Government moves to ease bank transfer limit regulations for startups
The government will overhaul regulations that hinder the growth of startups. Most notably, on the 23rd, the Regulatory Rationalization Committee's plenary meeting discussed ways to relax the bank daily transfer limit rules that restrict fund transfers by newly founded startups. The Ministry of SMEs and Startups, in consultation with related ministries including the Office for Government Policy Coordination, the Financial Services Commission, and the Ministry of Employment and Labor, has put together a 'Plan to Rationalize Startup Regulations' containing 10 tasks across the stages of founding, growth, and re-challenge.
A key change concerns the period for startup recognition. Under the current Act on Support for Small and Medium Enterprise Establishment, companies less than seven years old are recognized as startups. Even when a CEO paused business for military service or childbirth, that period counted fully toward the company's age, meaning some companies with short actual operating histories were excluded from support. The government has decided to create a special exception allowing up to five additional years of startup support beyond the seven-year period when such unavoidable gaps exist. Venture studio-type companies co-founded with a startup planner (AC) investing at least 50% equity will also be recognized as startups.
The threshold for R&D support programs—previously blocked at the application stage for companies with high debt ratios or fully eroded capital—will also be lowered. Going forward, companies less than three years old can apply first, with their financial condition assessed during the selection and evaluation process. The measure takes into account early-stage tech startups that take time to generate revenue.
The government will also fix account issues that entrepreneurs have raised in the field. To prevent financial fraud, newly opened accounts are subject to daily transfer limits of 1 million won each for ATMs and electronic financial transactions, and 3 million won at bank tellers. To lift these limits, the purpose of transactions must be proven, but required documents varied from bank to bank and branch to branch. The government plans to establish joint financial-sector guidelines and allow limits to be lifted quickly when credible verification materials—such as a record of selection for a government startup support program—are available.
The investment environment will also change in part. Funds backed by the fund-of-funds previously required unanimous consent from all contributors to extend their maturity, but going forward, agreement from only a certain proportion or more will suffice. The number of investment institutions recognized for venture business certification will increase from 21 to 23, adding startup and venture-specialized private equity funds and venture business investment trusts. Companies preparing for technology special listings will be able to submit documents to the two evaluation agencies using common materials and standard forms instead of preparing separate documents for each.
Support for second chances will also expand. The faithful management evaluation, which scrutinized a re-founder's past business conduct, will shift its criteria to focus on rehabilitation efforts, and related special exceptions will be extended to programs run by ministries other than the SME ministry. Criteria that treated new ventures as extensions of existing businesses and excluded them from startup support will also be relaxed, so that sole proprietors starting a business in a different sector and executives of existing corporations founding a new corporation on their own will also be recognized as startups. A provisionally named 'Challenge and Startup Career Record,' allowing founders to prove their experience as corporate executives or in startup preparation, will also be newly created and linked with the Ministry of Employment and Labor's integrated career verification service.
However, many of these tasks require amendments to enforcement decrees and related rules. Relaxing the criteria for exclusion from startup support requires revising the enforcement decree of the Act on Support for Small and Medium Enterprise Establishment. Expanding the investment institutions recognized for venture certification requires amending the enforcement decree of the Venture Business Act, while extending fund-of-funds maturities will be pursued through revision of the standard agreement, and simplifying technology special listing documents through revision of the operating guidelines for the specialized evaluation system.
