 20, 2023> |
| (3) | Notwithstanding paragraph (1) 1, Article 38 (1) shall apply to the investment ratios of a venture investment association whose operating partner is a venture investment company. <Amended on Jun. 20, 2023> |
| (4) | The amount that a venture investment association shall invest in a corporation listed in a securities market under Article 8-2 (4) 1 of the Financial Investment Services and Capital Markets Act and is determined and publicly notified by the Minister of SMEs and Startups shall not exceed the following investment ratios: Provided, That the Minister of SMEs and Startups may otherwise determine investment ratios for venture investment associations acquiring or merging with a small and medium enterprise or a venture business as prescribed by Presidential Decree. <Amended on Jun. 20, 2023> |
| 1. | The ratio prescribed by Presidential Decree to the aggregate of total partners’ equity in all venture investment associations operated by the same operating partner; |
| 2. | The ratio prescribed by Presidential Decree to the total partners’ equity in each venture investment association. |
| (5) | If a venture investment association fails to maintain the investment ratios under paragraphs (1) through (3) due to the recovery of investment, business normalization, or any other reason recognized by the Minister of SMEs and Startups, the Minister of SMEs and Startups may give a grace period not exceeding one year for the performance of the obligation to invest. |
| (6) | Notwithstanding paragraphs (1) and (2), the Minister of SMEs and Startups may otherwise determine investment obligations with respect to a venture investment association prescribed by Presidential Decree, such as a venture investment association which takes over or merges with small and medium enterprises or venture businesses, or purchases stocks, etc. owned by other venture investment associations, etc. <Newly Inserted on Jun. 20, 2023> |
| (7) | Matters necessary for the detailed guidelines, methods, etc. for determining the investment ratios of venture investment associations under paragraphs (1) through (6) shall be prescribed by Presidential Decree. <Amended on Jun. 20, 2023> |
| Article 51-2 (Special-Purpose Companies for Investment by Venture Business Investment Associations) |
| (1) | An operating partner of a venture investment association may establish a special-purpose company which meets all of the following requirements as a stock company or limited liability company under the Commercial Act: |
| 1. | The purpose of the special-purpose company is to use its property at a ratio higher than that prescribed by Presidential Decree in any of the businesses referred to in Article 37 (1) 1 through 3, 6, and 7; |
| 2. | The special-purpose company in which the venture investment association alone makes full investment; |
| 3. | Neither full-time executive officer nor employee shall be hired and no place of business, other than its head office, shall be established; |
| 4. | It shall entrust the management of its property to the operating partner of the venture investment association which has established the special-purpose company. |
| (2) | In cases of a special-purpose company in which a venture investment association established for the purpose of acquisition and merger of small and medium enterprises or venture businesses has invested at a ratio not less than that prescribed by Presidential Decree, the following stockholders or partners may make such investment: |
| 1. | An executive officer or a major shareholder of the company in which the special-purpose company invests, as prescribed by Presidential Decree; |
| 2. | Other persons prescribed by Presidential Decree. |
| (4) | A special-purpose company may borrow funds. In such cases, a borrowing limit for a special-purpose company, the method for calculating the investment ratio of the property of a special-purpose company, and other matters necessary for the management of the property of a special-purpose company shall be prescribed by Presidential Decree. |
| (5) | Articles 52 through 54 (excluding Article 52 (2) 2) and 61 shall apply mutatis mutandis to matters regarding the execution, etc. of the business of a special-purpose company. In such cases, "venture investment association" shall be construed as "special-purpose company". |
[This Article Newly Inserted on Jun. 20, 2023]
| Article 52 (Execution of Business Operations of Venture Investment Associations) |
| (1) | Each operating partner shall execute business operations of the venture investment association with due care as a good manager. |
| (2) | No operating partner shall do any of the following acts in executing business operations of the venture investment association: Provided, That the same shall not apply to cases prescribed by Presidential Decree as those where the soundness of asset management of the venture investment association is unlikely to be impaired: |
| 1. | Using property of the venture investment association for his or her own interest or a third party’s interest; |
| 2. | Taking out a loan, guaranteeing payment, or offering an asset as security; |
| 4. | Acquiring or owning real property for non-business purposes: Provided, That the same shall not apply where real property for non-business purposes is acquired as a result of exercising a security interest; |
| 5. | Other acts prescribed by Presidential Decree as those that undermine the purpose of establishment. |
| (3) | Where an operating partner acquired real property for non-business purposes by exercising a security interest under the proviso of paragraph (2) 4, it shall dispose of such real property within the period prescribed by Ordinance of the Ministry of SMEs and Startups, not exceeding the maximum of one year. |
| (4) | An operating partner may entrust part of business operations of the venture investment association to limited partners of the venture investment association under an agreement with the venture investment association. |
| Article 53 (Management and Operation of Property of Venture Investment Associations) |
| (1) | An operating partner shall preserve and manage property of the venture investment association in accordance with the following subparagraphs: |
| 1. | The operating partner shall entrust the preservation and management of property of the venture investment association to a trust business entity; |
| 2. | When the operating partner intends to change the trust business entity, it shall obtain approval from the general meeting of partners. |
| (2) | If necessary for the management of property of a venture investment association under paragraph (1), the operating partner shall give instructions to the trust business entity on the acquisition, disposal, etc. of property of the venture investment association, and the trust business entity shall acquire, dispose of, or otherwise manage the property in accordance with the operating partner’s instructions. |
| Article 54 (Annual Reporting by Venture Investment Associations) |
An operating partner shall submit an annual report to the Minister of SMEs and Startups within three months after the end of each business year as prescribed by Presidential Decree.
