Starting This July, Companies Failing Market Cap or Penny Stock Criteria to Be Placed Under Supervision... Delisting Rules Tightened

Market Capitalization Requirement to Be Raised One Year Early
New Semi-Annual Capital Erosion Rule Introduced, Disclosure Violation Standards Tightened

Starting in July, listed companies that do not meet the market capitalization requirements and those with share prices below 1,000 won—so-called penny stocks—will be designated as under administrative supervision.

The Financial Services Commission announced on the 13th that it has approved amendments to the Korea Exchange’s listing regulations reflecting these changes. The purpose is to break the vicious cycle in which the number of listed companies increases while delistings remain low, resulting in the accumulation of underperforming companies.

Under the revised listing rules, the market capitalization requirements for both KOSPI and KOSDAQ will be raised more quickly. Previously, the KOSPI market capitalization requirement was set to increase from 20 billion won to 30 billion won next year and 50 billion won in 2028, while the KOSDAQ requirement was to rise from 15 billion won to 20 billion won next year and 30 billion won in 2028. With this revision, the KOSPI requirement will be raised to 30 billion won in the second half of this year and 50 billion won next year, and the KOSDAQ requirement will be raised to 20 billion won in the second half of this year and 30 billion won next year.

The maintenance period for the market capitalization requirement has also changed. Previously, if a company designated as under administrative supervision failed to meet the market capitalization requirement for more than 10 consecutive trading days and a total of 30 trading days within a 90-trading-day period, it was subject to delisting. Going forward, companies will be delisted if they fail to maintain the market capitalization requirement for 45 consecutive trading days within a 90-trading-day period after being designated under administrative supervision.

A new delisting requirement has also been introduced for penny stocks with share prices below 1,000 won. If a company’s share price remains below 1,000 won for 30 consecutive trading days, it will be designated as under administrative supervision. If it then fails to exceed the 45-consecutive-trading-day threshold within a subsequent 90-trading-day period, it will be subject to final delisting.

Measures have also been implemented to prevent companies from avoiding delisting by conducting reverse stock splits or capital reductions. If a company has undertaken a reverse stock split or capital reduction within the past year, it will not be allowed to conduct additional reverse splits or capital reductions within the 90-trading-day period after being designated as a penny stock under administrative supervision. Furthermore, reverse splits or capital reductions exceeding a 10-to-1 ratio will also be prohibited during this period.

The delisting requirement due to complete capital erosion has been strengthened. Previously, delisting was triggered only if a company was in a state of complete capital erosion at the end of the fiscal year. Now, companies that are in such a state at the end of a semi-annual period will also be subject to delisting requirements. However, for semi-annual cases, the final decision on delisting will be made after a substantial review of the company’s going concern status.

The delisting criteria for disclosure violations will also be tightened. The threshold will be lowered from the previous cumulative 15 penalty points for disclosure violations over the past year to 10 points. In addition, any serious or intentional disclosure violation, even if committed only once, will constitute grounds for delisting regardless of the penalty point total.

The revised market capitalization requirements will take effect on July 1 and January 1 of next year, while the penny stock and disclosure violation requirements will be implemented starting July 1. The semi-annual complete capital erosion requirement will apply to companies with semi-annual period-ends after June 1, and reviews will begin with semi-annual reports for the first half of this year.

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