Restrictions on Dual Listings Tightened to Protect Parent Company Shareholders
The government has effectively halted 'asymmetric dual listings' that infringe on the rights of common shareholders in parent companies. To list subsidiaries, companies must now navigate stringent procedures to ensure the protection of parent company shareholders. Notably, subsidiaries formed through physical division will be required to obtain shareholder consent under the '3% rule,' which limits the voting rights of major shareholders. As a result, the threshold for initial public offerings (IPOs) for large corporate affiliates is expected to rise significantly.
On July 6, the Financial Services Commission and the Korea Exchange released detailed guidelines on the 'principle prohibition of dual listings and exceptional allowances.' This follows the government's capital market reform measures announced in March, aimed at curbing dual listings and spinoff listings, which have been cited as factors contributing to the Korea Discount.
According to the guidelines, parent company boards pursuing dual listings must fulfill five obligations: assessing shareholder impact, establishing shareholder protection measures, communicating with shareholders and confirming their consent, voting on the listing proposal, and disclosing relevant information. Additionally, to ensure compliance, an 'independent special committee' comprising at least three directors or external experts must be formed for prior review and decision-making.
The criteria for shareholder consent, which garnered significant attention, will apply the '3% rule' rather than a minority shareholder majority vote. This means that the voting rights of the largest shareholder and related parties will be capped at 3%, and a majority of attending shareholders (at least one-quarter of voting rights) must agree for a dual listing to proceed.
The criteria for shareholder consent will vary by subsidiary type. Subsidiaries formed through physical division must obtain consent from parent company shareholders. For general subsidiaries (acquisitions or newly established), obtaining shareholder consent will be considered sufficient for investor protection, but those that do not will face strict scrutiny. However, 'low-weight subsidiaries,' which account for less than 10% of the parent company's revenue, operating profit, or assets, will not require shareholder consent.
The market anticipates that the implementation of these guidelines will improve practices that have previously harmed parent company shareholders through spinoff listings. As of the end of last year, the dual listing rate in South Korea stood at 11.2%, significantly higher than in major countries like the United States (0.05%) and Japan (4.0%). However, concerns remain that the increased difficulty of dual listings through physical division may dampen the IPO market, with voices in the venture capital and private equity sectors expressing worries about the challenges of recouping investments through IPOs.
New Semiconductor Cluster to Be Established at Gwangju Military Airport
The government has selected Gwangju Military Airport as the site for a new semiconductor cluster in the southwestern region. This decision is part of the government's 'Three Mega Projects for South Korea's Great Leap Forward,' with a focus on resolving site issues before making significant investments.
On July 6, Kang Hoon-sik, Chief of Staff to the President, held a briefing at the Cheong Wa Dae press center regarding the joint public-private review meeting for the mega projects. He stated, "During today's meeting, we decided to establish a semiconductor industrial complex at Gwangju Military Airport, as companies indicated it was the most suitable site among candidates in the Honam region."
The meeting prioritized discussions on the semiconductor sector, which has the largest investment scale among the mega projects. President Yoon Suk Yeol chaired the meeting and emphasized the need for swift progress. He plans to hold related meetings monthly to monitor the progress of the semiconductor cluster and other key tasks within the three mega projects by region.
The main advantage of the Gwangju Military Airport site is its potential for a large area of approximately 2.5 million pyeong, and the airport's existing flat terrain will significantly reduce the construction time needed for site development.
During the meeting, companies also raised concerns about securing essential infrastructure such as power and water, as well as improving living conditions related to housing, transportation, and education.
Given the nature of the semiconductor industry, which requires rapid advancement, government support is deemed essential for a project that aims to transform the entire regional industrial ecosystem. The government plans to actively support the establishment of the industrial complex, permitting processes, infrastructure, and living conditions.
Canada Selects German TKMS for Next-Generation Submarine Project, Hanwha Ocean Disappointed
The Canadian government has chosen Germany's ThyssenKrupp Marine Systems (TKMS) as the preferred bidder for its next-generation submarine construction project (CSPS), according to multiple government sources cited by the Globe and Mail on July 6.
Prime Minister Mark Carney is expected to officially announce the selection of the preferred bidder for the Canadian Patrol Submarine Project (CPSP) at 5:10 PM local time (6:10 AM KST) on July 7 in Halifax, Nova Scotia.
This project aims to replace the Royal Canadian Navy's four 2,400-ton Victoria-class submarines with up to 12 new diesel submarines of up to 3,000 tons by the mid-2030s. The total project cost, including construction, operation, maintenance, and performance upgrades, is estimated to reach up to CAD 60 billion.
The Canadian government evaluated both Hanwha Ocean's KSS-III model and TKMS's 212CD as meeting the navy's performance requirements. The final selection reportedly considered investment in the Canadian economy and the industrial ripple effects as key criteria.
Hanwha Ocean proposed over CAD 70 billion in investments and trade expansion, along with the creation of more than 25,000 jobs annually until 2044. TKMS, in partnership with Norway, claimed it could contribute CAD 86 billion to Canada's GDP and create over 650,000 jobs during the project period.
Hanwha Ocean and HD Hyundai Heavy Industries were shortlisted candidates competing against TKMS.
New Penalties for Distributing Fake News to Be Enforced
The responsibility for online false information is set to be significantly strengthened. Content creators and platforms distributing such information will now face punitive damages.
On July 6, the government took its first step toward eradicating 'fake news.' With the implementation of revised laws and enforcement regulations, the accountability for online false information has been greatly enhanced.
The government has amended laws to address the growing harm caused by illegal and misleading information disseminated through information networks, which infringe on individual rights and create social chaos. The revisions aim to strengthen the economic responsibility of those distributing false information while expanding the means for victims to seek redress.
One notable change is the introduction of a fine system of up to 1 billion won. Information publishers who profit from disseminating false or misleading information by posting three or more articles in the three months prior to distribution will face fines if they repeat the distribution of information deemed illegal or misleading by the court more than twice. The fines will be determined based on the severity of the violations through a process of aggravation or mitigation.
Victims will also have enhanced avenues for redress. Individuals harmed by false information can file for damages, and if a publisher of a certain scale intentionally or maliciously distributes false information causing harm, the court may award up to five times the amount of damages.
In cases where harm has occurred but the exact amount cannot be proven, the court may recognize damages up to 50 million won.
The application of aggravated damages will be limited to information publishers of a certain scale. This includes those who have posted three or more articles in the three months prior to distribution while profiting from advertisements and have at least 100,000 subscribers or an average monthly view count of over 100,000 during the same period.