South Korea will allow holding companies of large conglomerates to own corporate venture capital (CVC) under limited terms related to equity, sourcing external funds, and investment outlet.
Hong Nam-ki, deputy prime minister and minister of economy and finance, said in an economic ministerial meeting on Thursday that the government will in principle allow general holding companies to own CVCs.
Mechanism will be placed to strictly prevent side effects from easing in separation of industrial and financial capital.
Currently, non-financial companies are not allowed to own financial subsidiaries under the country’s separation of industrial and financial capital regulation. CVCs are regarded as financial companies.
Under revision, general holding companies will be able to set up CVCs but under condition that they fully own them as subsidiary. They will be able to set up CVCs in the same form as venture capitals as small and medium enterprise establishment investment companies or new technology business financier.
CVCs owned by general holding companies will be able to borrow funds within 200 percent of equity capital and secure external funds that do not exceed 40 percent of total equity capital.
Conglomerate owners and financial subsidiaries will be prohibited from investing in funds. CVCs will also be banned from investing in companies related to conglomerate family, subsidiaries, and large business groups.
CVCs in principle will be allowed to manage only investment operations without engaging in other financial business such as loan operations.
The government plans to amend the country’s fair trade act by this year to allow general holding companies to own CVCs.
“Major advanced countries allow large companies to own CVCs,” Hong said, noting how Google Ventures set up by Google holding company Alphabet Inc. has led to a number of successful investment cases such as Uber. “CVCs are rooting as a global trend,” he added.
Hong noted that the government came up with measures to allow general holding companies to limitedly own CVCs after long period of discussion to enhance innovativeness and dynamism of Korean economy, establish virtuous venture investment circle ecosystem by boosting recouping market, and expand venture investment of large companies.
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]