Large firms in S. Korea to be allowed to own venture capital on condition

2020.07.29 12:21:34 | 2020.07.29 16:04:44

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South Korean industrial conglomerates restricted in access to financial sector will be allowed to create a venture capital if a holding entity wholly owns it under deregulation aimed to funnel more capital into venture enterprises.

The government is expected to announce its final outline on corporate venture capital (CVC) on Thursday during its emergency economic meeting, according to the Ministry of Economy and Finance and Fair Trade Commission on Tuesday.

It is still debating whether to allow corporate venture capital to receive investments from external sources, but sources said it is expected to conditionally approve it to meet the goal of spurring a venture boom. But it is expected to ban CVC investments in companies owned by family members of conglomerates.

Currently, a holding company of a large-sized firm is prohibited from establishing a CVC because of the law banning non-financial companies from owning a financial unit. But the government is seeking to revise the law to stimulate investments in startups to vitalize the virus-stricken economy.

The government decided to revise the fair trade act, not the venture investment promotion act under the Ministry of SMEs and Startups, to include some of the exceptions, in order to strengthen efforts to check large companies’ dominance.

Big companies have been strictly restricted in owning financial units as part of a crackdown aimed at preventing conglomerates from getting too big, FTC chairwoman Joh Sung-wook said during the State Affairs Committee at the National Assembly. She stressed that the commission will work hard to minimize side-effects of the deregulation by arranging proper restrictive measures.

By Baek Sang-kyung and Choi Mira

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