The FSC approved amendments to the KRX’s Kospi Market Disclosure Regulations. The amendments are intended to make it mandatory for Kospi-listed companies with total assets of more than KRW 2 trillion to disclose key information about their corporate governance from 2019.
Good corporate governance is essential for a company’s sustainable growth, enabling investors to have confidence in the company’s future and make long-term investments. With the introduction of stewardship code, the role and responsibility of institutional investors have become increasingly important. Accordingly, investors’ demand for corporate governance transparency is growing as well. Against this backdrop, the FSC and the KRX intend to progressively turn the disclosure of corporate governance, which has been on a voluntary basis since 20171, into a mandatory requirement for Kospi-listed companies from 2019.
1. Mandatory disclosure of corporate governance information
Kospi-listed companies with total assets of more than KRW 2 trillion2 are required to disclose a corporate governance report no later than two months after the statutory deadline for submission of annual reports. In the corporate governance report, companies should disclose whether they comply with key principles3 of corporate governance and explain why if they do not comply. The KRX plans to provide guidelines on disclosure of corporate governance by March 2019, which specify information that companies should include in their corporate governance report.
2. Disciplinary actions for violation of corporate governance disclosure rules
The amendments laid the ground for disciplinary actions for violation of corporate governance disclosure rules. If a company fails to disclose its corporate governance report within the deadline or makes a false disclosure, the company will be designated as an unfaithful disclosure corporation by the KRX and levied with penalty points.4 When a company makes an error or omits key information, the KRX will first ask the company to address the issue. If the company does not comply with the KRX’s request, then the company will be faced with disciplinary actions.
The KRX will provide specific standards and guidelines in regard with mandatory disclosure of corporate governance information. The draft of the KRX guidelines has been discussed among various market participants and will be finalized in March 2019.
The FSC will continue our policy efforts to create an environment where disclosure of corporate governance information can encourage more active engagement of shareholders. The FSC will support facilitation of electronic voting system and improvement of listed companies’ annual general meeting practices to help shareholders better exercise their rights. The FSC will also provide legal interpretations as needed to ease legal uncertainty for institutional investors to exercise their rights as responsible shareholders, and improve the rules for large shareholding disclosures (also known as the ‘5% rule’).
* Please refer to the attached PDF for details.