As the Korea Exchange (KRX) prepared a system overhaul that, in principle, bans duplicate listings, industry voices said clear shareholder-protection measures are needed when duplicate listings are exceptionally allowed, such as preferentially allocating new shares to parent-company shareholders or paying cash dividends.
Criticism has grown that general shareholders' interests are being infringed as duplicate listings, which depress the parent company's share value, have been carried out as a customary practice in Korea's stock market.
At the "ban on duplicate listings seminar" hosted by the Korea Exchange (KRX) on the 16th, academics, retail investors and corporate officials exchanged detailed views on protecting shareholder rights and corporate management in relation to the duplicate listing system.
Participants said the core of the duplicate listing issue is protecting shareholder rights, and that measures are needed to protect shareholder interests during the decision-making process for duplicate listings.
Na Hyun-seung, a professor in the business administration department at Korea University, said, "The biggest problem is the conflict of interest between controlling shareholders and general shareholders, so measures to protect general shareholders are important," adding, "When deciding on a duplicate listing, the opinions of general shareholders should be reflected by requiring a majority vote of general shareholders at the shareholders' meeting."
Lee Chang-hwan, head of Align Partners, also said, "If a duplicate listing is needed, based on directors' duty of loyalty, corporations should be required to provide detailed notices comparing alternatives to explain why a duplicate listing is the best decision from the perspective of all shareholders."
In this regard, an opinion was raised that disclosure standards for shareholder-protection plans should also apply to corporations that have already completed duplicate listings, to protect the rights and interests of general shareholders.
Regarding the Korea Exchange (KRX) decision to operate duplicate listing regulations under a "principle ban, exceptions allowed" framework, participants said additional steps are needed to safeguard shareholder rights even when duplicate listings are permitted.
Kim Chun, head of the Listed Companies Association, said, "Shareholder value is not protected merely because general shareholders agreed to a duplicate listing," adding, "It is also important to design a structure that creates channels for the parent company's shareholders to receive the subsidiary's dividends or cash."
Professor Na also said, "Even when a duplicate listing is allowed, it is worth considering as an exception the preferential allocation of new shares to the parent company's general shareholders."
On the other hand, concerns were raised that excessive regulation of duplicate listings could cause side effects. Bang Han-chul, Deputy Minister of IB1 at Korea Investment & Securities Co., said, "Funds raised through an initial public offering (IPO) are used for corporate growth by improving financial structures, capital expenditures and launching new businesses," adding, "Duplicate listings of competitive corporations should be evaluated positively from a valuation perspective."
Ahn Sang-jun, vice chairman of the Korea Venture Capital Association, also said, "It takes more than 14 years for a venture corporation to reach the IPO stage," adding, "Allowing leading corporations to have subsidiaries to enhance managerial efficiency and eliminate trial and error is something that is globally essential."
Lee Eog-weon, chairman of the Financial Services Commission (FSC), who attended the seminar, said, "Duplicate listings can enhance corporations' expertise and serve as a means of raising funds for a new leap forward, so this is not an issue to be banned outright," adding, "We will strictly review whether future listings are fair to all shareholders and create new value, or whether they are asymmetrical listings whose benefits concentrate on a few."
The Korea Exchange (KRX) plans to complete the process of revising related rules by June, reflecting industry opinions, and implement the new system as early as July.