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S. Korea’s financial regulators to ease listing requirements for large foreign firms
2012.12.06 18:13:32 | 2012.12.07 09:03:48
South Korea’s financial watchdog decided to ease eligibility requirements for listing on the Korean stock market for large, fundamentally-sound foreign companies.

[S. Korea’s financial regulators to ease listing requirements for large foreign firms] 기사의 본문 이미지

The Financial Services Commission (FSC) and Korea Exchange (KRX) said Thursday they agreed to loosen IPO (initial public offering) requirements on corporate governance system such as mandatory appointment of a certain proportion of outside directors to the board and creation of audit committee for eligible large foreign companies. “We will be flexible as much as possible in adopting policies to attract promising foreign companies within the boundary of the existing laws,” noted an official of the FSC.

To this end, the KRX submitted its proposal to the FSC that aims at allowing selective foreign companies which hope to be listed on the Korean stock market to exempt from strict local IPO requirements and instead, making them subject to their respective countries’ regulations.

The move by the government and financial regulators is seen as the government’s efforts to lure more promising companies with higher assets to be listed on the nation’s stock market. As of now, the number of companies listed on the domestic stock market is a meager 16 (five on the main bourse KOSPI and 11 on the junior KOSDAQ). Even worse, most of them are Asian companies including Chinese, Japanese and Hong Kong ones and their business size is relatively smaller. The asset held by China Ocean Resources, the biggest among the listed foreign companies, is estimated at merely 456.7 billion won ($421 million).

20 foreign companies became listed on Korean stock indexes since 2007, but four of them shut down business operations and one of them, China Gaoxian Fibre Fabric Holdings, is under supervision, one step before delisting.

The authorities and KRX, therefore, have decided to ease eligibility requirements to lure large, fundamentally-sound global companies. “It is an unreasonable to make it mandatory for foreign companies to abide by rules designed for Korean businesses in a one-size-fits-all approach,” said the KRX. “It is reasonable to ease requirements for large foreign companies from countries rated as appropriate.”

The decision does not mean all foreign companies automatically enjoy more lenient obligations to enter the Korean stock market. Following suit of the Hong Kong Stock market, the nation’s regulators plans to designate countries appropriate for investment and apply eased requirements to companies of the designated nations.

Relaxing the obligations, in particular, can be mandated by an FSC’s approval without amending relevant legislation. The regulation in commercial law regarding outside board directors or boards of auditors apply only to domestic companies and do not concern foreign companies. As a result, foreign firms will be eligible for listing on the Korean stock market once provisions regarding listing, which were legislated with revised commercial law, either become modified or deleted.

[Written by Byung-ho Kim, Il-son Sun - Jieun Lee, Sun-ah Kim / edited by Soyoung Chung]

[ⓒ Maeil Business Newspaper &, All rights reserved]

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