Startup Eligibility Period Extended for Suspensions Due to Military Service or Childbirth

Financial soundness assessment exemption for early-stage startups operating for less than three years when applying for government R&D programs
“Plan to Rationalize Regulations for Startups” submitted to Regulatory Rationalization Committee plenary meeting

Even if a business is suspended for reasons such as military service or childbirth, the period during which it qualifies as a startup will be extended, allowing it to receive government startup support. Companies in which an accelerator has invested in at least 50% of the shares will also qualify as startups and be eligible for support. In addition, early-stage startups will be exempt from financial soundness assessments when applying for government research and development (R&D) programs.

The Ministry of SMEs and Startups said on October 23 that it had submitted a "Plan to Rationalize Regulations for Startups" to the second plenary meeting of the Regulatory Rationalization Committee. The plan aims to remove unreasonable regulations that hinder people from starting businesses and support startup growth.

Following consultations with relevant government agencies, including the Office for Government Policy Coordination, the Financial Services Commission, and the Ministry of Employment and Labor, the ministry drew up measures to rationalize regulations across 10 areas, tailored to the startup life cycle from founding and growth to a fresh start.

Improving Uniform and Rigid Startup Support Criteria

First, the government will improve uniform and rigid criteria for startup support. Currently, there are no exceptions in calculating how long a company has been operating as a startup, even when it suspends business for unavoidable reasons such as military service or childbirth. Going forward, a special provision will allow such unavoidable business interruptions to extend the existing seven-year eligibility period by up to five years, enabling companies to receive government startup support for longer.

Government R&D programs have also restricted applications from companies with high debt ratios or complete capital impairment. Going forward, the government plans to exempt early-stage startups that have been operating for less than three years from financial soundness assessments, given that it can take a long time for them to generate revenue. In addition, companies launched with an accelerator investing in at least 50% of their shares will be included in the definition of startups, supporting the growth of companies established through the "venture studio" model.

Improving Startups' Financial Transactions and Investment Environment

The government will also revise joint guidelines to ease the stringent documentation requirements that early-stage startups must meet when seeking to lift daily transfer limits imposed upon opening a bank account. It plans to add credible eligibility criteria, such as a record of participating in startup support programs, so that early-stage startups can have the limits lifted more quickly.

The government will also improve the requirements for extending the maturity of sub-funds backed by the Korea Fund of Funds, increasing flexibility in fund management for long-term investment. It plans to expand the types of investment institutions whose investments can qualify a company for venture business certification, and to consider gradually extending eligibility to asset management companies, thereby broadening funding channels for startups and venture companies seeking to scale up. In addition, it will improve the technology-based special listing process by preparing common submission materials and standardized forms, and reduce the time and administrative burden involved in preparing for a listing.

Promoting Fresh Starts

The government will also establish a policy foundation to help entrepreneurs use their startup experience as an opportunity to try again. To this end, it will redesign the Sincere Business Management Evaluation system as a "fresh-start gateway" linked to cross-government special provisions for restarting businesses. The evaluation will shift its focus from the commercial viability of technology to efforts to recover from business failure. Special provisions for recovery-related support will first be applied in full to Ministry of SMEs and Startups programs, and then significantly expanded in consultation with relevant government agencies.

In addition, taking into account the startup environment, where business models change frequently and new companies are often established, startup support will cover cases such as sole proprietors starting businesses in different industries and corporate executives launching businesses on their own. Until now, startups by existing business owners have been viewed as continuations or expansions of their existing businesses and excluded from startup support. The government will also establish a certification system to issue a "Challenge and Startup Career Certificate" documenting experience such as serving as a corporate representative or preparing to launch a startup. It plans to link the system with the Ministry of Employment and Labor's integrated career certification service for management.

The Ministry of SMEs and Startups plans to establish a public-private regulatory rationalization governance framework for emerging industries and continue rationalizing regulations to reflect the voices of startups. To this end, it will broadly identify regulations through a regulatory innovation network of private-sector associations and organizations, as well as regulatory screening under the Startup for All Project. It will also establish a Startup and Venture Regulatory Innovation Committee under the Regulatory Rationalization Committee, where private-sector experts and relevant government agencies will jointly discuss regulatory rationalization measures. The government will also expand channels for regulatory testing, including the launch of joint regulatory demonstration projects for startups and a system of regulatory-free special zones linked across regions.

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