Seoul: South Korea's financial regulator has announced plans to enforce stricter de-listing rules to expedite the removal of companies failing to meet necessary requirements. The Financial Services Commission (FSC) aims to enhance the KOSDAQ market and support the nation's transition to productive finance, fostering innovative ventures and startup businesses.

According to Yonhap News Agency, starting July 1, companies on the KOSDAQ market with a market capitalization below 20 billion won (US$13.8 million) will face de-listing. This threshold will increase to 30 billion won at the beginning of next year. For companies listed on the Korea Composite Stock Price Index (KOSPI), the threshold will be set at 30 billion won in July and further increased to 50 billion won next year.

Penny stocks, defined as companies with shares trading under 1,000 won, will also be removed from the market starting in July. Additionally, companies experiencing capital impairment, where total liabilities surpass total assets at the half-year mark, will be subject to de-listing. Currently, firms face de-listing only if in complete capital impairment at the fiscal year's end.

The FSC will tighten de-listing criteria for disclosure violations from 15 points to 10 points within a year. Companies committing severe and intentional disclosure violations may be de-listed after a single violation, as per the financial regulator's guidelines.

The lenient de-listing requirements have been a significant issue, limiting the growth of the local stock market, particularly the smaller KOSDAQ, by allowing struggling firms to remain listed for extended periods. Over the past 20 years, 1,353 firms have newly listed on the Korean stock market, while only 415 firms have been removed.

The FSC and the Korea Exchange (KRX), the main bourse operator in South Korea, will conduct a special monitoring period from Thursday to June for companies potentially subject to de-listing. Under the new rules, the KRX estimates that the number of KOSDAQ-listed firms subject to de-listing this year could rise to around 150 from the previous estimate of 50.