與, Coupang belatedly “legislated different voting rights” after choosing US stock market… Even half

View larger-In addition, the Democratic Party promotes a differential voting system that grants multiple voting rights to the stocks held by venture business executives. With the background of Coupang, the largest e-commerce company in Korea, promoting listing on the New York Stock Exchange, interpretations have been raised that this is because such a management control defense device was not allowed in Korea.

However, it is pointed out that the currently reviewed differential voting rights are’half-sized voting rights’, which have limitations in defending management rights, such as converting to common stock 3 years after listing.

○ “Coupang going to the United States” in the political circles “Target for March”

The Small and Medium Venture Business Committee of the National Assembly of Trade, Industry and Energy held a general meeting on the 24th to consider the bill by proposing the Act on Special Measures on the Promotion of Venture Businesses. This is a government draft initiated by the Ministry of SMEs and Startups in December of last year, and the key is to allow up to 10 voting rights per share for unlisted venture companies. Rep. Song Gap-seok, a secretary of the Democratic Party of the National Assembly’s Industrial Self-Defense Committee, said in a call with Bonbo that “the bill is being reviewed, but we are hoping to speed it up and deal with it in March. The reason why the introduction of differential voting rights is considered is because venture companies are vulnerable to the defense of management rights due to their financial power. Start-up companies grow by attracting investment from venture capital (VC). If a large amount of investment is received, it is difficult to maintain management rights as the existing ownership of the founder is diluted. Company A, with annual sales of 25 billion won in 2019, attracted approximately 15 billion won in investment. As a result, the ownership of the founder has decreased from 99% to 48%. The inability to secure a majority of stakes can lead to exposure to external capital or hostile M&A threats during decision-making. Originally, the Special Act on Venture Businesses was subordinate to the order in which the bill was processed. As Coupang’s trip to the United States increased awareness that a separate device was needed to defend its management rights, it emerged as the first law to be dealt with. An official from the Democratic Party said, “As interest in differential voting rights has increased, the need to examine the bill has grown.” “I know that there are no major disagreements since both the opposition parties have initiated the related legislation.” Hong Nam-ki, Deputy Prime Minister of Economy and Minister of Strategy and Finance, said in a report on the National Assembly on the 16th, “I think the differential voting rights have an effect on Coupang’s listing in New York.”

○ Only private companies… Limitations in the defense of management rights

Contrary to the accelerating pace of bill processing, the venture industry believes that government proposals are not very effective. In the government, the target of introducing differential voting rights is non-listed companies. Currently, there are not many privately held companies with venture certification. This means that only 39,000 (about 1%) out of about 3.6 million SMEs in Korea are eligible for differential voting. For this reason, it is argued that the target companies that can be granted differential voting rights should be expanded regardless of whether they are listed, unlisted, or certified as a venture.

In particular, if the equity holdings of the founder falls below 30% due to large-scale investment attraction, the issue of differential voting stocks only for up to 10 years, and the need to convert to common stocks three years after listing is also a limitation. An official from the venture industry pointed out, “Does the hostile M&A threat disappear after 3 years of listing?” and “It is a limiting regulation that does not reflect the reality that a separate period for extinguishing the differential voting rights is set.”

As a result of a survey by the Small and Medium Business Research Institute of 209 venture companies in 2019, 184 companies (88.04%) agreed to introduce differential voting rights. Regardless of the stage of growth or the size of the company, a number of venture companies that need to continuously attract investments need to introduce differential voting rights.

On the other hand, civic groups such as the Citizens’ Alliance for Economic Justice are opposed to the introduction of differential voting rights. “Differential voting rights will be one of the means to increase the gap between ownership and control, such as being able to control a company with a small amount of capital,” Gyeongsilryeon said. “It is highly likely to lead to institutionalization of chaebol inheritance.”

Passports are highly likely to introduce differential voting rights. The Democratic Party is aiming to “treat the temporary National Assembly in March”. However, some point out that institutional supplementation is necessary. Democratic Party Rep. Kim Byung-wook, a secretary of the ruling party of the National Assembly’s Political Affairs Committee, said at a plenary meeting of the Political Affairs Committee on the 17th, “A matter that needs to be compensated for the fact that it violates the principle of a one-week, one-week voting right, which violates the principle of one-week, one-week voting, and makes mergers and acquisitions difficult.” Said.

Seongjin Park [email protected]Go to reporter page>Reporter Choi Hye-ryeong

::Differential Voting Rights::

A management defense that gives more voting rights to the largest shareholder or management’s holdings. Also called multiple voting rights.