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Jipyong News|KOREA LEGAL INSIGHT

Korea Tightens Delisting Rules: A New Era of Swift and Strict Enforcement

2026.05.04

<span style="font-size:18px;"><span style="color:#c0392b;"><strong>Introduction</strong></span></span>
<div><br />
<span style="font-size:18px;">On February 12, 2026, the Financial Services Commission (the “<strong>FSC</strong>”) and the Korea Exchange (the “<strong>KRX</strong>”) jointly announced a sweeping overhaul of the KRX delisting framework under the “Delisting Reform Plan for the Swift and Strict Exit of Underperforming Companies” (the “<strong>Reform Plan</strong>”) as a response to persistent market underperformance.  The delisting criteria under the Reform Plan are comprised of 4 key elements (of which are discussed in more detail below together with procedural streamlining provisions): (i) accelerated implementation of minimum market capitalization thresholds, (ii) introduction of a new standalone delisting criterion targeting penny stocks (referring to shares trading below KRW 1,000; <i>Dongjeonju</i>, in Korean), (iii) extension of the complete capital impairment trigger to cover semi-annual assessments and (iv) reduction of the accumulated disclosure violation threshold from 15 to 10 penalty points, with a single material and intentional violation independently triggering substantive delisting review.<br />
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The foregoing delisting criteria are applicable equally to both the KOSPI and KOSDAQ markets, through the amendments to the KOSPI Market Listing Rules and KOSDAQ Market Listing Rules effective July 1, 2026. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>1. Four Key Elements of the Delisting Criteria (Effective July 1, 2026)</strong></span></span>

<div><br />
<span style="font-size:18px;"><strong>1) Market Capitalization Requirements: Accelerated Timeline</strong></span><br />
<br />
<span style="font-size:18px;">The Reform Plan accelerates the previously scheduled upward adjustments to minimum market capitalization thresholds by 6 months at each stage.  The January 2026 increase took effect as originally planned and subsequent increases have been brought forward as follows:</span><br />
 
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			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">Market / Criterion</strong></div>
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			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">January 2026<br />
			(in effect)</strong></div>
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: center; line-height:10px;" width="15%">
			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">July 2026<br />
			(revised)</strong></div>
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: center; line-height:10px;" width="15%">
			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">January 2027<br />
			(revised) </strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(242, 242, 242); border-top: 2px solid #cc0000; padding: 8px; vertical-align: center; line-height:10px;" width="30%">
			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">Prior January 2027/2028<br />
			Schedule (superseded) </strong></div>
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(230, 230, 230); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">KOSPI Minimum<br />
			Market Capitalization</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 20BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 30BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 16px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 50BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(252, 235, 235); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: center;">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 30BN (January 2027)<br />
			→ KRW 50BN (January 2028)</div>
			</td>
		</tr>
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			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(230, 230, 230); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;"><strong style="line-height: 22px;">KOSDAQ Minimum<br />
			Market Capitalization</strong></div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 15BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 20 BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); font-size: 15px; text-align: left; line-height: 25px; padding: 12px; vertical-align: center">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 30BN</div>
			</td>
			<td style="border: 1px solid rgb(187, 187, 187); background-color: rgb(252, 235, 235); font-size: 16px; text-align: left; line-height: 25px; padding: 12px;  vertical-align: center;">
			<div style="line-height: 25px; font-size: 15px; text-align: center;">KRW 20BN (January 2027)<br />
			→ KRW 30BN (January 2028)</div>
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<span style="font-size:18px;">To prevent temporary share price support designed to avoid the market capitalization trigger, the cure period conditions have also been materially tightened.  A watch-list designated issuer must now maintain the applicable threshold for 45 consecutive trading days in a 90-trading-day window (significantly updated from the previous threshold of 10 consecutive and 30 cumulative days within the same window), failing which it will be subject to immediate delisting.</span><br />
 </div>

<div><span style="font-size:18px;"><strong>2) Penny Stock Delisting Criterion: New Measure</strong></span><br />
<br />
<span style="font-size:18px;">A new standalone delisting criterion targeting penny stocks will be introduced.  The criterion operates on a two-stage mechanism:</span><br />
 
