Korea announces 1st local firm to issue multiple voting shares

South Korea announced on Wednesday that Colosseum Corporation Inc., an artificial intelligence-powered logistics services provider, has become the first local company to issue multiple voting shares since the government revised its rules for unlisted ventures last November.

The startup has issued stock with 10 voting rights per share for the company’s founder and Chief Executive Park Jinsu, the Ministry of SMEs and Startups said on Feb. 21.

The multiple voting share class is where a share gives more than one vote to founders or other eligible shareholders. With such rights, the founder or management can continue to control their company even if venture capital firms’ investments dilute their stakes.

Under the law revised last year to promote venture businesses, an eligible shareholder should be a founder of an unlisted company that has attracted 10 billion won ($7.5 million) or more in cumulative investment, including 5 billion won or more in the latest funding round.

For eligibility, the founder should be the largest shareholder with 30% or more voting rights before the latest funding and would drop below 30% due to the funding round.  

To own multiple voting shares, the founder must also receive approval from at least 75% of votes at a shareholders' meeting.  

Park’s stake in Colosseum dropped from more than 30% to 28% after its series A funding last October. All investors in the startup agreed on the founder’s holding of multiple voting shares at a recent stakeholders' meeting, Colosseum said.

“Multiple voting shares are essential for startups to draw investment with stability,” said Park. “Based on the share class, we have built a foundation to attract large investments and started overseas businesses and the initial public offering process,” he added.

“In the US, ownership of multiple voting shares helps a company’s leader operate with a long-term plan. I have agreed for Park to hold multiple voting shares as it will stabilize the startup’s business,” said an investment firm head.

The startup ministry said it is considering allowing an additional five ventures to issue multiple voting shares.

Write to Kang-Ho Jang at callme@hankyung.com

Jihyun Kim edited this article.