South Korea Bans CVC Indirect Investments Through External Funds, Effective July 23

According to South Korea's Fair Trade Commission (KFTC), conglomerate-affiliated corporate venture capital (CVC) firms are banned from making indirect investments in total shareholder family companies through external fund participation, effective July 23. The KFTC announced amendments to the Fair Trade Act Enforcement Decree on July 23, with public comment period running until September 1. General holding company subsidiaries cannot directly invest in or participate as limited partners in funds whose primary investment target is restricted companies.

The revised regulations also prohibit indirect debt guarantees for affiliates using special purpose companies (SPCs) as intermediaries. Previously, financing structures where SPCs borrowed from financial institutions and other affiliates assumed SPC debt were not regulated. The amendments close this loophole by treating SPC-mediated guarantees as unlawful conduct.