Financial authorities on the 13th approved amendments to the Korea Exchange (KRX) listing rules to strengthen delisting standards in the KOSPI and KOSDAQ markets to remove distressed companies.
The Financial Services Commission said it approved amendments to the Korea Exchange (KRX) listing rules to implement the "reform plan for delisting to swiftly and strictly remove distressed companies."
The amendments include strengthening or newly establishing related requirements such as market capitalization for delisting, penny stocks (shares priced below 1,000 won per share), complete capital impairment on a semiannual basis, and disclosure violation standards.
Specifically, while the market capitalization requirement had been planned to be raised annually, it was accelerated to every half-year. Accordingly, the effective dates for the higher market cap thresholds were moved up to July 1 this year and Jan. 1 next year.
From July 1 this year, to maintain a listing, companies on the main board must have a market capitalization exceeding 30 billion won, and KOSDAQ-listed companies must exceed 20 billion won. From Jan. 1 next year, to remain listed, main-board companies will be required to have at least 50 billion won in market capitalization, and KOSDAQ-listed companies will need to exceed 30 billion won.
In addition, penny stocks priced below 1,000 won will be newly added as a delisting criterion. Measures to prevent circumvention of the penny-stock criterion through repeated or excessive reverse stock splits or capital reductions will also be introduced.
If a company conducted a reverse stock split or capital reduction within the past year, once designated as a penny-stock watchlist item, additional reverse splits or capital reductions will be banned for 90 trading days. Also, reverse splits or capital reductions exceeding 10:1 within 90 trading days after penny-stock watchlist designation will be blocked.
Complete capital impairment on a semiannual basis has also been added as a delisting criterion. Previously, only complete capital impairment at the end of the fiscal year met the delisting criterion. However, while end-of-fiscal-year complete capital impairment results in immediate delisting without review, the semiannual basis will require a substantive review before deciding on delisting.
The delisting threshold for disclosure violations will be lowered from "accumulation of 15 disclosure demerit points in the past year" to "accumulation of 10 disclosure demerit points in the past year." In addition, if a single serious and intentional disclosure violation occurs, the company will be subject to delisting review regardless of the demerit points.
Meanwhile, the market capitalization, penny-stock, and disclosure-violation criteria are set to take effect on July 1. The semiannual complete capital impairment criterion will apply starting with the semiannual report at the end of June this year.