| Article 55 (Withdrawal of Operating Partner from Venture Investment Association) |
An operating partner may withdraw from the venture investment association only in any of the following cases:
| 1. | Where the operating partner is unable to continue business operations due to the revocation of registration under this Act or any other statute or any other reason; |
| 2. | Where the operating partner is bankrupt; |
| 3. | Where all partners consent to the withdrawal; |
| 4. | Other cases determined and publicly notified by the Minister of SMEs and Startups. |
| Article 56 (Dissolution of Venture Investment Associations) |
| (1) | If any of the following events, a venture investment association shall be dissolved: |
| 1. | The expiration of the term of existence; |
| 2. | The withdrawal of all limited partners; |
| 3. | The withdrawal of all operating partners; |
| 4. | Cases where all operating partners are unable to continue business operations due to the revocation of registration under this Act or any other statute or any other reason; |
| 5. | Other events prescribed by Presidential Decree. |
| (2) | When an event falling under paragraph (1) 3 or 4 occurs to a venture investment association, the venture investment association may continue its business operations by admitting persons falling under any subparagraph of Article 50 (1) as operating partners, with consent of all limited partners, within three months from the date such event occurs in accordance with Presidential Decree. |
| (3) | When a venture investment association is dissolved, the operating partner shall become a liquidator: Provided, That any person other than the operating partner may be appointed as a liquidator, as provided by bylaws of the association. |
| (4) | If debts exceed the amount of the total partners’ equity at the time of dissolution of a venture investment association, operating partners shall jointly pay the debts. |
| Article 57 (Reporting of Results of Liquidation of Venture Investment Association and Cancellation of Registration) |
| (1) | When the liquidator under Article 56 (3) completes the liquidation process, it shall report the results thereof to the Minister of SMEs and Startups, without delay, in accordance with Ordinance of the Ministry of SMEs and Startups. |
| (2) | Upon receipt of the report under paragraph (1), the Minister of SMEs and Startups shall cancel the registration of the venture investment association, without delay. |
| Article 58 (Protection of Property of Venture Investment Associations) |
Notwithstanding Article 704 of the Civil Act, when a creditor to a partner of a venture investment association exercises a claim against the partner, the creditor may exercise the claim only up to the amount that the partner has invested in the venture investment association.
| Article 59 (Appropriation of Profit of Venture Investment Associations) |
A venture investment association may pay bonus to its operating partners in proportion to the return on investment, as provided by bylaws of the association, and matters regarding the methods, etc. for the determination of the return on investment for the purpose of paying bonus shall be prescribed by Presidential Decree.
