SMEs ministry shortens startup wait for same-sector restartups

The SMEs ministry said Tuesday that the period during which same-sector restartups are denied startup status will be cut to one year from three.

The ministry said the former three-year period had been viewed as too long in a startup environment changing rapidly through artificial intelligence and technological convergence. Its 2025 Startup Business Survey, using data from 2023, found that preparing to reopen in the same sector took an average 10.8 months. The ministry said it considered that preparation period in setting the new threshold.

“Through this revision to the enforcement decree, we expect to minimize the gap after failure, promote restartups and foster a virtuous cycle in the startup ecosystem,” Cho Kyung-won, startup policy director at the SMEs ministry, said. “We will continue to improve the system to promote startups by reflecting voices from the field,” he added.

The Cabinet approved the partial revision to the enforcement decree for the Act on Support for Small and Medium Enterprise Startups at its Aug. 25 meeting. The Act defines startup formation as establishing a new small or medium enterprise and beginning operations. Its enforcement decree identifies situations excluded from that definition to prevent duplicate benefits under startup-support programs.

One exclusion covers an individual who has closed a business and then establishes a new individual business or corporation in the same type of business. Previously, that person could not be recognized as a startup or participate in government startup-support projects until three years after closing the earlier business. The prior waiting period was two years when the earlier business had closed because of default or bankruptcy. Under the revision, the startup non-recognition period is one year.

The revised decree is scheduled to take effect in September. Businesses that began operating before then can also use the new recognition standard if seven years have not passed since the business began operations.