A court has blocked rules sharply tightened by financial authorities to delist companies whose market capitalization falls below minimum thresholds, a measure aimed at clearing out troubled firms. Because the court ruled that the Korea Exchange listing provision itself — which denied companies a chance to present their case — is unlawful and void, forced delistings based on market-cap standards have become virtually impossible, observers said. Critics say the financial authorities' value-up policy, which sought to improve the stock market's fundamentals by pushing out weak companies early, has been shaken at its foundation.
The 51st Civil Division of the Seoul Southern District Court, presided over by Senior Chief Judge Kwon Sung-soo, on the 2nd granted injunctions filed by Jooyontech (044380), listed on the KOSPI, and Kmpharmaceutical (225430), listed on the KOSDAQ, each seeking to suspend the effect of the exchange's delisting decisions. As a result, the delisting and liquidation trading of both companies are fully halted until a ruling on the merits becomes final.
The court said the provision — which classified a market-cap shortfall as a formal delisting ground on par with default or capital erosion, and thereby entirely excluded any objection or opportunity to respond — excessively infringes on companies' right to participate in the process. It also ruled that the supplementary provision moving up to July of this year the higher delisting thresholds of 30 billion won for the KOSPI and 20 billion won for the KOSDAQ, originally set to take effect in January 2027, lacked any specific justification and violated the principle of proportionality. The ruling rejected outright the very premise of swiftly removing companies based on the capital market's own assessment.
With the court declaring void the exchange provision that served as the basis for delisting, delistings of other listed companies facing review on the same ground are likely to collapse one after another. About 30 KOSDAQ companies currently face the risk of removal under the tightened market-cap requirements, and most are expected to file a chain of injunction suits. Fintel and Medicox, two KOSDAQ-listed firms already notified of delisting on the same ground, have also joined the legal response, filing petitions with the Seoul Southern District Court to suspend the effect of their delistings.
A legal industry official said the exchange, weighing the possibility of losing the case on the merits, now faces growing pressure either to halt delisting procedures entirely or to revise its listing rules by creating a right of objection and adding transitional measures.
