Six Issues Missing from Dual Listing Review Plan

South Korea's financial regulators are moving to reform the dual listing system, aiming for a policy of "principle prohibition, exceptional permission." The Financial Services Commission and Korea Exchange held a seminar to gather opinions on how to implement this, proposing a review process for companies seeking dual listing.

The proposed review would cover subsidiaries where the parent company holds over 50% of shares, including those from business divisions or acquisitions. Companies must meet criteria in operational independence, management independence, and investor protection to be approved. However, the specifics of investor protection measures are drawing criticism.

Key concerns include whether parent company shareholder consent is mandatory or merely advisory, especially given potential conflicts of interest where controlling shareholders benefit from dual listings while minority shareholders see their rights diluted. The proposal's allowance for online surveys instead of formal shareholder meetings for consent is also questioned for its fairness. Furthermore, the lack of clear legal consequences if minority shareholder approval isn't obtained, and the system's inapplicability to overseas dual listings, are significant gaps.

Critics also point out that the current focus is solely on protecting parent company shareholders, neglecting potential conflicts between parent and subsidiary shareholders. The proposals also fail to address the existing high number of dual listings in Korea, which already impacts parent company valuations. Experts urge regulators to incorporate these points into the new rules, particularly strengthening the legal basis for shareholder approval, to ensure a more comprehensive and equitable system.