The “Bull and Bear” statue installed in the front yard of the Korea Exchange in Yeouido, Seoul. Photo provided by Korea Exchange
Delisting defense is emerging as a new battleground in Korea’s legal market as the government intensifies its push for capital market structural reform. Major domestic law firms are deploying experts formerly with financial regulators and the Korea Exchange (KRX) to the front lines. With KOSDAQ delisting standards set to be significantly tightened from July this year, including the removal of so-called “penny stocks,” a wave of related litigation is expected to follow.
According to the legal industry on the 9th, Kim & Chang is fielding what is considered the nation’s largest accounting supervision team dedicated to delisting response. The firm has operated the team since 2009, when the substantive review system was introduced. Attorneys Kim Doo-bong, Moon Jong-il and Kim Min-seok, among other accounting audit and exchange experts, collaborate organically. Beyond mere post-event resolution, Kim & Chang offers preemptive governance improvement and M&A solutions through comprehensive analysis of business continuity, financial soundness and management transparency.
“As listed companies increasingly demand strategic measures to enhance corporate value through M&A, business restructuring and strengthened market communication such as investor relations (IR), advisory requests to Kim & Chang—which is well-versed in regulatory trends and the exchange’s qualitative review criteria—are rising,” a Kim & Chang official said. “In addition to resolving existing problems, we provide a range of practical solutions to listed companies seeking to establish preemptive response strategies under the changed regulatory environment and turn them into new growth opportunities.”
Lee & Ko has assembled a delisting response team centered on attorneys Cho Jun-woo and Park Hyun-soo, along with exchange veterans including advisor Lee Kyu-yeon, former managing director of the KRX Stock Market Division, as well as attorney Park Kwang-bae, former head of the Securities Crime Joint Investigation Team at the Seoul Southern District Prosecutors’ Office, and attorney Sung Chang-ho, former chief judge of the securities division at the Seoul Southern District Court.
Lee & Ko emphasizes that it secured a ruling invalidating the delisting decision of Gammanu (now Oneul ENM). Cases in which companies have won lawsuits seeking confirmation of the invalidity of delisting decisions are rare, with Gammanu among the few.
Bae, Kim & Lee is operating a “Listing Risk Response TF,” led by foreign attorney Kim Hak-kyoon, former chairman of the KRX KOSDAQ Market Committee, and advisor Kim Yong-sang. The firm has strengthened its governance solutions spanning policy judgment and market trends by recruiting advisor Koh Seung-beom, former chairman of the Financial Services Commission, and Ra Sung-chae, former KRX managing director.
Yulchon is responding through collaboration between its M&A Corporate Advisory Division and Capital Markets Unfair Trading Center. Exchange veterans including advisors Kim Jae-jun, Yang Yeon-chae and Chae Hyun-joo are working in tandem with attorneys Jang Bo-sung and Lee Hwa-seok. The firm recently brought on attorney Lee Young-hye, who has experience at the Financial Supervisory Service (FSS), the capital markets special judicial police and virtual asset exchange Dunamu.
Shin & Kim has reinforced its listing maintenance response team by recruiting Cho Hyo-je, former assistant deputy governor of the FSS, and Lee Chung-yeon, former assistant head of the KOSDAQ Market Division. They provide multidimensional advisory services alongside attorneys Seo Tae-yong, Hwang Do-yoon and Yoo Moo-young. Shin & Kim specializes in responding to various exchange measures related to listing maintenance, including trading suspensions, designation as administrative issues, audit opinion disclaimers and triggers for substantive listing eligibility reviews. In March this year, Shin & Kim held a seminar titled “Corporate Response Directions Under KOSDAQ Market Revitalization Policy,” where it released its market trend analysis.
Hwawoo is fielding attorney Jung Sung-bin, who boasts a record of more than 100 delisting defense cases. Together with advisor Chung Un-soo, former KRX vice chairman, and advisor Kim Sung-tae, a former managing director, the team is regarded as competitive across complex issues spanning disclosure, accounting and criminal matters. Hwawoo’s delisting response team develops effective defense strategies by analyzing market mechanisms and regulators’ judgment criteria.
Jipyong, through its “Listing Maintenance Support Center” led by advisor Chae Nam-ki, a former KRX vice chairman, has provided consulting to companies facing high-difficulty reviews, including a construction firm J, franchise M, as well as semiconductor and pharmaceutical companies. Some 30 experts, including managing attorney Lee Haeng-gyu and senior expert advisor Jang Young-eun, provide comprehensive consulting covering forensics, internal investigations and financial litigation. The firm is seen as specialized in preemptive risk management aligned with the value-up initiative.
Barun Law is strengthening its advisory services for companies in distress by operating a delisting response team centered on managing attorney Kim Do-hyung and attorney Cho Jae-bin. The firm has deployed advisor Yoon Ki-jun, former head of the KRX listing review department, along with attorneys Lee Hyung-jin and Choi Seung-hwan on the front line, handling trading resumption, responses to the Corporate Review Committee and internal control improvement advisory. The firm is also proposing a “two-track strategy” that pursues exchange review and court litigation simultaneously.
Daeryuk Aju is responding through its M&A team, including attorneys Kang Kyung-kook, Kim In-jin, Oh Sung-jin and Lee Chang-min, and its corporate restructuring team, including attorneys Kim Jung-dong and Lee Wang-min.
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Dongin scored a first-instance victory on the 10th of last month, representing Cheil Bio in a lawsuit seeking confirmation of the invalidity of its delisting decision. “This is a case in which the court found that, even though an audit opinion disclaimer was issued, there were no grounds sufficient to warrant delisting,” Dongin attorney Kim Sang-il said.
The reason major law firms are reinforcing their delisting response organizations is that legal demand from companies is rising. With KOSDAQ delisting criteria to be sharply tightened from July this year—including adding so-called “penny stocks” trading below 1,000 won to the delisting pool—corporate lawsuits are also expected to increase. In a simple simulation reflecting the new plan, the KRX projected that the number of KOSDAQ companies subject to delisting this year will reach around 150, up roughly 100 from the previously expected 50 or so. It also presented a forecast that, depending on factors such as share consolidations of penny stocks, the number of KOSDAQ companies facing delisting could reach up to around 220.