The government has extended its support to companies starting businesses overseas, aiming to increase the number of successful Korean startups in the global market. The Ministry of SMEs and Startups announced that amendments to the “Act on Support for Small and Medium Enterprise Establishment” and its enforcement decree, which provide the legal basis for supporting overseas startups, were approved at a Cabinet meeting on Feb. 20.
The key change shifts the startup policy paradigm from supporting only domestic companies to include those established abroad, enabling the government to actively support the establishment, settlement, and growth phases of companies in foreign countries. The government has laid the legal groundwork to support Korean nationals or domestic companies that start businesses abroad or establish foreign corporations, as well as domestic companies that become subsidiaries of newly established foreign corporations through overseas corporate transformation.
The amendment specifically defines “overseas startup” as a corporation established abroad by Koreans or domestic corporations owning a significant share of total stock or investment, thereby having substantial control. An “overseas startup company” is defined as a corporation that has not exceeded seven years since the commencement of its business abroad.
The Ministry of SMEs and Startups anticipates that, with “overseas startup companies” now specifically defined, they could receive more varied support in the future through other laws such as the “Act on the Promotion of Venture Investments” and the “Restriction of Special Taxation Act.”
Upon the enforcement decree’s revision, the government plans to set additional criteria to support overseas startup companies controlled by Koreans or domestic corporations that contribute to the South Korean economy by generating employment and sales domestically.
The Startup Support Act also introduces new provisions, including the basis for canceling the designation of dedicated organizations for integrity management evaluation and a rule that prevents organizations with a designation that has been canceled from being re-designated for two years. The integrity management evaluation system is used to determine whether a failed company has not engaged in fraudulent accounting, intentional defaults, or unfair dismissals, and thus can be selected for government support for restarting a business.
The amended Startup Support Act, passed by the Cabinet meeting, will be proclaimed on Feb. 27 and take effect six months later, while the amendments to the “Startup Support Act Enforcement Decree” will be implemented starting March 15.