| Article 60 (Prohibition on Compensation for Loss of Venture Investment Associations) |
| (1) | Unless the robust system for venture investment is unlikely to be undermined and there is good cause, no venture investment association shall do either of the following acts for investors in connection with investment in the venture investment association. The same shall also apply where the operating partner of a venture investment association does either of such acts on its own account: |
| 1. | Fully or partially compensating for a loss sustained by any investor; |
| 2. | Guaranteeing and providing a certain amount of profit to investors, regardless of whether the venture investment association has sustained a loss on investment. |
| (2) | No investor in a venture investment association shall request the venture investment association or any operating partner of the venture investment association to do any act referred to in paragraph (1). |
| Article 61 (Disclosure by Venture Investment Associations) |
| (1) | An operating partner shall disclose the following matters: |
| 1. | An annual report for each fiscal year; |
| 2. | Other documents on the operation of the venture investment association, determined and publicly notified by the Minister of SMEs and Startups. |
| (2) | Matters regarding the timing, method, etc. of the disclosure under paragraph (1) shall be determined and publicly notified by the Minister of SMEs and Startups. |
| Article 62 (Revocation of Registration of Venture Investment Associations) |
| (1) | If a venture investment association or its operating partner falls under any of the following subparagraphs, the Minister of SMEs and Startups may revoke the registration of the venture investment association, issue an order to suspend its business operations for not more than six months, or take corrective measures against, issue a warning to, or suspend assistance for, the association under this Act for not more than three years: Provided, That in cases falling under subparagraph 1, the Minister of SMEs and Startups shall revoke the registration: <Amended on Apr. 18, 2023; Jun. 20, 2023> |
| 1. | If the venture investment association or its operating partner files for registration or registration of changes under Article 50 (1) or 63-2 (1), by fraud or other improper means; |
| 2. | If the venture investment association or its operating partner ceases to meet the requirements for registration under Article 50 (2) or 63-2 (1) or (2); |
| 3. | If the venture investment association or its operating partner fails to observe the venture investment association’s obligation to invest, in violation of Article 51 or 63-2 (4); |
| 4. | If the venture investment association that otherwise determine an investment ratio pursuant to Article 70 (5) fails to comply with the relevant obligation to invest; |
| 5. | If the venture investment association or its operating partner establishes or operates a special-purpose company, in violation of Article 51-2; |
| 6. | If the venture investment association or its operating partner executes business operations, in violation of Article 52; |
| 7. | If the venture investment association or its operating partner preserves and manages its property, in violation of Article 53 (1); |
| 8. | If the venture investment association or its operating partner fails to submit an annual report, in violation of Article 54; |
| 10. | If the venture investment association or its operating partner refuses, obstructs or evades the ascertainment and inspection under Article 72 or fails to report or submits a false report; |
| 11. | If the registration of all operating partners is revoked or canceled under this Act or any other statute; |
| (2) | If any operating partner of a venture investment association falls under any subparagraph (excluding subparagraph 1) of paragraph (1), the Minister of SMEs and Startups may take any of the following measures against the operating partner: |
| 1. | Full or partial suspension of business operations for not more than six months; |
| 2. | An order to take corrective measures; |
| (3) | If any operating partner of a venture investment association falls under any subparagraph (excluding subparagraph 1) of paragraph (1) and impairs or is likely to impair robust operation of the venture investment association, the Minister of SMEs and Startups may request the operating partner to take any of the following measures against its executive officers and employees (limited to executive officers and employees involved in the relevant duties): |
| 1. | Removal or dismissal from office; |
| 2. | Suspension of performance of duties for not more than six months; |
| (4) | If a venture investment association falls under any subparagraph of paragraph (1) and any operating partner of the venture investment association is a new technology venture capitalist or other relevant entity, the Minister of SMEs and Startups may request the Financial Services Commission to take measures under paragraph (2) or (3) against the new technology venture capitalist or other relevant entity or its executive officers and employees (limited to executive officers and employees involved in the relevant duties). |
| (5) | Matters regarding the detailed guidelines and procedures for the requesting, etc. of administrative dispositions or measures under paragraphs (1) through (4) shall be determined and publicly notified by the Minister of SMEs and Startups. |
