S. Korea to implement dual-class shareholding for startups
- 4 years ago
비상장 벤처 복수의결권 도입...대기업•스타트업 상생생태계 만든다
To help startup companies get through the economic crisis caused by the pandemic and encourage the mutual growth of startups and big corporations, the government is going to enable startups to have multiple classes of stock as in, class A and class B.
The idea is to help the people who start companies raise money by selling shares... without the risk of losing control over their companies.
Eum Ji-young has the details.
A proposal from the Moon Jae-in administration would allow some unlisted local startups to have dual-class share structures.
The government aims to help the owners of startups grow their companies by raising funds through the sale of shares while maintaining stability in terms of management.
Currently, in matters decided by shareholders, ( 1) one share equals one vote. But if the bill is approved by the National Assembly, then the founders of a company could be given a special class of shares, each of which gives them up to 10 votes.
To adopt the dual-class system, three quarters of existing shareholders would have to agree to it.
The bill also includes a sunset clause limiting dual-class structures to 10 years.
Dual-share systems are common practice in many other countries, including the U.S., the UK, France, China and India, and have been implemented by tech companies including Google, Facebook and Alibaba.
Experts say, however, that the system could make investors wary.
"If the company has a dual class structure, the management or the founder could easily reject the views of other shareholders, so that could make people reluctant to invest."
In July, the government also relaxed another rule to help startups by allowing big industrial conglomerates like SK and LG to set up subsidiaries to invest directly in outside startups as corporate venture capital, or so-called CVC.
Another expert said CVCs are beneficial because they help residual funds flow from industrial conglomerates to venture firms, but they have problems as well.
"The problem is that this goes against the rule of separating industrial and financial capital. And more importantly it could be used to raise funds in ways that benefit only the family that owns the holding company."
To address this problem, the government is only allowing the CVCs to take funds from their parent companies so that they serve their intended purpose.
Eum Ji-young Arirang News.
To help startup companies get through the economic crisis caused by the pandemic and encourage the mutual growth of startups and big corporations, the government is going to enable startups to have multiple classes of stock as in, class A and class B.
The idea is to help the people who start companies raise money by selling shares... without the risk of losing control over their companies.
Eum Ji-young has the details.
A proposal from the Moon Jae-in administration would allow some unlisted local startups to have dual-class share structures.
The government aims to help the owners of startups grow their companies by raising funds through the sale of shares while maintaining stability in terms of management.
Currently, in matters decided by shareholders, ( 1) one share equals one vote. But if the bill is approved by the National Assembly, then the founders of a company could be given a special class of shares, each of which gives them up to 10 votes.
To adopt the dual-class system, three quarters of existing shareholders would have to agree to it.
The bill also includes a sunset clause limiting dual-class structures to 10 years.
Dual-share systems are common practice in many other countries, including the U.S., the UK, France, China and India, and have been implemented by tech companies including Google, Facebook and Alibaba.
Experts say, however, that the system could make investors wary.
"If the company has a dual class structure, the management or the founder could easily reject the views of other shareholders, so that could make people reluctant to invest."
In July, the government also relaxed another rule to help startups by allowing big industrial conglomerates like SK and LG to set up subsidiaries to invest directly in outside startups as corporate venture capital, or so-called CVC.
Another expert said CVCs are beneficial because they help residual funds flow from industrial conglomerates to venture firms, but they have problems as well.
"The problem is that this goes against the rule of separating industrial and financial capital. And more importantly it could be used to raise funds in ways that benefit only the family that owns the holding company."
To address this problem, the government is only allowing the CVCs to take funds from their parent companies so that they serve their intended purpose.
Eum Ji-young Arirang News.