As the Korea Exchange (KRX) moved to shorten the improvement period to speed up the delisting of underperforming KOSDAQ corporations, it drastically reduced the number of corporations subject to delisting compared with the initial plan. With listed companies currently undergoing a substantive review of listing eligibility applying the existing improvement period, there are, for now, no cases yet where the shortened improvement period applies.
Earlier, the Korea Exchange (KRX) revised the detailed enforcement rules of the KOSDAQ market listing regulations to reduce from 1 year and 6 months to 1 year the maximum improvement period granted to corporations during a substantive review of listing eligibility.
The exchange also established an addendum setting Apr. 1 as the effective date to implement the amendment. Under the addendum, corporations that will be granted the shortened improvement period are those whose reasons for a substantive review of listing eligibility arise on or after the 1st of this month. Nine listed companies for which reasons for a substantive review of listing eligibility have already arisen will be able to apply the improvement period of up to 1 year and 6 months.
According to the exchange, eight KOSDAQ-listed companies are in the improvement period under the first-instance Corporate Review Committee, and nine listed companies have had reasons arise for a substantive review of listing eligibility but have not yet undergone deliberation by the Corporate Review Committee. All 17 of these are excluded from applying the shortened improvement period.
Previously, the exchange announced a revision to the detailed enforcement rules to shorten the improvement period in line with the financial authorities' policy to strengthen the KOSDAQ market delisting system and gathered opinions. In that process, internal discussions appear to have reduced the number of corporations that would fall under the shortened improvement period.
According to the initial revision notice, the shortened improvement period was to apply to listed companies going through deliberation and resolution by the KOSDAQ Market Committee after the effective date. If so, KOSDAQ-listed companies currently in the first-instance Corporate Review Committee improvement period could all have become subject to the shortened improvement period.
An exchange official said, "At the time of the notice, because the improvement period being shortened was at the second-instance KOSDAQ Market Committee stage, we intended to simply apply it from that stage," adding, "However, because the rule strengthens the delisting of KOSDAQ-listed corporations, disadvantages could arise for corporations whose reasons had already occurred before the rule took effect, so the addendum was changed."
From the 1st, the base date, through today, no KOSDAQ corporations have had reasons arise for a substantive review of listing eligibility, so there is no listed company that will be the first to have a shortened improvement period applied.