Hello, this is Attorney Kim Kwang-sik from Cheongchul Law Firm.

In the process of preparing a startup investment platform or a technology finance company, I often receive the question of whether to go with "new technology business financing or venture investment company." Although both systems appear to be close to investing in technology and venture companies, the applicable laws, supervisory authorities, capital requirements, possible business activities, and regulations imposed after registration are quite different.

In particular, according to the latest legal standards, new technology business financing operates under the Credit Specialized Financial Business Act and requires registration with the Financial Services Commission, while venture investment companies are registered with the Minister of SMEs and Startups according to the Act on the Promotion of Venture Investment. Therefore, simply understanding that "both are companies that invest in startups" can lead to overlooking significant differences in capital requirements, human resource composition, business scope, and post-registration regulations at the actual design stage.

[Question]

What procedures are required for registration of new technology business financing under the Credit Specialized Financial Business Act, and how does it differ from venture investment companies under the Venture Investment Act?

[Answer]

1. Concept of new technology business financing and starting point of registration

New technology business financing under the Credit Specialized Financial Business Act does not simply refer to the business of investing in startup equity. The law broadly defines the scope of new technology business financing to include investment in, lending to, management and technical guidance of new technology businesses, establishment of new technology business investment associations, and management and operation of association funds. In other words, this system can be viewed as a broader technology finance system that includes not only simple "equity investment" but also loan-type financial support and growth support functions.

Additionally, the Credit Specialized Financial Business Act distinguishes cases among new technology financiers that do not engage in other financial businesses like credit card businesses, leasing businesses, or installment finance as "specialized companies in new technology business financing," and this distinction directly affects the capital standards and registration strategies observed later. Ultimately, when considering new technology business financing, one must first organize how to perform financial functions for technology companies rather than simply thinking of "establishing one investment company," and how to implement those functions within the framework of the Credit Specialized Financial Business Act.

2. Registration procedures and preparation documents for the Financial Services Commission

The practical starting point for registration of new technology business financing is a precise understanding of the jurisdiction and capital standards. New technology business financing must be registered with the Financial Services Commission, but in reality, it is processed by the financial supervisory authority, and the minimum capital varies according to the company structure. If you wish to register as a specialized new technology business financing company, you need 10 billion won, and if you wish to carry out either or both of leasing, installment finance, or new technology business financing excluding credit card business, you will need 20 billion won. Therefore, the company must clearly determine at the outset whether it will solely conduct new technology business financing or operate along with other financial businesses. During the registration application stage, details such as name, headquarters, capital, amounts contributed by each shareholder, share ratios, executives, the content of the intended business, whether it is a specialized new technology business financing company, and whether it engages in other businesses must be filled out in the application form, and articles of incorporation, proof of capital contribution, financial statements and annexes, executive resumes, and proof of experience must also be submitted. The Financial Services Commission will review these materials based on whether the legal capital requirement is met, whether there are disqualifications, and the appropriateness of the application contents, and will decide on registration after requiring supplements if necessary. Practically, it is more important to explain whether the shareholder composition, source of funds, executive experience, and the actual business model to be pursued align with the legal scope of new technology business financing rather than just the formalities of the registration documents.

3. Institutional differences with venture investment companies

Although new technology business financing and venture investment companies are often mentioned together because both can invest in technology and venture companies, they actually differ from the starting laws and supervisory authorities. New technology business financing is a system under the Credit Specialized Financial Business Act and must be registered with the Financial Services Commission, whereas venture investment companies are registered with the Minister of SMEs and Startups under the Act on the Promotion of Venture Investment. The capital threshold also differs significantly. As mentioned earlier, new technology business financing requires capital of 1 billion or 2 billion won, while venture investment companies only need a paid-in capital of at least 200 million won to meet the registration criteria according to the enforcement decree. This difference is not just a matter of numbers. New technology business financing has a character closer to that of a financial institution within the framework of the Credit Specialized Financial Business Act, while venture investment companies are more focused on investment and association management functions within the venture investment ecosystem. Therefore, when designing small initial management companies, the venture investment company system may be a realistic choice, but if considering comprehensive financial functions for technology companies, the new technology business financing system might be more suitable.

The differences between the two systems are not only evident in the registration authority and capital requirements but also in the scope of permissible business activities and regulations imposed after registration. New technology business financing, according to the legal text, includes not only investments but also loans, management, and technical guidance, thus allowing for various forms of financial support for technology companies beyond simple fund management functions. On the other hand, venture investment companies are designed around investments in venture enterprises under the Venture Investment Act and the formation and management of venture investment associations, and registration requirements include having at least 2 full-time professionals, meeting eligibility criteria for major shareholders and executives, etc. Additionally, venture investment companies must maintain statutory investment obligations after 5 years of registration, with the ratio set at 40% according to enforcement decrees. In other words, while venture investment companies can start with relatively lower capital, they continuously bear specialized staffing requirements and investment obligations focusing on venture investments, whereas new technology business financing requires higher capital and is based on the premise of crossing hurdles of financial regulation while being able to perform a broader technology finance function. Because of this, although the two systems may appear similar on the surface, their actual operational methods and compliance points are quite different.

In practice, it is more appropriate to approach it based on "which business model fits better with which system" rather than saying "which system is better." For example, if a company intends to conduct not only equity investment but also loans, growth support, establishment, and operation of associations broadly for technology companies, then new technology business financing may be a better fit institutionally. In contrast, if starting with relatively lower capital while operating a venture investment association, investing in early-stage companies, and running a professional human resources-centered investment organization, the structure of a venture investment company may be more realistic. However, a commonly overlooked aspect during the establishment phase is that this choice affects not only the registration authority but also the methods of capital procurement, shareholder composition, executive appointments, internal controls, future investment execution speed and ratio, and the design of associations. Therefore, whether to choose registration under new technology business financing or venture investment companies should be carefully considered from the stage of writing the business plan, especially if it’s a structure straddling the boundary between investment and finance, it is advisable to review relevant laws and supervisory practices before proceeding.