Financial authorities have drawn the sword to oust poorly performing companies from the KONEX market following KOSDAQ. As in the KOSDAQ market, they moved to revise the rules so that companies will be delisted immediately if they receive substandard audit opinions for two consecutive years in the KONEX market.
While some say this is a meaningful move to improve the soundness of the capital market, others note that improvements to the stagnant KONEX market are also needed.
On the 11th, according to Korea Exchange (KRX), the KOSDAQ Market Division recently released the "Partial Amendment to the KONEX Market Listing Regulations" and said it plans to implement it starting in April. The main point is to immediately delist KONEX-listed corporations that receive substandard audit opinions for two consecutive years, without allowing an appeal.
Along with "tightening the criteria for substandard audit opinions," the plan also includes refining the "criteria related to substantive review of listing eligibility." Companies that receive substandard audit opinions for two consecutive years will be delisted immediately, but considering the impact on the economy, corporations in rehabilitation or corporate restructuring (workout) will be given a limited grace period of up to one year.
The trigger point for a substantive review of listing eligibility was also changed from when a rehabilitation proceeding is "filed" to when a rehabilitation filing is "dismissed." Previously, even filing for rehabilitation would lead to a delisting review, but now the review will proceed only when a court dismisses the rehabilitation filing, reducing the burden on corporations.
Korea Exchange (KRX) said the measure is intended to strengthen exit standards for poorly performing companies in the KONEX market as well, to improve market consistency and credibility. A Korea Exchange (KRX) official said, "It is rare for corporations that received substandard audit opinions for two years or more to change to 'unqualified,' and we considered that the re-audit expense burden instead grows," adding, "This measure will be a chance to boost trust in KONEX-listed companies."
Na Su-mi, a research fellow at Korea SMEs & Startups Institute (KOSI), said, "Since KONEX corporations are also listed companies, they should have external requirements and corporate capabilities befitting that status," adding, "This appears to be a system improvement to shore up the fundamentals of KONEX-listed companies that lack management capacity."
However, listed companies are expressing unease about the strengthening of KONEX listing rules. The KONEX Association said it understands the purpose of the amendment while also stating that policies to revitalize the market are needed together.
Hwang Chang-soon, head of the KONEX Association, said, "The incentives for corporations to want to list on KONEX need to be strengthened," adding, "When policies to revitalize the market go hand in hand with the exit of poorly performing companies, it will help the growth of the KONEX market."
Yoon Sun-jung, a professor in the Department of Business Administration at Dongguk University, said, "If listing standards are low, the market can be rated poorly, but if listing standards are tightened excessively, the number of corporations seeking to list on KONEX may decrease," adding, "Support for the KONEX market and stronger exit standards for poorly performing corporations should proceed together."