The Korea Exchange (KRX) gave notice of revisions to listing rules to swiftly delist insolvent corporations from the KOSPI and KOSDAQ markets. While reflecting previously discussed measures such as raising the market capitalization threshold and introducing a penny stock criterion, the plan also includes safeguards to prevent circumvention of the penny stock rule.
On the 17th, the Korea Exchange (KRX) re-notified proposed amendments to the listing rules for the stock market and KOSDAQ market under the "Reform plan for swift and strict delisting of insolvent corporations." The revisions are scheduled to take effect on July 1 after approval by the Financial Services Commission in May.
The revisions include: ▲ raising the market capitalization threshold ▲ introducing a penny stock criterion ▲ adopting a semiannual basis capital impairment test ▲ strengthening penalty points for disclosure violations.
First, the market capitalization threshold will be strengthened in stages. Starting July 1, if KOSPI falls below 30 billion won and KOSDAQ below 20 billion won for 30 days or more on a continuous basis, they will be designated as issues under administrative watch. If the standard is not restored for 45 consecutive trading days within 90 days thereafter, they will be subject to delisting. From Jan. 1 next year, the thresholds will be further raised to 50 billion won for KOSPI and 30 billion won for KOSDAQ.
A penny stock criterion will also be newly introduced. If the closing price remains below 1,000 won for a certain period, the issue will be designated under administrative watch and will fall under formal delisting grounds. In particular, regulations have been strengthened to prevent evasion of the penny stock criterion through reverse stock splits or capital reductions.
Specifically, corporations that conducted a reverse stock split or capital reduction within one year before the date of designation as a penny stock under administrative watch will be prohibited from additional splits or reductions within 90 trading days after designation. In addition, if a split or reduction is carried out during that period, the total ratio cannot exceed 10-for-1. A violation will be deemed grounds for immediate delisting.
However, the rules will not be applied retroactively. They will apply to reverse stock splits and capital reductions for which a "changed listing" is completed on or after July 1, the effective date of the revisions, and will cover cases where the board resolution or disclosure occurred earlier if the changed listing date falls after the effective date.
In addition, a requirement for full capital impairment as of the end of the half-year will be newly established. This provision will apply from the semiannual report for the first half of this year, and full capital impairment on a semiannual basis will constitute grounds for a substantive review of listing eligibility.