Korea Exchange (KRX) will overhaul its rules so that venture corporations can keep "multiple voting rights" even after listing. The effectiveness of the multiple voting rights system, which had effectively been neutralized during the listing process, is expected to increase.
Korea Exchange (KRX) on the 9th previewed a partial revision to the listing rules for the stock and KOSDAQ markets, creating provisions for shares with multiple voting rights and defining the criteria for a de facto controller.
The multiple voting rights share system was introduced in Nov. 2023 to allow unlisted venture corporations to attract investment without concerns about equity dilution. If the founder's equity falls to 30% or less due to outside investment of at least 10 billion won, the corporation can issue shares with multiple voting rights. Such shares can grant up to 10 votes per share and are used as a tool for founders to defend management control.
The problem is that, under current rules, the multiple voting rights system becomes meaningless when an unlisted venture corporation lists through Korea Exchange (KRX). In fact, Hylium Industries, a venture corporation that issued multiple voting rights shares, faced this issue during the KOSDAQ special technology listing process.
Through this revision, the exchange will newly introduce the concept of a "largest voting-rights holder" applicable to corporations that issue shares with multiple voting rights. Shares with multiple voting rights are excluded from the calculation of common shares, and the shareholder with the most voting rights, after combining the equity of related parties, is defined as the largest voting-rights holder.
If the largest shareholder and the largest voting-rights holder are different, the various listing regulations applied to the largest shareholder will also be applied in the same manner to the largest voting-rights holder.
In the stock market, at the time of a new listing or a merger listing, the largest voting-rights holder and related parties, and investors who acquired shares held by them within one year before the listing application date, are included as subjects of mandatory holding. The mandatory holding period for shares with multiple voting rights is set until the legal deadline for conversion into common shares, or until the end of the mandatory holding period for the relevant shareholder's common shares.
If the largest voting-rights holder changes due to a third-party allotment paid-in capital increase, a six-month mandatory holding will also apply to investors who acquired the new shares. In a merger between a listed company and an unlisted company, if the unlisted company is larger, the requirements related to the largest shareholder that the unlisted company must meet will also apply in the same manner to the largest voting-rights holder.
In the KOSDAQ market, separate mandatory holding rules and periods have been established for shares with multiple voting rights. In addition, if the largest voting-rights holder owns at least 30% equity, the KONEX fast-track transfer listing special case can be applied.