KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

I. Background and Purpose of Research

▶ Development of policy efforts to create fund of funds for agriculture and food and to promote private investment in management;

○ In the early 2000s, there was a consensus that the survival of our agriculture and fisheries in the midst of market opening of agricultural and fishery products and competition with agricultural powerhouses requires the establishment of a new support system for the size of agricultural, fisheries, and food management companies and the creation of high added value. It was argued that large-scale investments such as private capital that wanted to participate in management should be promoted, away from the existing support method of subsidies or loans.

○ Accordingly, in January 2010, the "Act on Formation and Operation of Agricultural, Fisheries, and Food Investment Funds" was enacted, and under this Act, the basis for the formation and operation of the "Fund of Funds for Agriculture, Fisheries, and Food Investment" was established.

▶ Promotion of policies to promote private investment in the agricultural and food sector to create an ecosystem for innovation in the agricultural industry;

○ However, in a situation where the recent trend of high interest rates and increased economic uncertainty are likely to intensify the financial market crunch, and there is concern about a contraction in investment in agri-food management, the preparation of measures to attract private capital and expand investment to support the survival and growth of agri-food management and maintain a virtuous cycle of "investment -recovery-reinvestment" in the agri-food investment market has emerged as a key policy issue for the relevant ministries.

▶ Request for legislative review of measures that can contribute to the creation of a growth foundation for agri-food enterprises;

○ To this end, from a legal point of view, a legislative review of a plan is requested to contribute to the creation of a growth foundation for agricultural and food management by promoting the inflow of private capital into the agricultural and food investment market by allowing the establishment of a large-scale re-indirect agricultural and food investment association and the establishment of a private sector to finance subsequent investments by introducing a new investment method such as a conditional acquisition contract" to enhance the initial investment of management entities along with the expansion of the agricultural and food fund, and by allowing the establishment of an investment purpose company of the agricultural, fisheries, and food investment association and borrowing financial institutions through the same.

▶ The purpose of this study is to provide basic data for the efficient realization of the policy implementation of the Ministry of Research and Demand by reviewing the current legal system and the amendment of laws being discussed in advance to prepare measures to revitalize private investment in the agricultural and food sector as a key policy issue of the Ministry of Research and Demand.

 

Ⅱ. Contents

▶ Examining the system of the Agricultural and Fishery Food Investment Association Act and subordinate statutes;

○ Differences among relevant statutes, such as investment techniques through the examination of consistency with the Act on Formation and Operation of Agricultural, Fisheries, and Food Investment Funds and the Financial Investment Services and Capital Markets Act, establishment of special purpose companies, recognition of special cases of private indirect venture investment associations, etc., as major statutes related to the Act on Formation and Operation of Agricultural, Fisheries, and Food Investment Funds;

▶ Examining the grounds for introducing new investment methods such as advanced venture investment techniques;

○ Considering the characteristics of the agricultural and food sector, it is a contract that does not incur interest on investment and has no maturity date for repayment. It is a consideration to introduce a 'conditional share acquisition contract', which means a contract that first invests in an initial company that is difficult to calculate corporate value, calculates the equity ratio by setting corporate value in the event of subsequent investment, converts it into stocks of investors' shares, and applies incentives for pre-investment.

▶ Establishment of a special-purpose company and preparation of grounds for borrowing;

○ Review on the establishment of grounds for allowing the executive members (private management companies) of the Agricultural and Food Investment Association to establish a paper company-type investment purpose company and allowing the investment purpose company to borrow from financial institutions, etc. in order to create a private-led investment ecosystem and expand the liquidity of investment capital in order to strengthen the competitiveness of agriculture and create high value-added products.

▶ Special cases concerning private re-indirect agriculture and food investment associations;

○ It is pointed out that under the current law, there is no basis for forming an agricultural and food investment association only with investment from private financial institutions (without the investment of the parent fund), which limits the inflow of self-sustaining private capital for investment in the agricultural and food industry.

○ Therefore, it is necessary to establish a foundation for the creation of a private parent fund and to prepare a basis for investment in promising companies in new agricultural and food industries such as smart agriculture, food tech, and green bio.

▶ Proposal of other system improvements to promote investment in the agri-food industry;

 

Ⅲ. Expected Effects

▶ Preparation of the details of the provision of legislative basic data to promote the improvement of the system to promote private investment in the agricultural and food sector, in relation to strengthening the role of the fund of funds for agriculture and food as a priming water, expanding the attraction of private investment in excellent agricultural and food enterprises, and supporting the stable operation of businesses such as youth enterprises and startups;