Starting Apr. 1, the improvement period granted to KOSDAQ-listed companies designated for substantive review of listing eligibility is expected to be significantly reduced. As the improvement period granted during the Korea Exchange (KRX)'s deliberation and resolution process is shortened, the pace at which insolvent corporations exit the market is likely to accelerate.
According to the Korea Exchange (KRX) legal portal on the 31st, the exchange announced on the 20th that it would revise the detailed enforcement rules of the KOSDAQ market listing regulations. The revision follows the financial authorities' policy to tighten the KOSDAQ delisting regime, and its core is to reduce the maximum improvement period granted to corporations during substantive eligibility reviews from the current 1 year and 6 months to 1 year.
The KOSDAQ market currently applies a two-tier delisting review to corporations for which grounds for substantive review arise. After one round of deliberation by the Corporate Review Committee (the first tier), the final decision on whether to maintain the listing is made again by the KOSDAQ Market Committee.
When grounds for substantive review of listing eligibility arise at a KOSDAQ-listed company, it is determined whether the case will be subject to deliberation by the Corporate Review Committee. If it is, the Corporate Review Committee conducts a review and decides either to delist or to grant an improvement period. If a delisting decision is made even after an improvement period is granted, the listed company proceeds to the second tier, the KOSDAQ Market Committee, through an appeal. There, it can be granted another improvement period.
Through this revision, the Korea Exchange (KRX) reduced the maximum improvement period granted by the KOSDAQ Market Committee, the second tier, from 1 year to 6 months. Accordingly, the total improvement period, which had been up to 1 year and 6 months when combining the first and second tiers, has been shortened to 1 year. This is an additional step taken just a few months after last year's reduction of the maximum period from 2 years to 1 year and 6 months.
An exchange official said, "If the first tier grants a 1-year improvement period, the second tier cannot grant any improvement period at all, so the first tier will likely operate by granting about 9 to 10 months."
The exchange plans to implement the shorter improvement period as soon as two days later, on Apr. 1. However, it is continuing internal discussions on the entities to which this revision will apply. As initially announced, it was to apply to listed companies that undergo deliberation and resolution by the KOSDAQ Market Committee after the effective date, but that could encompass all KOSDAQ-listed companies currently within a first-tier Corporate Review Committee improvement period.
Meanwhile, as of the day, KOSDAQ corporations for which grounds for substantive review have arisen but for which a decision has not been made on whether they will be subject to Corporate Review Committee deliberation include Hironic, Dragonfly GF, TS Nexgen, Daejin Advanced Materials, Pureun Savings Bank and Eehwa Construction.