Corporations Delaying Financial Closing Due to COVID-19 Exempt from Administrative Sanctions

[Asia Economy Reporter Ji Yeon-jin] The Securities and Futures Commission announced on the 24th that it will exempt administrative sanctions for companies unable to submit business reports due to delays in settlement caused by COVID-19 and extend the submission deadline until the 31st of next month.

Delays in submitting business reports are subject to administrative sanctions (such as fines) under the Capital Markets Act and the External Audit Act and are grounds for designation as a management item by the Korea Exchange. However, this year, concerns have arisen that the preparation and timely submission of financial statements, audit reports, and business reports may be difficult due to delays in external audits caused by the COVID-19 pandemic.

Accordingly, the financial authorities plan to decide on the exemption from sanctions at the Securities and Futures Commission meeting on the 24th of next month if an application for exemption from administrative sanctions is submitted during the five days starting from the 3rd of next month. Corporations required to submit business reports can apply to the Financial Supervisory Service if they do not apply Korean International Financial Reporting Standards or to the Korean Institute of Certified Public Accountants if they prepare consolidated financial statements.

The eligibility for application is for companies with a fiscal year ending on December 31, 2020, and if either of the two conditions is met: ▲ the company’s main business sites (including subsidiaries) are located in countries affected by COVID-19 or conduct significant operations in those countries, or ▲ the auditor’s preparation of the 2020 fiscal year financial statements or external audit was delayed due to COVID-19 or various measures taken for COVID-19 prevention.

The application details will be disclosed on the websites of the Financial Supervisory Service, the Korean Institute of Certified Public Accountants, and the Korea Exchange disclosure system. On the 23rd of next month, the Securities and Futures Commission will decide on the exemption from sanctions based on the review results from the Financial Supervisory Service and the Korean Institute of Certified Public Accountants.

The Korea Exchange will defer the designation of management items until the extended submission deadline for listed companies exempted from administrative sanctions. Companies exempted from sanctions must submit their business reports by May 17, the submission deadline for the first quarter of this year, and those subject to review by the Korean Institute of Certified Public Accountants must submit audit reports on consolidated financial statements by June 14, which is 45 days extended from the original deadline of April 30.

This content was produced with the assistance of AI translation services.