The amended listing rules of the Korea Exchange (the “KRX”) for the KOSPI and KOSDAQ markets, together with the related enforcement rules (collectively, the “Listing Rules”), which set forth the principle of “prohibition of dual-listings, with exceptions permitted,” took effect on August 3, 2026. Under the Listing Rules, where an unlisted company (the “subsidiary”) that is substantially controlled by a listed company (the “parent company”) is listed on a domestic or overseas securities market, five key obligations are imposed on the parent company’s board of directors, and strengthened special review criteria for dual-listings apply to the subsidiary.

Under the previous listing rules, only a broad and abstract review standard—namely, that efforts to protect shareholders must be faithfully carried out—applied in cases of listing following a spin-off. Going forward, however, regardless of how the parent-subsidiary relationship was established, dual-listings will generally be subject to both (i) procedural obligations of the parent company’s board of directors, and (ii) review standards applicable to the subsidiary, including business and management independence, investor protection and related factors. This can be understood as the introduction of a so-called “prohibition in principle, with exceptions permitted” framework, under which dual-listings are not outright banned, but are permitted only exceptionally when stringent review standards are satisfied, including the implementation of sufficient safeguards to protect general shareholders’ interests. That said, because each company’s circumstances differ, the KRX’s position is that reviews will be conducted on a case-by-case basis rather than through quantitative or uniform criteria, and that the guidelines will be continuously supplemented and made public based on actual review cases and related examples.
 

In particular, the Listing Rules now provide that, where the listing of equity securities of an unlisted company results from a merger between a common stock-listed company and an unlisted company, or from a comprehensive share exchange, such that the transaction constitutes a dual-listing, and the KRX determines that the unlisted company is required to undergo preliminary listing review for the realization of the public interest and the protection of investors, such transaction may be treated as a backdoor listing.

Accordingly, whereas backdoor listings were previously recognized only where the transaction had the effect of a change of control, under the Listing Rules, a transaction that constitutes a dual-listing will now be treated as a backdoor listing and, as such, must undergo preliminary listing review, even if it does not have the effect of a change of control. In such cases, both the backdoor listing review requirements and the special review criteria for dual-listings under the Listing Rules will apply. However, the KRX retains discretion to determine whether a dual-listing without a change of control effect constitutes a backdoor listing.
 

To ensure the fair implementation of these obligations, the parent company must obtain the prior review and approval of an independent special committee within the board before adopting resolutions on the shareholder impact assessment, protection measures and the final approval or rejection of the listing. The special committee must: (i) consist of at least three members, who are either directors or outside experts who meet the qualification requirements under Article 542-8 (2) of the Commercial Code, (ii) be chaired by an independent director, with independent directors and outside experts constituting at least two-thirds of its members, and (iii) be entitled to receive assistance from independent experts at the company’s expense.

Even when a subsidiary is listed on an overseas exchange, the parent company must comply with the same five key obligations and disclosure requirements. In addition, in the case of an overseas public offering, if a securities registration statement is required to be filed with the Financial Supervisory Service pursuant to the resale criteria under the Financial Investment Services and Capital Markets Act, the registration statement must fully describe the board of directors’ compliance with the obligations under the dual-listing regulations, as well as the shareholder protection measures adopted.
 

If a parent company lists a subsidiary without fulfilling its shareholder-protection obligations under the Listing Rules, a penalty for breach of the listing contract, of up to KRW 1 billion, may be imposed following review by the Listing Disclosure Committee. In addition, the company may be subject to a one-day trading suspension and sanctions for unfaithful disclosure, and if penalty points from such sanctions accumulate, they may constitute grounds for a substantive delisting review. Companies should therefore exercise caution in this regard.
 

However, in the case of a “low-weight subsidiary”—where the subsidiary’s ratios of sales, operating profit and assets to those of the parent company are all less than 10%—the review of whether shareholder-protection measures have been implemented may be exempted, provided that the procedural obligations have been fulfilled. By contrast, for “ordinary subsidiaries” that undergo individual review because shareholder consent was not obtained, a strict examination is conducted, comprehensively taking into account factors such as the necessity of listing separately from the parent company, the applicant’s industry characteristics (including whether it falls within a high-tech industry), the background and duration of the parent-subsidiary relationship, the parent company’s contribution to the subsidiary, the subsidiary’s significance within the parent company, and the potential for conflicts of interest between controlling and general shareholders.
 

With the introduction of the Guidelines, the listing of a subsidiary has shifted from a financing method that a listed company could choose at its own discretion to a matter falling within a regulatory framework where such listings are permitted only exceptionally, on the premise that procedures to protect the parent company’s general shareholders are carried out. When pursuing the listing of an affiliate within a corporate group, each listed company needs to check whether the dual-listing regulations apply to affiliates in a vertical control relationship with its consolidated subsidiaries, and also review whether (i) overseas listings, (ii) backdoor listings such as SPAC mergers, and (iii) ongoing M&A transactions fall within the scope of dual-listing. In particular, in corporate groups with multi-tiered control structures, particular care is warranted as both the holding company and the intermediate holding company may bear obligations as the parent company.

Therefore, if a subsidiary listing is planned, the subsidiary’s operational and managerial independence should be assessed from the initial stage of the process, and the governance structure should be proactively restructured. In addition, the board of directors and an independent special committee should be organized in compliance with the amended Commercial Code, such as by securing a pool of external expert candidates and establishing procedures for obtaining expert assistance at the company’s expense. Furthermore, it is necessary to establish an objective methodology for assessing the impact on shareholders and to design feasible shareholder-protection measures, such as cash dividends, cancellation of treasury shares and in-kind dividends of subsidiary shares. If the shareholder consent confirmation process is not conducted, then a rationale should be prepared in advance to address the case-by-case review, such as the need for large-scale fundraising and the low likelihood of harm to the rights and interests of general shareholders. In this process, the consistency with related disclosures, such as any corporate value enhancement plan, as well as objective supporting grounds for the deliberation and resolution process, should also be systematically put in place.

[Korean Version]