| Article 63 (Special Cases concerning Publicly Placed Venture Investment Associations) |
| (1) | Articles 11 through 16, Articles 30 through 36, Article 38, Articles 40 through 43, Articles 51 through 53, Articles 56, 58, 60, 62, 63, 65 and 80, Articles 82 through 84, subparagraphs 2, 3 and 6 through 8 of Article 85, Articles 86 through 95, Articles 181, 182, 182-2, 183, 184 (excluding paragraph (4)), 196, 218 and 219, Articles 221 through 223, Articles 229 through 241, Articles 244 through 249, Articles 249-2 through 249-22, Articles 250 through 253, and Articles 415 through 425 of the Financial Investment Services and Capital Markets Act and the Act on Corporate Governance of Financial Companies shall not apply to publicly placed venture investment associations (referring to venture investment associations not classified as privately placed funds defined in Article 9 (19) of the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply). |
| (2) | Prior to the registration of a publicly placed venture investment association, the Minister of SMEs and Startups shall consult with the Financial Services Commission thereon. In such cases, the publicly placed venture investment association shall meet the requirements prescribed in Article 50 (4), and other requirements that a publicly placed venture investment association shall meet for registration and the requirements that operating partners of a publicly placed venture investment association shall meet with respect to minimum equity capital, etc. |
| (3) | If necessary to protect public interest or partners of publicly placed venture investment associations, the Financial Services Commission may order a publicly placed venture investment association or the venture investment company that is the operating partner of the association to submit documents or to report its business operations and may authorize the Governor of the Financial Supervisory Service to inspect its business operations. <Amended on Jun. 20, 2023> |
| (4) | If a publicly placed venture investment association or the venture investment company that is the operating partner of the association violates this Act, an order issued, or a disposition made this Act or violates the Financial Investment Services and Capital Markets Act or an order issued or a disposition made under that Act, the Financial Services Commission may request the Minister of SMEs and Startups to take measures under any of Article 49 (1) and (2) or Article 62 (1) through (3), and the Minister of SMEs and Startups shall comply with such request, unless there is a compelling reason not to do so. In such cases, the Minister of SMEs and Startups shall notify the Financial Services Commission of the results of the measures taken. <Amended on Jun. 20, 2023> |
| Article 63-2 (Special Cases concerning Private Venture Fund of Funds) |
| (1) | Notwithstanding Article 50 (1), where a venture investment association organized by any of the following persons, the total amount of which is at least the amount prescribed by Presidential Decree, intends to be governed by this Act, it shall file for registration with the Minister of SMEs and Startups as a private venture fund of funds. The same shall also apply where the venture investment association intends to change any important matter prescribed by Ordinance of the Ministry of SMEs and Startups among the registered matters. <Amended on Jun. 20, 2023> |
| 1. | A venture investment company; |
| 2. | A new technology venture capitalist or other relevant entity; |
| 4. | Other persons prescribed by Presidential Decree. |
| (2) | An association that intends to file for registration as a private venture fund of funds under paragraph (1) shall meet the requirements prescribed by Presidential Decree in terms of the scope of partners, the term of existence, etc. |
| (3) | Notwithstanding the latter part of Article 50 (3), the general partner of a private venture fund of funds shall be a person falling under any subparagraph of paragraph (1), but a person prescribed by Ordinance of the Ministry of SMEs and Startups may become a general partner jointly with any person falling under any subparagraph of paragraph (1). |
| (4) | Notwithstanding Article 51 (1), a private venture fund of funds shall make investment at not less than the rate prescribed by Presidential Decree but not more than 70 percent of its total partners' equity until three years after the date of its registration. |
| (5) | Notwithstanding Articles 51 (2) through (4) and 52 (2) 5, requirements for the investment ratio, restriction on acts, etc. may be otherwise prescribed for private venture funds of funds, as prescribed by Presidential Decree. |
| (6) | Except as provided in paragraphs (1) through (5), matters necessary for the procedures and methods for the registration of private venture funds of funds and for the operation, etc. thereof shall be prescribed by Ordinance of the Ministry of SMEs and Startups. |
[This Article Newly Inserted on Apr. 18, 2023]
| Article 64 (Special Cases concerning Foreign Investment in Venture Investment Associations) |
| Article 65 (Application Mutatis Mutandis of the Commercial Act to Venture Investment Associations) |
Except as provided in this Act, the provisions of the Commercial Act concerning limited partnerships shall apply mutatis mutandis to venture investment associations: Provided, That Articles 86-4 and 86-9 of that Act shall not apply mutatis mutandis.
