The Ministry of SMEs and Startups announced that it passed an amendment to the Enforcement Decree of the Act on Supporting Small and Medium Enterprises Startups at a Cabinet meeting on the 4th, expanding the scope of recognition for startups even if a 'business owner who failed in diligent management' reestablishes their business in the same industry.
Previously, if a business owner reestablished their business in the same industry, they were unable to be recognized as a startup and participate in government startup support programs, even if they began operations within three years of closing their business (or two years in cases of closure due to failure or bankruptcy). However, there have been calls from the field for recognition of immediate startup status for business owners with strong capabilities for revival, even if they reestablish their business in the same industry.
In response, the Ministry of SMEs and Startups revised the Enforcement Decree of the Act on Supporting Small and Medium Enterprises Startups. As a result, if business owners who failed in diligent management are recognized for their strong revival capabilities through the adoption of new business models or technologies, they can legally be recognized as startups even if they reestablish in the same industry.
The determination of whether the revival capability of reestablishing business owners is strong is confirmed through a diligent management evaluation, which assesses whether they managed their businesses sincerely without violations of related laws such as accounting fraud, intentional bankruptcy, or unfair dismissal. Passers will be subject to an in-depth evaluation of diligent management that analyzes the reasons for failure and the future viability of the business.
The revised decree will be implemented starting in June. Business owners recognized as startups after passing the in-depth evaluation of diligent management will be eligible to participate in startup support programs administered by the government and local governments.
Jo Kyung-won, director of startup policies at the Ministry of SMEs and Startups, noted, "We expect that expanding the opportunities for reestablishing excellent business owners will provide substantial help to those aiming for revival," and added, "We will continue to develop and implement various policies to facilitate the smooth re-challenges of failed business owners and create a virtuous cycle of startup ecosystems."