"Shutdown Is Not a Failure but a Springboard for a New Challenge"... Restriction Period for Re-Starting in the Same Industry Shortened to One Year

Shortened Waiting Period for Same-Industry Re-Startups

Cabinet Approves Amendment to Enforcement Decree of SME Establishment Support Act

The period during which a previously closed business cannot be recognized as a startup upon reopening in the same industry will be drastically shortened from the current three years to one year. This measure aims to minimize the downtime after business failure and promote swift re-startups based on past experience.

The Ministry of SMEs and Startups announced on August 25 that it had passed a partial amendment to the Enforcement Decree of the Support for Small and Medium Enterprise Establishment Act at a Cabinet meeting. Under the current laws, a "startup" is defined as establishing a new SME, while the Enforcement Decree specifies exceptions to prevent duplicate benefits from startup support programs. Until now, if an individual business owner closed their business and then established a new individual or corporate business in the same industry, they could only be recognized as a startup and participate in government startup support programs three years after closing the previous business.

However, as the startup environment is rapidly changing due to factors such as artificial intelligence (AI) and technology convergence, the three-year period has been criticized as being too long and as a restriction on the rapid re-entry into business based on industry experience. The Ministry recognized that the average preparation period for re-starting in the same industry is about 11 months, and thus has shortened the period in which a re-startup is not recognized as a startup from three years to one year.

The amended enforcement decree is scheduled to go into effect in September. Even companies that started their business before the new rule goes into effect will be eligible for the revised startup recognition criteria if less than seven years have passed since they opened. Cho Kyungwon, Director General of Startup Policy at the Ministry, said, "Through this amendment, we expect to minimize the post-failure gap and boost re-startups, thereby creating a virtuous cycle in the startup ecosystem," adding, "We will continue to improve systems for startup promotion by reflecting on-site feedback in the future."

This content was produced with the assistance of AI translation services.