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Photo courtesy of Financial Services Commission |
[Alpha Biz= Ellie Kim] South Korea’s financial authorities have finalized stricter delisting rules targeting so-called “penny stocks,” as part of broader efforts to overhaul the capital market by facilitating faster exits of underperforming companies while supporting innovative listings.
The Financial Services Commission (FSC) announced on May 13 that it approved amendments to listing regulations of the Korea Exchange to implement its reform plan aimed at “swift and rigorous delisting of insolvent companies.”
The key measure introduces a new delisting trigger for stocks trading below KRW 1,000. Companies whose share prices remain below this threshold for 30 consecutive trading days will be designated as “under supervision.” If they fail to recover above the threshold for at least 45 consecutive days within a 90-trading-day period, they will face final delisting.
The revised rules also prevent companies from avoiding delisting through reverse stock splits or capital reductions. Firms that have conducted such measures within the past year will be prohibited from additional reverse splits or capital reductions for 90 trading days after being designated under supervision. Reverse splits exceeding a 10-to-1 ratio after designation will also be effectively banned, with violations constituting grounds for delisting.
Market capitalization requirements will also be tightened on an accelerated schedule. Starting July 1, the minimum market cap threshold will rise to KRW 30 billion for KOSPI-listed firms and KRW 20 billion for KOSDAQ-listed firms. These thresholds will be further increased to KRW 50 billion and KRW 30 billion, respectively, from January 1 next year.
The criteria for maintaining listing status will also become more stringent. Previously, companies could avoid delisting if they met market cap requirements for at least 10 consecutive trading days and 30 cumulative days within a 90-day window. Under the new rules, firms must now maintain compliance for 45 consecutive trading days to prevent short-term price manipulation.
Regulations on disclosure violations will also be strengthened. The threshold for triggering delisting review will be lowered from 15 to 10 cumulative penalty points within one year. Existing penalty points will be adjusted to two-thirds of their original value. Notably, a single serious or intentional disclosure violation can now lead to delisting review regardless of accumulated points.
In addition, capital impairment criteria will be expanded. While full capital erosion at fiscal year-end previously resulted in automatic delisting, full capital impairment at the semiannual level will now also be subject to substantive review regarding a company’s viability.
The enhanced rules on penny stocks, market capitalization, and disclosure violations will take effect on July 1. The new semiannual capital impairment criteria will apply to companies whose half-year reporting periods end after June 1, with reviews beginning from June-end filings.
Alphabiz Ellie Kim 인턴기자(press@alphabiz.co.kr)
