The South Korea Financial Services Commission has approved a package of legislative and regulatory revisions to establish a full operating and oversight framework for business development companies (BDCs) designed to channel capital into startups and venture businesses. The revisions under the Financial Investment Services and Capital Markets Act and related decree, supervisory and Korea Exchange rules take effect from March 17, 2026. BDCs must invest at least 60% of total assets in primary targets including unlisted startups or venture businesses, venture investment associations, and KONEX-listed or eligible KOSDAQ-listed companies, with only up to 30% of investments in venture associations and 30% in eligible KOSDAQ issuers counted toward the 60% minimum. Investments may be made through share purchases or lending, but lending is capped at 40% of investments in primary targets and must be supported by internal controls for credit risk management. BDCs must hold at least 10% of total assets in safe assets such as cash, deposits, certificates of deposit and money market funds, and may manage up to 30% of assets on a discretionary basis under existing publicly offered fund rules. Concentration limits include a 10% cap of total assets in a single entity using the same investment method and a prohibition on acquiring more than 50% of an investee’s total shares, alongside restrictions intended to prevent circumvention via fund-of-funds structures. Grace periods are available for certain non-compliance situations, including one year for unavoidable breaches driven by factors such as price moves or restructuring, with further committee-based extensions for meeting the 60% requirement and for breaches of the single-entity limit due to unlisted stock price increases. For investor protection, BDCs must have a maturity of at least five years and a minimum subscription amount of KRW30 billion, alongside a seed funding requirement calibrated to subscription size and a lock-up set as the longer of five years or half the maturity period, capped at ten years. Governance and transparency requirements include an investment review committee, external evaluations supporting investment decisions, quarterly fair value assessments and semiannual external valuation reviews. BDC securities must be listed on KOSDAQ within 90 days of establishment and are subject to tailored listing and ongoing compliance rules, with disclosure triggers including changes of more than 5% in investment asset size and material changes at investee companies, supported by a sanctions framework for unfaithful disclosures. Implementation steps include Korea Exchange system upgrades by April 2026 and completion of securities registration with the Financial Supervisory Service and a listing review by Korea Exchange before BDCs are introduced and listed.

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