As the implementation of a principle-based ban on dual listings approaches in July, the Korea Exchange is delaying the announcement of its listing review guidelines. While the framework of the system has been revealed through three public seminars, final adjustments are ongoing regarding investor protection methods and the process for reflecting the opinions of common shareholders.
According to the financial investment industry on June 9, the Financial Services Commission and the Korea Exchange are finalizing the details of the guidelines for exceptions to the dual listing ban. Although the overall direction has been established, discussions are still underway on how to institutionalize investor protection methods.
Initially, the industry expected the exchange to announce regulatory amendments last week. To implement the guidelines in July, the exchange must announce the regulatory changes, gather public opinions for seven days, finalize the proposal, and complete the decision-making process with the Securities and Futures Commission and the Financial Services Commission. Given that the Securities and Futures Commission and the Financial Services Commission typically meet every two weeks, the timeline is tight.
The delay in the announcement is attributed to the final design work on investor protection measures and listing review criteria. The dual listing system is expected to significantly impact the domestic IPO market, necessitating both effectiveness and legal stability in the new regulations.
The overarching guideline has already been established as "principle-based ban on dual listings, with exceptions allowed." For a listed company to list a subsidiary or a company under vertical control, it must meet three criteria: operational independence, managerial independence, and investor protection.
Among these, the most significant concern is the investor protection standard. While operational and managerial independence can be assessed relatively objectively through financial statements and disclosures, quantifying the level of protection for common shareholders is expected to be a key factor in the exchange's review process. The exchange has indicated in several public seminars that it will closely examine whether the parent company's common shareholders were adequately persuaded and whether their opinions were genuinely reflected in the decision-making process.
In the industry, the method of obtaining consent from common shareholders is likely to favor the "3% rule" applied to general resolutions over the minority shareholder majority (MoM) approach. This method involves conducting general resolutions while limiting the voting rights of the largest shareholders and related parties, similar to the process for appointing audit committee members. Given the high ownership stakes of controlling shareholders in domestic companies, this approach is seen as more effective in protecting common shareholders and ensuring legal stability.
Conversely, academics and institutional investors are advocating for the introduction of MoM, where only common shareholders excluding controlling shareholders vote separately. However, the Ministry of Justice has expressed concerns that this could conflict with the principle of shareholder equality, as outlined in the guidelines released in February regarding the amended Commercial Act, making the actual implementation of this system unlikely.
While the announcement of regulatory amendments has been delayed, it remains uncertain whether the implementation schedule will be postponed. Financial authorities have stated that they can hold extraordinary meetings if necessary to meet the original target of implementing the guidelines in July.
* This article has been translated by AI.
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