Barun Law LLC (led by attorneys Lee Dong-hoon, Lee Young-hee, and Kim Do-hyung) announced on July 16 that it held a seminar on July 15 at its auditorium on the 15th floor of the Barun Building in Gangnam, Seoul. The seminar focused on 'Survival Strategies for Listed Companies Amid Regulatory Changes – Legal Risks and Practical Responses Following the Delisting System Reform.'
The event attracted numerous employees and practical staff from listed companies, reflecting a strong interest in the enhanced delisting regulations.
The seminar aimed to analyze the legal risks that listed companies may face and to propose strategies for maintaining listings and enhancing corporate value based on practical case studies. The revised listing regulations have been in effect since July 1.
Since February, the exchange has designated a concentrated management period from now until June 2027 and has activated a 'Delisting Concentrated Management Team' led by the exchange's vice president. The KOSDAQ review process has been strengthened with four teams comprising 20 members, and the maximum improvement period for substantial reviews has been reduced by one year. The Barun Delisting Response Team analyzed that as the speed and density of reviews have increased, planning based on past processing speeds could lead to significant risks.
Attorney Choi Seung-hwan (39th Judicial Research and Training Institute) presented on 'Legal Response Strategies for Listed Companies Following the Implementation of the Delisting System for Stocks Below 1,000 Won,' dissecting the practical application of the delisting criteria that took effect on July 1.
Choi emphasized the need to clearly distinguish between the price and trading days that determine the closing price, as well as the criteria for designating and lifting management items. He particularly noted the limitations of responses through stock consolidation and capital reduction. The revised regulations define repeated consolidations and consolidations exceeding a 10-to-1 ratio as separate grounds for delisting, indicating that attempts to formally evade these rules could actually lead to delisting.
He advised that even after stock consolidation, the reasons for delisting related to stock price, market capitalization, and distribution structure remain, urging legal teams to manage articles of incorporation, par value, and total issued shares, while disclosure and stock affairs teams should monitor closing prices and continuous shortfall days. The planning and finance teams should manage theoretical prices based on consolidation ratios and post-consolidation market capitalization, establishing a collaborative response system across departments. He stressed that stock consolidation should not be viewed as an isolated price adjustment task but as a comprehensive decision-making process that addresses listing maintenance, finance, audit, and disclosure risks.
Attorney Lee Hyung-jin discussed 'Enterprise-wide Risk Management to Prevent Delisting,' categorizing the risks associated with delisting into legal and management risks. He explained that legal risks could include damage claims from minority shareholders, securities-related class actions, investigations by financial authorities due to false disclosures, and potential criminal penalties and administrative sanctions against executives, including fines and recommendations for dismissal.
The management implications are even broader. Lee noted that capital market funding through rights offerings and corporate bonds could be effectively blocked, leading to credit rating downgrades, increased interest rates, and refusals to extend maturities. He warned that there could be reluctance to maintain or extend contracts with business partners, disadvantages in international partnerships and bidding qualifications, and even the loss of talented employees. He emphasized that preventing delisting should be treated as an enterprise-wide risk management task.
Advisor Yoon Gi-jun (former head of the KOSDAQ market listing department at the Korea Exchange) highlighted in his presentation on 'Changes and Significance of the Delisting System' that the key takeaway for listed companies from this reform is the emphasis on 'early warning' rather than 'strengthened standards.' Yoon pointed out that the requirement for stock price and market capitalization to recover for 45 consecutive trading days makes short-term reactive measures difficult, and the periods for recovery and improvement are not lengthy.
He proposed establishing a 'CFO Dashboard' that encompasses market (daily stock price, market capitalization, trading days), finance (monthly self-capital and potential complete capital erosion), cash flow, funding plans, and pre-consultation on audit issues. He suggested using a weekly management situation board to check stock price and disclosure issues, reporting capital, cash, and audit issues in monthly risk meetings, and bringing matters to the board for approval of capital transactions and disclosure actions when approaching critical thresholds.
Yoon stated, 'What is needed now is not post-explanation and damage control, but early warning and proactive response for each company,' adding, 'Listing maintenance risks should be managed as ongoing management indicators, not just year-end tasks.'
Attorney Lee Dong-hoon remarked, 'The recent reform aimed at the swift exit of failing companies has significantly increased the legal risks faced by listed companies.' He added, 'The Barun Delisting Response Team will support the establishment of an integrated response system encompassing finance, disclosure, investor relations, and compliance to help companies achieve the dual goals of maintaining their listings and enhancing corporate value.'
The Barun Delisting Response Team is a specialized organization composed of experts with practical experience in financial regulatory agencies such as the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange, providing comprehensive advice on legal risks and practical responses related to the enhanced delisting system, including the delisting of stocks below 1,000 won.
* This article has been translated by AI.
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