CHAPTER VII ESTABLISHMENT OF KOREA VENTURE INVESTMENT CORPORATION AND ORGANIZATION AND OPERATION OF FUND OF FUNDS FOR VENTURE INVESTMENT
| Article 66 (Establishment of Korea Venture Investment Corporation) |
| (1) | The Korea Venture Investment Corporation shall be established for the purpose of efficiently promoting investment for the growth and development of startups, small and medium enterprises, venture businesses, etc. <Amended on Dec. 28, 2021> |
| (2) | The Korea Venture Investment Corporation under paragraph (1) (hereinafter referred to as the “Korea Venture Investment Corporation”) shall be a juristic person. |
| (3) | The Korea Venture Investment Corporation shall be duly incorporated when it completes the registration of its establishment with the registry having jurisdiction over its principal place of business. |
| (5) | The articles of incorporation of the Korea Venture Investment Corporation shall include the following matters, and the Korea Venture Investment Corporation shall obtain authorization from the Minister of SMEs and Startups before the formulation or amendment of its articles of incorporation: |
| 3. | Locations of its principal place of business and branches; |
| 4. | Matters concerning business operations and the execution of such business operations; |
| 5. | Matters concerning property and accounting; |
| 6. | Matters concerning executive officers and employees; |
| 7. | Matters concerning the board of directors; |
| 8. | Matters concerning the amendment of the articles of incorporation; |
| 9. | Matters concerning the methods of public announcement; |
| 10. | Other matters necessary for the organization and operation of the Korea Venture Investment Corporation. |
| (6) | Except as provided in this Act, the provisions of the Commercial Act concerning stock companies shall apply mutatis mutandis to the Korea Venture Investment Corporation. |
| Article 67 (Business Activities of Korea Venture Investment Corporation) |
| (1) | The Korea Venture Investment Corporation shall conduct the following business activities in order to accomplish its purpose prescribed in Article 66 (1): <Amended on Dec. 28, 2021; Jun. 20, 2023> |
| 1. | The organization of a fund of funds for venture investment under Article 70 (1) and the execution of its business operations; |
| 2. | The organization of venture investment associations and the execution of business operations therefor; |
| 4. | Assistance in attracting foreign venture investment funds; |
| 5. | Assistance in developing overseas markets for startups, small and medium enterprises, venture businesses, etc.; |
| 6. | The promotion of venture investment companies; |
| 7. | The management of performance in venture investment; |
| 8. | Other business activities prescribed by Presidential Decree. |
| (2) | If necessary for the business activities under paragraph (1), the Korea Venture Investment Corporation may borrow funds from domestic and foreign financial institutions, etc. |
| (3) | If necessary, the State, a local government, or a public institution designated and publicly notified under Articles 4 through 6 of the Act on the Management of Public Institutions may contribute funds required for the performance of the business activities of the Korea Venture Investment Corporation under paragraph (1) to the Korea Venture Investment Corporation. |
| Article 68 (Prohibition on Disclosure of Confidential Information by Executive Officers and Employees of Korea Venture Investment Corporation) |
Any person who serves or served as an executive officer or employee of the Korea Venture Investment Corporation shall not disclose or misappropriate confidential information acquired in the course of performing his or her duties, without good cause.
| Article 69 (Guidance and Supervision of Business Operations of Korea Venture Investment Corporation) |
| (1) | The Minister of Economy and Finance shall guide and supervise the Korea Venture Investment Corporation in its business operations, and may give instructions or issue orders regarding its business operations, if necessary. |
| (2) | Matters regarding the guidance and supervision by the Minister of Economy and Finance over the Korea Venture Investment Corporation shall be prescribed by Presidential Decree. |
| Article 70 (Organization of Fund of Funds for Venture Investment) |
| (1) | The Korea Venture Investment Corporation may organize a fund of funds for venture investment (hereinafter referred to as the “Fund of Funds”) through mutual contribution by itself and a person prescribed by Presidential Decree in order to invest in the following associations, etc.: <Amended on Apr. 20, 2021> |
| 1. | Individual investment associations; |
| 2. | Venture investment associations; |
| 7. | Other persons determined and publicly notified by the Minister of SMEs and Startups. |
| (3) | The Korea Venture Investment Corporation shall manage and operate assets of the Fund of Funds according to purposes of policies, such as the boosting of venture investment. |
| (4) | The term of existence of the Fund of Funds shall be the period prescribed by Presidential Decree, and other matters necessary for the management, operation, etc. of the Fund of Funds shall be prescribed by Presidential Decree. |
| (5) | Notwithstanding Articles 13 (1) and (2) and 51 (1) and (2), the Minister of SMEs and Startups may determine different investment ratios for individual investment associations or venture investment associations in which the Fund of Funds invests. |
CHAPTER VIII VENTURE DEBT
| Article 70-2 (Venture Debt Contract) |
| (1) | Any of the following institutions (hereinafter referred to as "lending institutions") may enter into a venture debt contract with a corporation that has received or is to receive venture investment: |
| 1. | A person prescribed by Presidential Decree among fund management entities under Article 71 (1); |
| 8. | Other institutions prescribed by Presidential Decree. |
| (2) | In order for a contract under paragraph (1) to be entered into, all of the following shall be satisfied: |
