Financial authorities will significantly tighten delisting requirements to expel so-called "zombie companies," one of the factors behind the domestic stock market's undervaluation. Through delisting reform measures, the authorities plan to accelerate a shift to a "high birth, high death" market structure that swiftly removes insolvent companies and to support the smooth listing of innovative companies.
On the 12th, the Financial Services Commission and the Korea Exchange (KRX) announced "delisting reform measures for the swift and stern removal of insolvent companies" and proposed operating a focused management period, strengthening the four major delisting criteria, and streamlining procedures.
Reflecting the reform plan, the number of KOSDAQ companies subject to delisting this year is estimated at around 150 (100–220), about 100 more than the 50 initially expected.
◇ Forming a delisting task force for intensive oversight through June next year
First, the Korea Exchange (KRX) will form a delisting task force for intensive oversight and operate a focused management period from today through June next year. The deputy executive managing director in charge of the KOSDAQ division will serve as Director General. The task force will consist of four teams (20 members) by adding one newly established team this month to the existing three delisting review teams within the KOSDAQ division. Additional personnel will be promptly reinforced as needed.
The Director General will closely and regularly monitor delisting progress during this period. In this year's KRX management evaluation, a high weight (provisionally 20%) will be given to the KOSDAQ division's performance during the focused management period to encourage execution. The financial authorities said that, as a separate management evaluation system has been introduced this year to strengthen the KOSDAQ division's independence and autonomy, synergy is expected with the weighting plan.
◇ Market cap threshold raised sharply… Sub-1,000-won penny stocks will be delisted
The financial authorities strengthened the four major delisting criteria around two frameworks: market capitalization and share price level.
With a revision to the KRX listing rules in Jul. last year, the market cap delisting threshold was raised once, from 4 billion won to 15 billion won starting Jan. this year, and further hikes are scheduled to 20 billion won in Jan. 2027 and 30 billion won in 2028. Under the new plan, those adjustment intervals are shortened to every half-year. In other words, the 20 billion won threshold is moved up to Jul. this year, and the 30 billion won threshold to Jan. 2027.
In addition, detailed application standards and market surveillance will be strengthened to prevent avoiding delisting through temporary share-price boosts.
Currently, if a company falls below the market cap threshold for 30 consecutive trading days, it is designated as an issue to be managed, and it can avoid delisting if it exceeds the market cap threshold for 10 consecutive trading days or a cumulative 30 trading days within the following 90 trading days. Going forward, however, if it fails to exceed the market cap threshold for 45 consecutive trading days within 90 trading days after being designated for management, it will be delisted immediately.
A new delisting criterion has also been created for so-called "penny stocks" with share prices below 1,000 won. The financial authorities said penny stocks tend to have high price volatility and low market capitalization and are easily exploited as targets of stock manipulation. The U.S. Nasdaq also operates delisting requirements related to "penny stock" shares priced under $1.
Starting Jul. 1, penny stocks under 1,000 won will be subject to delisting, and to prevent evasion through reverse stock splits, cases where the post-split price falls below par value will also be included in the delisting criteria. For example, even if a company with a par value of 500 won and a share price of 300 won conducts a reverse split to a par value of 2,000 won (share price 1,200 won) to avoid the penny-stock delisting criterion, it will still be subject to delisting.
The detailed application standards are the same as the strengthened market cap criteria. If the share price is below 1,000 won for 30 consecutive trading days, the company is designated for management; if it fails to exceed 1,000 won for 45 consecutive trading days within the following 90 trading days, it will be delisted.
In addition, the delisting criterion that applies to listed companies in a state of complete capital impairment at the end of the fiscal year will be expanded to include the half-year basis. For the fiscal year-end basis, delisting is immediate at that time, but for the half-year basis, delisting is decided after a substantive review of the company's going concern.
The delisting standard for disclosure violations will also be adjusted, from 15 cumulative penalty points over the past year to 10 cumulative points. Even a single serious and intentional disclosure violation will be included in the scope subject to delisting. The strengthened four major delisting criteria will apply equally to the main market.
◇ Delisting improvement period cut from 1.5 years → to 1 year
Procedures during the delisting review process will also be improved for efficiency. Following last year's institutional reform, which reduced the maximum improvement period that can be granted to companies in KOSDAQ substantive reviews from two years to one year and six months, the period will be further shortened to one year this year.
The authorities also plan to consult with the courts to ensure that injunction lawsuits against delisting proceed swiftly and efficiently. Although the rate of injunctions being granted (KRX losing) is low, an increase in cases can lengthen litigation periods and delay final removal. In fact, while it took an average of 103 days for lawsuits to be decided in 2022, that rose to 202 days in 2024. Of 85 KRX delisting injunction cases over the past five years (2021–2025), only two were granted.
The Financial Services Commission (FSC) and the exchange plan to strengthen oversight of unfair practices such as accounting fraud and stock manipulation during the implementation of the reform plan. When insolvent companies are removed, listing system improvements will proceed in parallel so that promising innovative companies can list smoothly in their place.
Vice Chairman Kwon Dae-young of the Financial Services Commission (FSC) said, "Last year, a customized technology special listing system was introduced and implemented for artificial intelligence (AI), space, and energy industries, and this year we will continue to expand the scope of innovative technologies eligible for customized technology special listings."
Kwon added, "We plan to swiftly prepare fundamental innovation measures that amount to a full redesign of the exchange, creating an attractive exchange where investors can invest with confidence and good companies want to list."