S Korea to legalise crowd funding to help financing of venture companies

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SEOUL, May 16 (Xinhua): South Korea planned to legalize the crowd funding system as part of efforts to help venture companies finance their seed money from a number of small investors with fewer restrictions, the Finance Ministry said yesterday. Regulations for the crowd funding, including business requirements, investment ceiling and investor protection, will be introduced, the Ministry of Strategy and Finance said in a joint statement with related ministries. The crowd funding, which began to gain attention after the U.S. legalized such system at the JOBS Act in April 2012, refers to the funding of a company by selling small amounts of equity to a wide pool of investors via the Internet. The ministry said that the crowd funding will help venture companies fund their seed money from a wide pool of small investors through online funding platform, saying that it will ease posting regulations over such funding. Angel investors, who inject seed money into small startups or provide ongoing financial support for the growth startup companies, will receive more tax benefits to ease burden for their investment risks, the ministry said. Those measures came amid concerns that lack of funding has blocked startups of small businesses with creative and innovative technologies. Angel investors, who tend to inject money into growth startup companies, usually those of less than three business years, account for only 2 per cent of the total venture investment in South Korea, while the figure in the U.S. reaches nearly 80 per cent, the ministry said. To promote investment into startup companies from the private sector, the government planned to set up a fund worth 500 billion won (450 million U.S. dollars) consisting of 350 billion won from the private sector, 100 billion won in government money and 50 billion won from private fund managers. The fund, named"future creation fund,"will have various divided accounts that will be managed by respective management companies. The government money will offset possible losses from the investment, while the private investors will have the priority right to gains from the investment. Another fund, named "growth ladder fund,"will be launched with the size of 2 trillion won to provide diverse financial support to the already-grown small businesses. The fund will be comprised of 600 billion won in public funds and 1.4 trillion won from the private sector. Here in Seoul, there remained many obstacles to securing new technologies through mergers and acquisitions (M&A) with small companies of innovative technology, the ministry said, noting that there have been heavy taxes imposed on company sales.