Listed parent companies pursuing initial public offerings (IPOs) of their subsidiaries will now be required to obtain shareholder approval and board consent, and to undergo a separate special review by the exchange. In particular, to list a subsidiary created through a physical spin-off, the voting rights of controlling shareholders must be capped at 3 percent before shareholder meeting approval becomes mandatory. While uncertainty over dual-listing regulations has been resolved, the difficulty of corporate fundraising will rise sharply, as the exchange will now individually review the qualitative value of investor protection.
The Financial Services Commission (FSC) and the Korea Exchange (KRX) announced the "Exchange Rules and Guidelines for Prohibiting Dual Listings in Principle While Allowing Exceptions" containing these details Thursday.
First, the parent company's board will bear five duties, including shareholder communication and the establishment of shareholder protection measures. The standard for recognizing shareholder approval is a majority at the shareholder meeting and support from at least one-quarter of total voting rights. In this case, the voting rights of the largest shareholder and specially related parties are capped at a maximum of 3 percent. The 3 percent rule applies even to those who are not the largest shareholder or specially related parties. The five duties apply equally when a subsidiary lists on an overseas stock market.
For the listing of an ordinary subsidiary, if a shareholder approval vote is held, fulfillment of efforts to protect shareholders is presumed to have been met. If no vote is held, the exchange will strictly review fulfillment on an individual basis. The government plans to gather opinions through the 14th of this month and, at the earliest, implement the rules through an FSC resolution on the 29th.