| 1. | A corporation which intends to receive a venture debt shall be a corporation whose stocks are not listed on the securities market (excluding a securities market prescribed by Presidential Decree, which is established for trading stocks, etc. issued by small and medium enterprises) under Article 8-2 (4) 1 of the Financial Investment Services and Capital Markets Act (hereafter in this Article referred to as "unlisted corporation") and received or is to receive venture investment by a method determined and publicly notified by the Minister of SMEs and Startups; |
| 2. | There shall be an arrangement wherein lending institutions shall be granted the right to purchase equity shares up to a rate of 10 percent of the total amount of loans, which is determined and publicly notified by the Minister of SMEs and Startups when entering into a venture debt contract under subparagraph 1. |
| (3) | A lending institution that has entered into a venture debt contract pursuant to paragraphs (1) and (2) shall report the details thereof to the Minister of SMEs and Startups, as prescribed by Presidential Decree. |
| (4) | A lending institution or any of the following investment institutions may mutually provide data publicly notified by the Minister of SMEs and Startups, such as data for lending or investment review, with consent of the relevant unlisted corporation: |
| 2. | A venture investment association; |
| 5. | Other institutions prescribed by Presidential Decree. |
[This Article Newly Inserted on Jun. 20, 2023]
CHAPTER IX SUPPLEMENTARY PROVISIONS
| Article 71 (Investment of Fund) |
| (1) | The person who manages a fund prescribed by Presidential Decree, among funds under the National Finance Act, (hereinafter referred to as “fund management entity”) may invest a portion of the fund up to the ratio prescribed by Presidential Decree for venture investment or may contribute such portion of the fund to a venture investment association or a new technology venture business association, in accordance with its fund management plan. |
| (2) | When a fund management entity invests the fund for venture investment or contributes the fund to a venture investment association or a new technology venture business association within the scope of the fund management plan, it shall be deemed that the fund management entity obtained authorization, permission, approval, etc. under relevant statutes or regulations. |
| (3) | Notwithstanding Articles 106, 108, and 109 of the Insurance Business Act, an insurance company defined in subparagraph 6 of Article 2 of that Act may invest its funds for venture investment or contribute its funds to venture investment associations or new technology venture business associations up to the limit prescribed by the Financial Services Commission. |
| (4) | A person who manages a fund founded by the head of a local government for fostering the local small and medium enterprises pursuant to Article 8 (1) 1 of the Act on the Fostering of Local Small and Medium Enterprises and Promotion of Their Innovation may contribute a portion of the fund to the following associations in order to foster the local small and medium enterprises and venture businesses: <Amended on Jul. 27, 2021> |
| 1. | Venture investment associations; |
| 3. | New technology venture business associations. |
| Article 72 (Reporting and Inspection) |
| (1) | If necessary, the Minister of SMEs and Startups may ascertain and inspect the current status of business operations of the following persons or may require the following persons to file a report on their investment performance: <Amended on Jun. 20, 2023> |
| 1. | Professional individual investors; |
| 2. | Individual investment associations; |
| 4. | Venture investment companies; |
| 5. | Venture investment associations; |
| 6. | The Korea Venture Investment Corporation; |
| 7. | Private limited companies or limited liability companies that are operating partners of a venture investment. |
| (2) | In any of the following cases, the Minister of SMEs and Startups may authorize competent public officials to enter the location or place of business of a person referred to in any subparagraph of paragraph (1) (in cases of an association, including its operating partners) to inspect books of accounts, documents, etc. prescribed by Presidential Decree, including auditor’s reports: <Amended on Apr. 18, 2023> |
| 1. | Where it is necessary to ascertain whether the requirements for registration under Articles 9, 12, 24, 37, 50, and 63-2 are maintained; |
| 2. | Where it is necessary to ascertain whether the obligation to invest under Articles 10, 13, 26, 38, 51, and 63-2 are observed; |
| 3. | Where it is necessary to inspect the execution, etc. of business operations under Articles 14 and 52; |
| 4. | Where it is necessary to ascertain whether the restrictions on activities under Articles 27 and 39 are violated; |
| 5. | Where it is necessary to ascertain whether the standards for the management soundness under Articles 29 and 41 are observed; |
| 6. | Where it is necessary to ascertain whether information relating to duties under Articles 30 and 42 has been used; |
| 7. | Other cases prescribed by Presidential Decree as similar to those referred to in subparagraphs 1 through 6. |
| (3) | When the Minister of SMEs and Startups intends to conduct an inspection under paragraph (2), he or she shall notify the person to be inspected of the inspection plan, containing the purpose, date, time, details, etc. of inspection, no later than seven days before the scheduled date of inspection: Provided, That the same shall not apply where it is necessary to conduct an inspection urgently or where it is deemed impracticable to accomplish the purpose of inspection due to the destruction of evidence, etc. if prior notice is given. |
| (4) | Public officials who conduct an inspection under paragraph (2) shall carry an identification showing their authority and produce it to interested persons. |
| Article 73 (Submission of Data) |
The Minister of SMEs and Startups may require a new technology venture capitalist, a specialized new technology venture financing company, a new technology venture business association, the Korea Development Bank under the Korea Development Bank Act, or the Industrial Bank of Korea under the Industrial Bank of Korea Act to submit data on the performance in venture investment on a quarterly basis in order to boost venture investment and efficiently establish and implement policies.
