A ruling party lawmaker is pushing legislation to block subsidiary listings on the Korea Exchange (KRX) that proceed without shareholder consent.
Rep. Ahn Do-geol of the Democratic Party of Korea, a member of the National Assembly's Finance and Economic Planning Committee, said on the 9th that he had introduced an amendment to the Financial Investment Services and Capital Markets Act that sets legal standards for subsidiary listings and includes safeguards for the rights of parent company shareholders.
"This preserves the intent of the listing rules and guidelines the Korea Exchange recently revised to tighten its review of subsidiary listings, while addressing the lack of clarity in those standards and the reduced predictability for companies that have been raised as problems," Ahn said.
The amendment defines the listing of a parent company's subsidiaries and affiliates as an "overlapping listing" — the separate listing of a parent and its subsidiary on the same exchange, not a cross-border dual listing — and restricts it in principle. As an exception, a subsidiary listing would be permitted if it meets all of the following objective requirements: consent from parent company shareholders, substantive compensation for existing shareholders, and management independence of the listed company.
Current exchange rules do not require consent from parent company shareholders for subsidiary listings other than those involving a spin-off of business assets. The amendment would require shareholder consent for all subsidiary listings, broadening shareholder authority. It also writes shareholders' right to approve subsidiary listings into law rather than leaving it in exchange rules, clarifying the basis for parent company shareholders to take part in the decision.
While subsidiary listings would be barred in principle, the bill allows subsidiary listings through a special resolution, addressing criticism that a blanket ban would infringe on corporate management autonomy. A subsidiary or similar entity could list if a special resolution passes at a shareholder meeting with approval from at least two-thirds of the voting rights present and at least one-third of total shares issued. The aim is to protect corporate management autonomy in areas such as growth strategy and fundraising.
The exception is limited to cases where "substantive independent management" is possible — where the subsidiary's revenue accounts for less than 25% of the parent company's revenue and fewer than one-third of its executives hold concurrent posts at the parent.
The bill would also require that at least 50% of the shares in a newly listed subsidiary's public offering be allocated to existing parent company shareholders on a priority or discounted basis.
"We must not leave minority shareholders exposed to harm from subsidiary listings, but neither should ambiguous regulation block normal corporate growth and fundraising," Ahn said. "We will establish reasonable subsidiary listing principles that open growth opportunities for companies while strengthening shareholder rights and market trust, and build a capital market that sustains the 'Korea premium.'"
