Crowdfunding rules will take effect January 25 this year as relevant amendments to the Enforcement Decree of the Financial Investment Services & Capital Markets Act were approved in a Cabinet meeting on January 5, 2016. The amendments are intended to stipulate details regarding the scope of issuers and registration requirements for crowdfunding intermediaries.

KEY PROVISIONS

1. Scope of Issuers

Smaller and startup companies with their business operations less than 7 years are to be allowed to issue securities through crowdfunding. Venture companies and SMEs engaging in projects such as technology development and cultural business are to be allowed to raise capital through crowdfunding regardless of how many years they are in business.

2. Registration Requirements of Crowdfunding Intermediaries

To be registered as an intermediary for a crowdfuning offering, a company must have a minimum capital of KRW500 million and meet requirements similar with those of investment advisory services and discretionary investment services.

3. Investor Protection

(1) Limits on capital raising by issuers: A company is allowed to raise up to KRW700 million per year through crowdfunding.

(2) Limits on investments by investors: Investors are subject to differentiated caps on the amount of investments depending on their professional knowledge of investment and risk- taking capacity. 

(3) Exception to ban on securities sales by investors: In principle, investors are prohibited from selling securities within a year of issuance. However, issuers, large shareholders and professional investors are exceptionally allowed to sell their holdings within a year.

* Please read the attached file for details.