Lee Orders Review of Delisting Rules for Firms With Concentrated Ownership
Proposals have emerged to tighten listing maintenance requirements for companies that enjoy the benefits of being publicly listed while allowing controlling shareholders to hold dominant stakes, effectively operating like privately held firms. President Lee Jae-myung directed officials to consider w
President Lee Jae-myung issued an order to review the conditions for maintaining firm listings, specifically focusing on companies with concentrated ownership controlled by a single shareholder. During a capital market policy forum on November 13 at Korea Exchange, Lee emphasized that the primary objective of the stock market is to foster widespread participation and ensure fair pricing.
He argued that a structure wherein a controlling shareholder holds over 50% of a company while fewer than 10% of its shares are available for trading conflicts with this objective. Lee called for stricter assessments of controlling shareholders' ownership stakes as a prerequisite for retaining a listed status and proposed measures to delist companies failing to meet these requirements.
In addition, Lee directed officials to examine institutional and policy barriers hindering hostile mergers and acquisitions (M&A). He highlighted that such transactions, which enable investors to acquire undervalued companies to unlock their value, could act as a vital market check but currently face constraints due to societal perceptions and a tendency to protect companies against takeovers.
Lee expressed concerns about the infrequency of hostile M&A in South Korea and urged discussions on measures to promote these transactions. The government and related institutions would conduct a comprehensive review of the relevant rules. Financial Services Commission Chairman Lee Eok-won stated that he would investigate potential shortcomings in the current stock distribution requirement within the listing maintenance criteria.
Korea Exchange Chairman Jeong Eun-bo explained the existing rules, noting that while general shareholders are supposed to hold around 20% of a company's shares at listing, controlling shareholders can accumulate nearly 80% due to various factors. Lee stressed the need to address the structure that allows companies to enjoy the benefits of being listed without bearing the associated responsibilities, emphasizing the urgency of revising the standards.
The debate on controlling shareholders' stakes and listing maintenance requirements followed remarks by Truston Asset Management division head Lee Seong-won on protecting minority shareholders. The forum, themed "A Trusted Capital Market: Asking Questions and Finding Answers on the Ground," convened approximately 50 participants, including government officials, financial industry experts, and policymakers, to discuss critical capital market concerns.
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