Last Year, 19 Cases of Physical Division in Listed Companies... Less Than Half Compared to Previous Year

by Cha Minyoung

Published 06 Mar.2024 12:00(KST)

Financial Supervisory Service, Review of Investor Protection Status

Financial Supervisory Service, Yeouido, Seoul. Photo by Heo Younghan younghan@

The number of physical spin-off cases pursued by listed companies last year decreased to 19, less than half of the previous year's 35 cases. This is also significantly lower compared to the average of 39.4 cases over the past five years.

On the 6th, the Financial Supervisory Service (FSS) announced that it had inspected the status of protecting the rights and interests of common shareholders in 19 listed companies that disclosed physical spin-offs in 2023, revealing these results.

This measure is a follow-up action based on the "Plan to Enhance the Rights and Interests of Common Shareholders Regarding the Listing of Physical Spin-off Subsidiaries" announced by the Financial Services Commission and the FSS in September 2022.

Listed companies granted shareholders opposing the spin-off the right to request the purchase of their shares. Various investor protection measures were prepared upon the listing of the newly established spin-off companies.

A physical spin-off involves dividing assets and liabilities to establish a new company, with the parent company holding 100% of the shares of the newly established spin-off company. During this process, concerns were raised mainly by common shareholders that the value of the subsidiary was not properly reflected in the value of the parent company, thereby damaging shareholder value.

Additionally, disclosures regarding the purpose and expected effects of the physical spin-off, as well as restructuring plans, have improved following strengthened disclosure formats.

However, cases were also identified where the disclosure lacked specificity or where some shareholders’ rights to request the purchase of their shares were restricted. These include instances where the description of the purpose and effects of the spin-off was somewhat insufficient and cases where correction disclosures were not made despite changes in restructuring plans (such as transfer of subsidiary management rights).