Giving a Second Chance to Venture Businessmen

In 2005, a program that gives a second chance to venture entrepreneurs will be introduced. Under the system, when venture businessmen without records of prior irrationality and moral hazard fail, the Korea Technology Credit Guarantee Fund will financially support them after a verification process.

In addition, the number of shares assigned to shareholders of IPO companies at KOSDAQ will increase from 20 percent to 40 percent, and the daily range of price limits on the KOSDAQ market will be expanded from the current 12 percent to 15 percent.

Against this backdrop, expectations are high that the KOSDAQ market that has been suffering in the excessive recession will be revitalized, and that venture investment will recover to some extent.

The government held an economic ministerial meeting on December 24, convened by Lee Hun-jae, the vice economic prime minister, and prepared “ways to invigorate venture start-ups” with the above-mentioned details.

The Ministry of Finance and Economy said it would enforce the related law as soon as it passes the National Assembly, and implement other plans that do not need revisions of law starting in the first quarter of 2005. According to the government’s proposal, the ratio of small shareholders, whose transfer income tax is exempted in terms of disposition of shares, will expand from less than three percent to less than five percent of the whole number of issued shares in order to attract more institutional investors to venture enterprises.

Under the plan, IPO companies in the KOSDAQ market should save 30 percent of their income so that they can make up for potential losses, given that they stand a high chance of losses at an early stage.

Chang-Won Kim changkim@donga.com