The government will allow Kosdaq-listed companies that fall short of the market capitalisation threshold to transfer their listing to Konex if they meet certain financial requirements, in a bid to reduce market shock from tougher delisting criteria. It also decided to delay by 6 months a planned additional increase in the market-cap delisting threshold that had been set for January next year.

Financial authorities prepared the supplementary measures to the delisting reform plan at a market situation review meeting chaired by Deputy Prime Minister and Finance and Economy Minister Yun-cheol Koo (구윤철) on Sept. 4 at the Bankers Association building in central Seoul.

Under the measures, companies designated as issues under administration for failing to meet the market-cap threshold since July 1 can transfer their listing to Konex if they meet certain financial requirements and want to move. They will be able to do so without a liquidation trading process and while maintaining the existing price.

Under current rules, a company is designated as an issue under administration if it stays below the market-cap threshold for 30 consecutive trading days. If it fails to recover the threshold for at least 45 consecutive trading days within the following 90 trading days, it is delisted after liquidation trading or transferred to Konex.

The government decided to create an exceptional route allowing a transfer to Konex without liquidation trading to reduce the risk of sharp share-price falls and investor losses that could occur in the process.

The measure will not apply to all companies. A company must have operating profit in the black in 2 of the last 3 years, or be in the black in 1 of the last 3 years and have equity capital of at least 20 billion won. Companies with impaired capital will be excluded.

It will also defer, for a certain period, the requirement to appoint a designated adviser needed for a Konex transfer to speed up the move.

The government will also adjust the schedule for tougher market-cap delisting rules. It had planned to raise the Kosdaq market-cap threshold to 30 billion won from 20 billion won from Jan. 1 next year, but decided to delay implementation by 6 months to July. The aim is to provide a recovery period in consideration of recent weakness in the Kosdaq market and the burden on companies.

Criticism has been raised that even profitable companies could be forced out as more firms are designated as issues under administration for failing to meet market-cap and share-price thresholds after the new delisting criteria took effect.

Financial Services Commission Chairman Eok-won Lee (이억원) also said last month at the National Assembly's political affairs committee that a full overhaul of the delisting policy would be difficult, but added, "We will review areas that need fine-tuning."