The government moved to tighten regulations on "duplicate listings," long cited as a chronic problem in the capital market. From now on, when a subsidiary seeks a listing, authorities will strictly examine whether general shareholders of the parent company are protected, and, in principle, will restrict the listing if the standards are not met.
The Financial Services Commission and the Korea Exchange (KRX) held a "public seminar on improving the duplicate listing system" at the Korea Exchange conference hall on the 16th and announced a reform plan reflecting these measures. This step is a follow-up to the "capital market stabilization and normalization plan" unveiled in March and is slated to take effect as early as July.
Under the revision, duplicate listings will shift from customary acceptance to a framework of "prohibited in principle, allowed by exception." To that end, a "special review for duplicate listings" will be newly established in the exchange's listing detailed rules.
The review will cover subsidiaries under the effective control of a controlling company or affiliates within the same corporate group that are in a vertical control relationship. These include listings of subsidiaries created through physical spinoffs, spin-offs (for conversion to a holding company), and listings of subsidiaries established or acquired.
The review will comprehensively assess the subsidiary's operational and managerial independence and efforts to protect investors. In particular, it will closely examine whether the subsidiary relies excessively on the parent's revenue or core technology, and will use the level of personnel interchange and the board's independent decision-making structure as key criteria. If any of these requirements are not met, approval for listing will be restricted.
If a subsidiary listing is pursued, the parent company's board of directors will be subject to a "duty of loyalty to shareholders." The board must directly evaluate how the subsidiary's listing will affect the parent's share price—namely, the potential for equity value dilution or a discount—and prepare protective measures. It must also disclose the relevant details and is obligated to actively communicate with shareholders through surveys, briefings, or similar channels.
Lee Eog-weon, chair of the Financial Services Commission, said at the seminar, "The principle of prohibiting duplicate listings applies the newly introduced duty of loyalty to shareholders to the listing system," adding, "It is a key task to improve the structure of the capital market."
Financial authorities and the exchange plan to draft and pre-announce the rule amendments within this month, complete the revision process by June, and implement the new system as early as July.