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			<td width="97%"><span style="font-size:18px; line-height: 25px;"><span style="line-height: 20px;">(i) <u>Stage 1 (Watch-list Designation)</u>: Where an issuer’s share price falls below KRW 1,000 for 30 consecutive trading days, it will be watch-list designated.</span></span></td>
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			<td valign="top">  </td>
			<td><span style="font-size:18px; line-height: 25px;"><span style="line-height: 20px;">(ii) <u>Stage 2 (Formal Delisting Procedures)</u>: If the issuer fails to maintain its share price at or above KRW 1,000 for 45 consecutive trading days within the subsequent 90-trading-day period, it will face formal delisting procedures.</span></span></td>
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	</tbody>
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<span style="font-size:18px;">To prevent circumvention, the following anti-bypass measures for the penny stock criterion following feedback received from listed companies and investors after the initial rule drafts were released in early April have been announced by the KRX:<br />
  </span>

<ul>
	<li><span style="font-size:18px;"><i>Strong restrictions on further reverse stock splits or capital reductions</i>: If a watch-list designated issuer (due to its penny stock status) has already conducted a reverse stock split or capital reduction within the 12 months prior to the date of such designation, it is prohibited from conducting any further reverse stock splits or capital reductions during the 90-trading-day cure period.  Violation of such restriction will constitute independent grounds for immediate delisting.</span></li>
	<li><span style="font-size:18px;"><i>Ratio cap for splits or reductions during the cure period</i>: Notwithstanding the absence of any prior reverse stock split or capital reduction, any reverse stock split or capital reduction conducted by a watch-list designated issuer during the 90-trading-day cure period must not result in a total ratio exceeding 10-to-1.  Violation of such restriction will constitute independent grounds for immediate delisting.</span></li>
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<div><br />
<span style="font-size:18px;"><strong>3) Complete Capital Impairment: Extended to Semi-Annual Assessment</strong></span><br />
<br />
<span style="font-size:18px;">Under the current framework, complete capital impairment (where total liabilities exceed total assets) constitutes a formal delisting trigger only upon assessment at fiscal year-end.  The Reform Plan extends this criterion to cover semi-annual assessments where complete capital impairment identified at the half-year mark will subject the issuer to a substantive delisting review, following which a delisting determination will be made.  For the avoidance of doubt, year-end complete capital impairment will continue to give rise to formal delisting procedures.</span><br />
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<span style="font-size:18px;"><strong>4) Reduced Disclosure Violation Threshold</strong></span><br />
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<span style="font-size:18px;">The accumulated penalty points threshold for substantive delisting review on grounds of disclosure violations will be reduced from 15 points to 10 points within any rolling one-year period.  Additionally, a single material and intentional disclosure violation will independently result in substantive delisting review, irrespective of the issuer’s accumulated penalty points.<br />
 </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>2. Procedural Streamlining</strong></span></span>

<div><br />
<span style="font-size:18px;">The maximum grace period granted to KOSDAQ market issuers subject to substantive delisting review was reduced from 18 months to 12 months, through an amendment to the Enforcement Rules of the KOSDAQ Market Listing Regulations effective April 1, 2026.  The FSC and KRX have indicated their intention to establish, in coordination with the courts, an expedited handling framework for injunctive proceedings initiated by issuers seeking to delay confirmed delisting decisions.  A dedicated planning and review team was established within the KRX KOSDAQ delisting department on February 9, 2026 to strengthen institutional expertise and execution capacity. </span></div>
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<span style="font-size:18px;"><span style="color:#c0392b;"><strong>Concluding Remarks</strong></span></span>

<div><br />
<span style="font-size:18px;">The Reform Plan represents a fundamental recalibration of the KRX delisting framework, marking a decisive shift in regulatory philosophy from one of relative forbearance towards a regime of swift and strict enforcement.  The acceleration of market capitalization thresholds, the introduction of the penny stock criterion and the tightening of capital impairment and disclosure violation standards, collectively create a materially more demanding listing maintenance environment for all KRX-listed issuers.<br />
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The Reform Plan should be understood not as an isolated regulatory measure, but as one component of a broader and continuing program of capital market structural reform being pursued by the Lee Jae-myung administration.  Taken together with concurrent initiatives (including reforms to the IPO framework, restrictions on duplicate listings and the ongoing value-up program) the delisting reforms form part of a coherent policy agenda directed at improving the overall quality and international competitiveness of the Korean capital market, addressing the long-standing Korea discount, and repositioning the KOSPI and KOSDAQ markets as credible platforms for innovative growth companies and institutional investment. </span></div>

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