The proposed amendment to allow multiple-voting shares for venture businesses passed the National Assembly’s Legislation and Judiciary Committee on Wednesday, raising optimism for the venture industry recently struggling from an economic downturn and impacts from the collapse of Silicon Valley Bank.

The bill to amend the Act on Special Measures for the Promotion of Venture Businesses was proposed 28 months ago in December 2020 by the Ministry of SMEs and Startups following concerns that ventures and startups tend to see their stakes being diluted after obtaining some large-scale investments, leaving them vulnerable to hostile mergers and acquisition or external capital.

If passed by the Plenary session of the National Assembly on Thursday, the introduction of multiple voting shares would allow the founders or the largest shareholders of a venture business or a startup raise funds with less risk of losing control of the company. The venture industry is welcoming the move, expecting the introduction of multiple voting shares to invigorate domestic venture firms amid sluggish investment activities across the world lately.

If multiple voting shares are allowed by law, unlisted venture and startup companies can issue shares with a maximum of 10 votes per share if they see the founder‘s stakes fall below 30 percent or the founder loses the status of the largest shareholder in the process of raising funds. Venture companies and startups need external capital for growth. The multiple voting shares is a type of defense mechanism to ensure that founders operate their companies without risking control even if their stake is diluted from investments.

According to the Korea Venture Business Association, countries like the U.S., Japan, India and Singapore allow multiple voting shares on an exceptional basis while maintain the “one vote per share” principle. Many Silicon Valley-based companies and global unicorns, including Google LLC, have adopted multiple voting shares. China has also allowed multiple voting shares since 2019.

The delay in the introduction of multiple voting shares has prompted some Korean venture firms to list on foreign markets. Coupang Inc. listed on the Nasdaq in 2021 instead of the Korean market. Kim Bom-seok, commonly known as Bom Kim, the then-board chair of Coupang Inc., was holding only 10.2 percent stake of the company’s shares, but Kim was granted 29 votes per his share, which allowed him to maintain control until after the listing without fear of any hostile M&A.

Some activist groups, however, express concerns that the new system may be abused by the largest shareholders to maintain their grip or consolidate unreasonable control. The venture industry counterclaims that such concerns are a mere speculation and that there are sufficient safeguards in place.

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