This article was published on July 11, 2025, at 11:46 a.m. on the ChosunBiz MoneyMove site.
As the Korea Exchange is reported to be specifying the review criteria for 'duplicate listings', a draft of the criteria has been released. The draft includes whether the interests of the parent company's shareholders are harmed and whether the newly listed corporations operate businesses that overlap with those of the parent company.
On the 11th, according to the financial investment industry, the Korea Exchange presented materials on the criteria and principles for duplicate listing reviews during the 'Private Meeting on Listing Review Issues' attended by securities firms' initial public offering (IPO) personnel on the 2nd. The main point of the materials is that when reviewing for duplicate listings, individual matters will be comprehensively examined regarding the independence of operations and management, and investor protection.
The most important criterion is whether the interests of the parent company's common shareholders are harmed. Corporations that intend to list must assess the proportion of subsidiaries within the parent company, and the impact of subsidiary listings on parent company shareholders should be prioritized for protection. The history of parent-subsidiary formation and whether the subsidiary must absolutely be listed are also subjects of review.
The item of operational independence was also included. Whether the operating sector of the newly listed company is similar or highly dependent on the business sector operated by the parent company will be examined. If the main products and sales channels are similar or if the dependency on materials and supplies or sales from the parent company is excessively high, the listing may be restricted.
The item of management independence examines whether decision-making and governance are independent of the parent company. The exchange said it will consider the independence of the board of directors and audit committee as well as the presence of full-time executives in the listing review.
◇ Partitioning also allows duplicate listings if shareholder protection is observed
The exchange decided to allow listings even with partitioning if efforts to gather shareholder opinions and protect them are faithfully implemented. They will also examine whether a pre-partitioning listing plan or shareholder protection measures were disclosed, and whether shareholders opposing the partition were provided with liquidity opportunities through shareholder buyback rights. Communication with shareholders, as well as dividend policies or share buybacks, are expected to be crucial for spin-offs.
To enhance the predictability of market participants regarding future duplicate listings, the exchange presented examples of successful and unsuccessful listings of three companies previously reviewed, while also revealing which aspects were considered.
In the case of Company A, the economic substance between the parent and subsidiary companies was essentially the same, resulting in a failure to meet the operational independence criteria. The sharing of main products and market revenue sources was also a hindrance. Additionally, there were concerns raised regarding the largest shareholder of the parent company holding long-term positions as executives of the subsidiary.
Company B attempted to list its subsidiary within three years after partitioning but succeeded in listing after being recognized for its efforts to communicate with and protect common shareholders. The parent company proposed in-kind dividends of subsidiary shares, differential dividends among parent and subsidiary companies, and share buybacks as incentives. The continuous engagement with shareholders through meetings and surveys, as well as related disclosures, were also taken into account.
In the case of Company C, there were concerns that the controlling shareholder's control would excessively expand during the transition to a holding company after the subsidiary's listing. Nevertheless, thanks to the proposed shareholder protection measures, such as differential dividends between the newly established company and the ongoing company, as well as share buybacks, it passed the review threshold. Plans for quarterly shareholder meetings and surveys also positively impacted the listing.
However, a representative from the Korea Exchange noted, "In the case of listing reviews, each corporation's situation is different, so it is not easy to present criteria that can be used for quantitative evaluation, and it has not yet been determined whether criteria will be established." They added, "Even if established, it will be difficult to present quickly as external institutions will need to conduct research."