| Article 74 (Public Notice of Guidelines for Business Operations) |
The Minister of SMEs and Startups may determine and publicly notify guidelines for business operations for venture investment in order to efficiently assist professional individual investors, individual investment associations, accelerators, venture investment companies, or venture investment associations in their venture investment. <Amended on Jun. 20, 2023>
When the Minister of SMEs and Startups intends to revoke the registration of a professional individual investor, an individual investment association, an accelerator, a venture investment company, or a venture investment association under Article 11, 22, 36, 49 or 62, he or she shall hold hearings. <Amended on Jun. 20, 2023>
| Article 76 (Delegation and Entrustment of Authority) |
| (1) | Part of the authority of the Minister of SMEs and Startups under this Act may be delegated to the heads of agencies affiliated with the ministry or Mayors/Do Governors, as prescribed by Presidential Decree. |
| (2) | The affairs assigned to the Minister of SMEs and Startups under this Act may be entrusted to the Korea Venture Investment Corporation or an institution or organization relating to venture investment, as prescribed by Presidential Decree. |
| Article 77 (Prohibition on Use of Similar Names) |
No person other than a professional individual investor, an individual investment association, an accelerator, a venture investment company, a venture investment association, the Korea Venture Investment Corporation, or the Fund of Funds may use such a name as a professional individual investor, individual investment association, accelerator, venture investment company, venture investment association, Korea Venture Investment Corporation, or Fund of Funds or any other similar name. <Amended on Jun. 20, 2023>
CHAPTER X PENALTY PROVISIONS
| Article 78 (Penalty Provisions) |
| (1) | Any of the following persons shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won: <Amended on Jun. 20, 2023> |
| 1. | A person who commits an act referred to in any subparagraph of Article 28 (1) or 40 (1) as a large shareholder, etc. with intent to obtain his or her own benefit, in violation of Article 28 (1) or 40 (1); |
| 2. | A person who uses information relating to duties for his or her own benefit or a third party’s benefit without good cause, in violation of Article 30 or 42; |
| 3. | A person who uses the property of a private investment association or of venture investment association as an operating partner of the fund for his or her own benefit or a third party’s benefit, in violation of Article 14 (2) 1 or 52 (2) 1. |
| (2) | Any of the following persons shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding 10 million won: |
| 1. | A person who fails to dispose of shares, in violation of an order to dispose of shares under Article 37 (4); |
| 2. | A person who discloses or misappropriate confidential information acquired in the course of performing duties without good cause, in violation of Article 68. |
| Article 79 (Joint Penalty Provisions) |
If the representative of a corporation or an agent or employee of, or any other person employed by, the corporation or an individual commits any violation described in Article 78 in performing any business affair of the corporation or individual, the corporation or individual shall, in addition to punishing the violator accordingly, be punished by a fine prescribed in the relevant Article: Provided, That the same shall not apply where the corporation or individual has not been negligent in the exercise of due care and supervision as to the relevant business affair to prevent such violation.
