Government Eases Relief Criteria if Startup Status Met Within 7 Years

Relief for SMEs is in sight! Even companies that were not recognized as startups in their early stages can now seize the opportunity. SMEs that missed out on legitimate startup opportunities due to existing equity issues or business connectivity finally have a path to relief opened up for them. According to the amendment to the 'Enforcement Decree of the Act on the Support for Small and Medium Enterprises Establishment,' which recently passed the Cabinet meeting, they can now acquire startup status if they resolve these issues within 7 years of establishment. Up until now, the current legislation strictly judged startup recognition solely at the time of business commencement. Cases such as a sole proprietor commencing another business while maintaining an existing one, the establishment of a corporation exceeding a specific shareholding ratio, or an existing corporation's controlling shareholder becoming the controlling shareholder of a new corporation, were not regarded as genuine new startups but rather as a 'continuation of business,' thereby excluding them from startup eligibility. Consequently, there was an unfairness where companies that lost startup opportunities due to initial temporary issues or a lack of understanding of regulations were excluded from support even if they resolved the issues later. However, even if a company fell under the reasons for startup exclusion at the time of business commencement, if they resolve the relevant reasons within 7 years from the establishment date, they will be recognized as a startup from that point. However, it is important to clearly understand that the recognized startup period will still be applied identically as up to 7 years from the initial business commencement date, meaning they can enjoy government support benefits for the remaining period. This significant change will come into effect on January 1, 2026. In particular, companies that started their business before the effective date but have not yet passed 7 years can also benefit from the amended regulations, and if they have already resolved the exclusion reasons, they will be immediately recognized as a startup from the effective date. Meanwhile, the issue of succession of startup status when changing company form, which was discussed during the legislative preview, has been clearly resolved: if the corporate identity is maintained according to the Commercial Act, startup eligibility will be determined based on the date of initial corporate registration. The Ministry of SMEs and Startups expects this amendment to provide a stable growth foundation for companies that have previously been in a blind spot for support, and to significantly contribute to revitalizing the domestic startup ecosystem. Strengthening the institutional foundation will create an environment where more innovative companies can grow.