Going forward, listed companies seeking to list a subsidiary created by spinning off a lucrative business unit through physical division on the stock market must pass a strict consent procedure involving parent company shareholders. As financial authorities crack down on the practice of so-called “split-off listings,” the bar for dual listings, which have been criticized for undermining the rights of general shareholders in the parent company, has been raised significantly.
On the 6th, the FSC and the Korea Exchange disclosed exchange regulations and guidelines centered on the “principle of prohibiting dual listings with exceptions.” This measure is a follow-up to the “Capital Market Structural Improvement Plan” announced in March and is scheduled to be fully implemented as early as the end of this month after a public comment period ending on the 14th.
The core of the new rules stipulates that shareholder consent from the parent company is a mandatory requirement when pursuing a dual listing for a physically-divided subsidiary, and applies the “3% rule” as the standard for that consent. The 3% rule is a method equivalent to that used for appointing audit committee members under the Commercial Act. It limits the combined voting rights of the largest shareholder and related parties to 3%, requiring the approval of a majority of attending shareholders’ voting rights and at least one-quarter of total issued shares. Because any voting rights exceeding 3% are restricted, it becomes virtually impossible for a controlling shareholder to unilaterally push through a listing without the consent of general shareholders.
Alongside this, financial authorities have newly imposed five major duties on the parent company’s board of directors, concretizing the fiduciary duty to shareholders under the Commercial Act. When pursuing a subsidiary listing, the parent company’s board must sequentially: △ conduct a shareholder impact assessment; △ prepare shareholder protection measures, such as in-kind dividends of subsidiary shares or treasury stock retirement; △ confirm shareholder consent through communication or a general shareholders’ meeting; △ pass a board resolution with for-and-against votes and notify the subsidiary; and △ disclose the fulfillment of these duties in stages. This process must undergo prior deliberation and resolution by an independent special committee, which must be chaired by an outside director or composed of at least two-thirds outside directors and external experts.
If the board violates these five duties, powerful penalties including a maximum fine of 1 billion won (approximately $652,494) and a one-day trading suspension will be imposed. If penalty points accumulate due to negligence in disclosure obligations, it could become grounds for a substantive delisting review.
The intensity of regulation is applied differently depending on the type of subsidiary. Shareholder consent is mandatory for physically-divided subsidiaries, but is stipulated as a recommendation for general subsidiaries incorporated through M&A or new establishment. If a general subsidiary fails to obtain shareholder consent, the Korea Exchange will conduct a strict individual review, comprehensively considering factors such as the necessity of fundraising, whether it is a high-tech industry, and the duration of the parent-subsidiary relationship. The FSC explained that the legitimacy of a dual listing may be relatively more recognized during the review process for fields like high-tech industries where independent fundraising and timely R&D investment are essential.
Furthermore, “low-weight subsidiaries,” where revenue, operating profit, and assets are all less than 10% of the parent company, are exempt from the shareholder consent obligation, as their impact on parent company shareholders is deemed insignificant. However, significant subsidiaries whose estimated corporate value exceeds 10% of the parent company are not granted an exception even if they are low-weight, and subsidiaries established through physical division must unconditionally obtain shareholder consent regardless of their weight.
Overseas stock market listings by subsidiaries cannot be a loophole in the regulation. The FSC has stipulated that the five duties of the parent company’s board apply equally when listing a subsidiary on a foreign exchange. For example, the Nasdaq listing of Boston Dynamics, the U.S. robotics subsidiary that Hyundai Motor is pursuing, will also be subject to these rules. Boston Dynamics is considered an affiliate under Hyundai Motor’s effective control, as HMG Global, in which Hyundai Motor is the largest shareholder, holds about a 56% stake. In this case, Hyundai Motor’s board must fulfill the five duties and disclose the results, and the adequacy of shareholder protection measures is expected to be verified through the review of securities registration statements submitted to South Korea’s Financial Supervisory Service during the overseas listing process.
The structural undervaluation of the South Korean stock market, the so-called “Korea Discount,” lies behind this regulatory tightening. According to the FSC, as of the end of 2025, South Korea’s dual listing ratio reached 11.2% of total market capitalization. This is an overwhelmingly high figure compared to major countries such as the United States (0.05%), Japan (4.0%), China (2.4%), and Taiwan (2.7%). There has been persistent criticism that parent company boards and controlling shareholders have pursued private interests by not sharing the value of growth businesses with general shareholders through subsidiary listings.
Market reactions are sharply divided. Minority shareholders maintain that the regulations are still insufficient. Lee Sang-mok, CEO of the minority shareholder platform Act, argued for the introduction of a special resolution, stating, “Determining consent through an ordinary resolution effectively permits dual listings.” Conversely, the corporate and investment banking sectors worry that “limiting the major shareholder’s stake to 3% alone is a strong regulation practically equivalent to requiring majority consent from general shareholders,” making it difficult to list high-quality subsidiaries and potentially shrinking venture investment. Lee Chae-won, Chairman of Life Asset Management, expressed regret that the Majority of Minority (MoM) consent system was not applied, saying, “At a shareholders’ meeting, the controlling shareholder attends 100% of the time, but general shareholder attendance is low, so even with the 3% rule, it could easily exceed a majority.”
Financial authorities explained that the MoM method was not introduced because the Ministry of Justice judged it could potentially violate the principle of shareholder equality. Koh Young-ho, Director of the FSC’s Capital Markets Division, emphasized, “The 3% rule has the effect of turning the controlling shareholder into a general shareholder, which will actually be a more demanding standard for companies as they must encourage general shareholder participation.” The FSC plans to continuously supplement the guidelines by accumulating review cases on a semi-annual basis after implementation.