Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Gov't to effectively ban subsidiary listings to protect minority shareholder value
Financial Services Commission Chairman Lee Eog-weon delivers a speech at a public seminar on the overhaul of Korea's dual listing framework at the Korea Exchange in Seoul, April 16. Courtesy of Korea Exchange
By Park Han-sol
New rules require explicit shareholder approval for most spin-off IPOs
Companies in Korea will, in principle, no longer be allowed to list subsidiaries created by splitting off businesses from already listed parent companies, in accordance with new rules aimed at curbing a longstanding practice that has drawn criticism for diluting shareholder value, government officials said Monday.
The restriction applies to subsidiaries formed when a listed company spins off part of its business while retaining ownership. Such listings will be granted only in exceptional cases after passing stricter reviews, with companies required to demonstrate that minority shareholders are adequately protected.
The guidelines, unveiled by the Financial Services Commission (FSC) and the Korea Exchange, impose five new obligations on the boards of parent companies seeking dual listings, alongside tougher listing review standards.
According to the FSC, the practice has become widespread in Korea despite concerns that it hurts minority shareholders by lowering the value of the parent company’s shares. Investors have long argued that once a valuable business is listed separately, part of the parent’s value is effectively counted twice in the market.
As of the end of 2025, separately listed subsidiaries accounted for 11.2 percent of Korea’s total stock market capitalization, compared with 0.05 percent in the United States, 4 percent in Japan and 2.4 percent in China.
The new rules apply when a listed company seeks to float an unlisted subsidiary that it effectively controls.
Under the revised framework, the parent company’s board must evaluate how the listing would affect existing shareholders, prepare measures to protect their interests and transparently communicate with investors.
Possible measures include distributing shares in the subsidiary directly to shareholders or canceling treasury shares to help offset the impact on shareholder value.
Companies that fail to fulfill these obligations could face penalties of up to 1 billion won ($653,000) as well as a one-day trading suspension. The same rules will also apply when subsidiaries seek overseas listings.
“Even for overseas listings, companies are required to file securities registration statements with the Financial Supervisory Service, and regulators will review whether these board obligations have been properly fulfilled during that process,” said Ko Young-ho, an FSC official.
The Korea Exchange also tightened its listing review standards.
A subsidiary will not qualify for listing if its business substantially overlaps with that of the parent company or relies too heavily on it. As a rule of thumb, a subsidiary will be presumed to lack sufficient operational independence if more than half of its sales or purchases involve the parent company.
The exchange also made shareholder approval one of the key factors in deciding whether a listing can proceed.
To count as approval, voting rights held by controlling shareholders and related parties will be capped at 3 percent. The proposal must also win support from a majority of votes cast and at least one-quarter of all eligible voting rights.
Smaller subsidiaries may be exempt from the shareholder approval requirement if they are unlikely to have a meaningful impact on the parent company’s value. The exemption applies when the subsidiary accounts for less than 10 percent of the parent's revenue, operating profit and total assets.