| Article 80 (Administrative Fines) |
| (1) | Any of the following persons shall be subject to an administrative fine not exceeding 30 million won: <Amended on Apr. 18, 2023; Jun. 20, 2023> |
| 2. | A person who fails to submit an annual report in accordance with Article 16, 31, 44 or 54 or who submits a false annual report; |
| 3. | A person who fails to make a disclosure in accordance with Article 21-2, 32, 45, or 61 or who makes a false disclosure; |
| 4. | A person who fails to report a transfer of business or a division and merger in accordance with Article 33 (1) or 46 (1) or who falsely report a transfer of business or a division and merger; |
| 5. | A person who fails to submit a report in accordance with Article 72, who submits a false report, or who refuses, obstructs, or evades an inspection conducted under that Article; |
| 6. | A person who uses such a name as a professional individual investor, private investment association, accelerator, venture investment company, venture investment association, the Korea Venture Investment Corporation, or Fund of Funds or any other similar name, in violation of Article 77. |
| (2) | Administrative fines under paragraph (1) shall be imposed and collected by the Minister of SMEs and Startups as prescribed by Presidential Decree. |
ADDENDA <Act No. 16998, Feb. 11, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability to Requirements for Operating Partners of Individual Investment Associations)
Article 3 (Applicability to Prohibition on Compensation for Loss of Venture Investment Associations)
Article 60 shall begin to apply to venture investment associations registered after this Act enters into force. Article 4 (Special Cases concerning Obligation of Venture Investment Associations to Invest)
Article 5 (General Transitional Measures concerning Administrative Dispositions and Other Measures)
Article 6 (Transitional Measures concerning Registration of Individual Investment Associations and Other Entities)
| (3) | An investment company for the establishment of small and medium enterprises, registered under Article 10 of the previous Support for Small and Medium Enterprise Establishment Act at the time this Act enters into force, shall be deemed an investment company for the establishment of small and medium enterprises, registered under this Act. |
Article 7 (Transitional Measures concerning Renaming of Fund of Funds for Small and Medium Enterprise Investment)
Article 8 (Transitional Measures concerning Korea Venture Investment Corporation)
| (2) | The old corporation shall prepare the articles of incorporation under this Act and shall obtain authorization therefor from the Minister of SMEs and Startups within two months from the enforcement date of this Act. |
| (3) | The new corporation shall succeed to all assigned business affairs, rights, obligations, and property of the old corporation at the time this Act enters into force. |
| (4) | The value of the property to be transferred to the new corporation under paragraph (3) shall be appraised with the book value on the date immediately before the registration date of the incorporation of the new corporation. |
| (5) | The name of the old corporation, entered in registers and other official records at the time of incorporation of the new corporation, shall be deemed the name of the new corporation. |
| (6) | Executive officers and employees of the old corporation at the time of incorporation of the new corporation shall be deemed executive officers and employees of the new corporation; and the date of previous appointment shall be a base date for the calculation of their term of office. |
| (7) | Acts done by or to the old corporation before the incorporation of the new corporation shall be deemed acts done by or to the new corporation. |
Article 9 (Transitional Measures concerning Penalty Provisions and Administrative Fines)
Article 10 Omitted.
Article 11 (Relationship to Other Statutes or Regulations)
ADDENDA <Act No. 17799, Dec. 29, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 26 Omitted.
ADDENDA <Act No. 18128, Apr. 20, 2021>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 10 Omitted.
ADDENDA <Act No. 18358, Jul. 27, 2021>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 through 6 Omitted.
ADDENDA <Act No. 18661, Dec. 28, 2021>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 8 Omitted.
ADDENDUM <Act No. 19179, Jan. 3, 2023>
This Act shall enter into force three months after the date of its promulgation.
ADDENDUM <Act No. 19395, Apr. 18, 2023>
This Act shall enter into force six months after the date of its promulgation.
ADDENDA <Act No. 19504, Jun. 20, 2023>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability to Requirements for Operating Partners of Individual Investment Associations)
The amended provisions of Article 12 (4) shall also apply where applications are filed for the registration of an individual investment association before this Act enters into force and the registration procedures are in the progress as at the time this Act enters into force. Article 3 (Applicability to Penalty Provisions against Operating Partners of Individual Investment Associations)
The amended provisions of Article 78 (1) 3 regarding individual investment associations shall begin to apply to violations committed after this Act enters into force. Article 4 (Transitional Measures concerning Accelerators' Obligation to Invest)
Where the date of registration as an accelerator among those who are subject to the amended provisions of the proviso of Article 26 (1) is earlier than the enforcement date of this Act, the obligation to make investment under the amended provisions shall be fulfilled by the date on which three years have elapsed from the enforcement date of this Act. Article 5 (Transitional Measures concerning Registration of Venture Investment Companies)
The investment company for the establishment of small and medium enterprises registered under the previous provisions as at the time this Act enters into force shall be deemed registered as a venture investment company registered on the enforcement date of this Act.
Article 6 Omitted.
Article 7 (Relationships to Other Statutes or Regulations)
A citation to any provisions of the previous Venture Investment Promotion Act by any other statute or regulation as at the time this Act enters into force shall be deemed a citation to the corresponding provisions of this Act in lieu of the previous provisions, if such a corresponding provision exists in this Act.