Court Blocks KRX Delistings Over Market Cap Rules
A court has halted the fast-track delisting system based on market capitalization thresholds, a policy that financial authorities and the Korea Exchange have been pushing forward. The court determined that applying the tightened standards had undermined predictability for companies and failed to mee
A South Korean court has temporarily halted the delisting of two companies, Jooyontech and KM Pharmaceutical, over concerns that the country's market capitalization thresholds for delisting have been set too low and lack proper procedural legitimacy. The decision, made by the 51st Civil Division of the Seoul Southern District Court on October 2, grants provisional injunctions to have the delisting decisions suspended until a final ruling is made.
The court determined that the Korea Exchange accelerated the increase of market capitalization thresholds for KOSPI and KOSDAQ listed companies, raising them to 30 billion won ($22.45 million) and 20 billion won ($14.87 million) respectively, ahead of the planned schedule. This swift increase, implemented in July, was found to undermine predictability for affected companies and violate the principle of proportionality.
The court also criticized the Korea Exchange for not providing companies with sufficient opportunities to present their opinions or file objections, despite the significant increase in listing-maintenance thresholds. Additionally, the court ruled that the requirement of 45 consecutive trading days of recovery, mandated for companies to exit management status, may excessively restrict their ability to recover, as demonstrated by the case of Sejin TS.
The ruling is expected to cause widespread disruption to delisting procedures based on market capitalization shortfalls, potentially delaying proceedings for other companies facing delisting due to various reasons. The Korea Exchange plans to review the court's decision and consult with financial authorities on a possible response.
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