The demand for funding among corporations has increased, but the threshold for financing has risen, leading to growing concerns for listed companies. The Financial Supervisory Service has reinforced its review of securities registration statements required for paid-in capital increases, resulting in a prolonged period for financing through paid-in capital increases. For corporations in urgent need of funds, business activities are inevitably stifled. Although it is a measure to protect shareholders (investors), corporations express dissatisfaction, claiming the scrutiny is excessive.
According to the Financial Supervisory Service's electronic disclosure system on the 20th, CHA Biotech confirmed the issuance price for its paid-in capital increase on the 8th and will begin its subscription on June 3. CHA Biotech first disclosed its paid-in capital increase plan in December of last year. After correcting the disclosure six times, it has finally been able to pursue the paid-in capital increase after four months.
Corporations can secure funds by obtaining loans or issuing bonds, but the number of corporations opting for paid-in capital increases has increased due to prolonged economic recession and high-interest rates. According to the FSS, from January 1 to April 18 of this year, 33 companies in the KOSPI and 127 companies in the KOSDAQ disclosed plans for paid-in capital increases, a 69% increase compared to the previous year.
Since the second half of last year, the FSS has already strengthened its review of paid-in capital increases for companies like Kumyang, causing many to delay their schedules for capital increases after submitting their audit reports. As a result, industry insiders explain that there have been more recent disclosures of paid-in capital increases.
While the number of corporations embarking on paid-in capital increases has grown, the FSS's scrutiny has tightened, resulting in longer 'waiting lines' for reviews. Although the number of listed companies that disclosed their plans for paid-in capital increases has increased, the number of actual completed increases has decreased during the same period. According to the Korea Securities Depository, the number of paid-in capital increases completed this year was 19 in KOSPI and 105 in KOSDAQ, totaling 124 cases. This represents a slight decrease compared to the same period last year (128 cases).
In general, a paid-in capital increase allocated to shareholders becomes effective seven days after the company submits its securities registration statement. During this process, the FSS reviews the public disclosure of the paid-in capital increase to suppress corporate indiscriminate increases and protect investors, requiring corrections if the content is deficient. If the FSS requests corrections, the effective date is suspended, and the company must revise and resubmit the report. This means that the timing of the company's funding is pushed back.
Hanwha Aerospace, which announced its paid-in capital increase plan on the 20th of last month, is also experiencing difficulties, though not as severe as CHA Biotech. This company has also received correction requests from the FSS twice.
In the industry, there are claims that the FSS's excessive scrutiny is stifling corporate activities. A source in the business community noted, 'I understand the FSS's intention to strengthen the review of paid-in capital increases for investor rights protection,' but added, 'I wonder if there's a need to consider a balance so that corporations can secure funding on time.'
A CEO of a KOSDAQ company actually said, 'I was considering reviewing a paid-in capital increase around the second half of the year,' noting that 'given the possibility of prolonged delays, I’m contemplating whether I should start taking steps soon.'
The FSS has stated that it only checks whether a corporation's paid-in capital increase plan and the purpose of fund usage are well explained to investors and whether the disclosure documents are properly prepared in accordance with regulations. The FSS explains that there is no reason to block or delay paid-in capital increases as long as relevant information is properly conveyed to investors.
Not all corporations are experiencing delays, as explained by the FSS. Despite concerns that the paid-in capital increase by Hyungji I&C, which issues new shares amounting to 90% of existing shares, would not be easily approved, it overcame the FSS hurdle in about three weeks. Following the announcement of its paid-in capital increase, Hyungji I&C's stock skyrocketed due to its connection with Lee Jae-myung, a leading candidate in the presidential election, causing controversy. The FSS reviewed Hyungji I&C's paid-in capital increase plan as a priority but the company corrected its documents on its own, leading the effective date of the securities registration statement for the paid-in capital increase to occur on the 11th.
An FSS official stated, 'The principle of review is to see whether investor protection measures are properly implemented' and added, 'We are diligently reviewing based on this principle.'