The government will allow companies facing delisting from the KOSDAQ due to insufficient market capitalization to transfer to the KONEX market. If they meet certain financial requirements, they can make the transfer without undergoing a liquidation process. Additionally, the planned increase in the market cap threshold for delisting, originally set for January next year, will be postponed by six months. The same measures will apply to the KOSPI market.
On September 4, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol chaired a joint market situation review meeting at the Korea Federation of Banks, where the government decided to implement these reforms to the delisting system.
The government and the Korea Exchange have been pursuing reforms to ensure the swift and strict exit of underperforming companies. However, recent feedback from the business community indicated a need for adjustments in light of the deteriorating KOSDAQ market conditions.
Eligible companies for the KONEX transfer are those designated as management items due to insufficient market capitalization since July 1, provided they meet specific financial criteria. Companies wishing to transfer must apply to the exchange.
The financial requirements stipulate that a company must have recorded operating profits for two out of the last three years, or have made a profit in one of the last three years with equity exceeding 20 billion won. Companies that are insolvent are excluded from this provision.
Qualified companies will be able to transfer to the KONEX without undergoing liquidation, maintaining their existing price. To facilitate a swift transfer, the requirement to appoint a designated advisor, such as a securities firm, will also be temporarily waived.
Companies facing delisting whose deadlines arrive between the announcement of the regulatory changes and the implementation of the revised rules will also be allowed to apply for the transfer if they meet the criteria. The same financial requirements will be applied to KOSPI companies wishing to transfer to KONEX.
The timeline for strengthening the delisting market cap criteria will also be adjusted. The KOSDAQ was set to raise its market cap threshold from the current 20 billion won to 30 billion won starting January 1, but this will now be postponed until July next year, reflecting the need for a recovery period in the market.
Similarly, the KOSPI will delay its increase in the market cap threshold from 30 billion won to 50 billion won from January to July next year. The government explained that this decision considers similar requests from KOSPI companies and aims to ensure fairness with KOSDAQ firms.
During the meeting, participants also reviewed trends in domestic and international financial and foreign exchange markets, as well as the real estate market. They noted that the increase in government bond issuance and corporate bond issuance by global AI companies, combined with expectations of interest rate hikes in major economies and rising oil prices due to renewed tensions in the Middle East, are contributing to sustained upward pressure on interest rates.
The government and relevant agencies will closely monitor trends in the domestic bond market and manage to prevent excessive market volatility.
The impact of rising interest rates on vulnerable borrowers and the soundness of the mutual finance sector have been assessed as generally stable so far. However, they warned that significant future interest rate increases could exacerbate difficulties and committed to implementing the support measures for vulnerable borrowers announced on August 28 without delay.
* This article has been translated by AI.
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