Concerns are mounting that industrial competitiveness and innovative company growth will weaken as the government accelerates regulatory reforms based on the principle of prohibiting dual listings. Critics argue that uniformly blocking subsidiary listings without considering Korea's unique capital market characteristics—including M&A and IPO funding channels and a manufacturing-centered industrial structure—would make it difficult to achieve the intended goal of protecting general shareholders.
The Financial Services Commission (FSC) and Korea Exchange (KRX) held a public seminar on Wednesday to gather opinions on improving the dual listing system, presenting the direction for screening targets and criteria. KRX plans to announce draft regulation amendments this month, complete the revision process in the first half of the year, and begin enforcing dual listing regulations as early as July.
Dual listing screening will cover three main categories: companies established through physical spin-offs by listed companies seeking new listings, companies seeking relisting after being spun off for holding company conversion purposes, and companies newly established or acquired by listed companies. This effectively subjects all unlisted subsidiaries of listed companies to screening.
Screening criteria include three areas: operational independence, management independence, and investor protection. Operational independence examines whether the subsidiary's main business operates independently without relying on the parent company. Management independence assesses whether the subsidiary's decision-making and governance structure are independent. For investor protection, the screening evaluates whether measures to protect parent company general shareholders have been faithfully implemented—notably including whether "general shareholder approval from the parent company" has been obtained.
The government views controlling shareholders as causing the "Korea Discount" by abusing dual listings to maintain control. According to the FSC, the dual listing ratio in Korea's stock market was 11.2% by market capitalization at the end of last year, significantly higher than Japan's 4%, Taiwan's 2.7%, and China's 2.4%. Analysis of 261 companies dual-listed between 2000 and 2024 found that parent company stock prices fell an average of 10.81% six months after subsidiary listings.
However, concerns persist that the regulatory improvement direction oversimplifies the subsidiary listing issue. Experts point to Korea's unique circumstances: past government policies promoting holding company conversions to simplify circular shareholding structures, and the high proportion of manufacturing industries requiring large-scale facility investments that depend relatively heavily on funding methods including IPOs.
"Companies that converted to holding company structures following past government policies and those that acquired companies through M&A are experiencing significant confusion from sudden policy changes," said Bang Han-cheol, Head of IPO at Korea Investment & Securities. "Flexible policy application is needed to maintain and strengthen corporate competitiveness."
Kim Chun, Head of Division at the Korea Listed Companies Association, emphasized, "The core issue is not whether to list, but the structure that dilutes general shareholders' equity value and cash flow. Designing structures that allow parent company shareholders to receive stable dividends or cash flow from subsidiaries should come first."
The venture capital industry stressed that exemptions from dual listing regulations are needed for innovative venture companies. M&A is a natural growth path among venture companies, and dual listings naturally occur in that process. A blanket prohibition could lead to market contraction.
"IPO is the key path for recovering public fund investments. If subsidiary listings are blocked, the venture ecosystem itself could be shaken," said Ahn Sang-jun, Vice Chairman of the Korea Venture Capital Association.
The seminar saw the unusual scene of individual company representatives publicly expressing concerns about the regulations. A representative from GS Entech, a subsidiary of GS Global, stated, "If blanket regulations block listings even for subsidiaries operating independently from parent companies, damage to minority shareholders and employees is inevitable. Protection of subsidiary stakeholders, not just parent company shareholders, must also be considered."
Opinions sharply divided over regulatory details. The provision requiring general shareholder approval from the parent company for subsidiary dual listings drew particular debate. Lee Chang-hwan, CEO of Align Partners, argued that "approval from a majority of general shareholders should be required." In contrast, Professor Lee Sang-hoon of Kyungpook National University Law School expressed concern about "a system that bypasses the board and simply defers to majority rule at shareholder meetings."
The Listed Companies Association stated its position that "it is unclear whether shareholder approval at the time of listing alone can protect general shareholders."
Critics voiced that this seminar may prove ineffective. Detailed matters of industry interest—including standards for general shareholder approval, exception criteria by industry and company size, and measures to protect subsidiary minority shareholders—were not even presented as examples.
"I cannot guarantee whether there will be additional seminars," said Lim Heung-taek, Executive Director of KRX's Securities Market Division, "but even if regulation amendment announcements go out this month, there will be a separate opinion-gathering process."
FSC Chairman Lee Eog-weon emphasized, "General shareholders are no longer a silent majority. The plan to prohibit dual listings in principle applies the newly introduced fiduciary duty to shareholders to the listing system, making it an important task for improving the capital market's fundamentals."
