As the Financial Services Commission moved to ban "duplicate listings" in principle, the Ministry of Trade, Industry and Resources conveyed on the 21st that "corporations could find it harder to raise capital." It said that if duplicate listings are to be banned, there must be a grace period and separate special exceptions.
Duplicate listings have long drawn criticism for using a method in which a listed parent company spins off and lists a profitable core division or subsidiary, which can depress the parent's share price and hurt the parent's shareholder interests.
The Financial Services Commission on the 6th announced a draft to establish guidelines on duplicate listings. It would in principle ban separately listing an unlisted subsidiary that is effectively controlled by an already listed parent. The bar for exceptions is high. With the voting rights of the largest shareholder and related parties capped at 3%, more than 50% of general shareholders must agree, and at least one-fourth of all voting rights must vote in favor.
In response, the Ministry of Trade, Industry and Resources was said to have relayed industry views that if duplicate listings are banned in principle, even newly established or acquired subsidiaries would be barred from listing, which could hinder the cultivation of new businesses and the spread of in-house ventures.
The Ministry of Trade, Industry and Resources also reportedly conveyed the view that banning listings of overseas entities could be problematic. To expand market share after entering countries such as Vietnam and India, there can be cases where listing on the local exchange is needed to raise funds, and this channel could be blocked.
In addition, the ministry was said to have noted concerns that the repayment burden on venture corporations would grow. Domestic ventures have attracted investment by issuing redeemable convertible preferred shares (RCPS) on the premise of an initial public offering (IPO) by a certain point. If an IPO falls through due to a ban on duplicate listings, it could lead to demands for repayment of the investment.
Accordingly, the Ministry of Trade, Industry and Resources conveyed to the Financial Services Commission that if duplicate listings are to be banned in principle, at least a one-year grace period and separate special exceptions are needed. The ministry also proposed granting dissenting shareholders the right to demand that the company buy their equity at a fair price (appraisal rights).
An industry official said, "If a grace period and separate special exceptions are provided, corporations that have been preparing for duplicate listings would be able to proceed without any constraints," adding, "It is effectively the ministry expressing opposition to the Financial Services Commission's plan."
An official at the Financial Services Commission said, "We are reviewing a range of opinions on duplicate listings," adding, "We will examine whether there are areas that need improvement."