IPO failure-related stock price 'haircuts' face curbs as venture investment partnership abuses are blocked

[Financial News] Venture investment partnerships will be prohibited from imposing contract terms that disadvantage investee companies, such as excessively lowering stock prices because an initial public offering (IPO) failed.
 According to the Ministry of SMEs and Startups on the 22nd, an amendment to the 'Venture Investment Promotion Act' containing these provisions passed the Cabinet meeting that day.
 The amendment first prohibits major shareholders of venture investment companies and others from providing or receiving money to exert undue influence over venture investment companies. The measure is intended to strengthen the independence of venture investment company management.
 It also establishes provisions prohibiting general partners of venture investment partnerships from entering into unfair investment contracts. The provisions are intended to restrict unfair terms that place excessive burdens on investee companies when venture investment partnerships enter into investment contracts.
 Specifically, the restrictions cover cases in which investment funds are recovered early without a legitimate reason based on changes in management performance indicators, or recovered early without a specified grace period. They also cover so-called 'Refixing' clauses that excessively adjust securities prices because an IPO has failed.
 The amendment also establishes a legal basis for denying the validity of such terms and imposing administrative sanctions when unfair investment contract terms are set.
 The amendment will be promulgated on the 29th and take effect on March 30, 2027. The Ministry of SMEs and Startups plans to revise subordinate regulations before the system takes effect.
 No Yongseok, first vice minister of the Ministry of SMEs and Startups, said, "We will continue communicating with the industry and pursuing the necessary support and institutional improvements to enhance confidence in the venture investment market."
[email protected] Kim Hyun-chul Reporter