The Financial Services Commission and the Korea Exchange announced plans to strengthen delisting rules intended to facilitate the exit of unviable companies in a more swift and strict manner.
Background
The government has been making necessary upgrades to the KOSDAQ market to transform it into an engine of productive finance and a platform for growth for innovative companies. In December last year, the government introduced measures to boost confidence and innovation in the KOSDAQ market consisting of the following key policy initiatives—(a) strengthening the independence, autonomy, and competitiveness of the KOSDAQ market division, (b) redesigning the listing/delisting system to make the KODSAQ market more dynamic with easy entry and exit, (c) fostering stable conditions for institutional investors to enter the market, and (d) strengthening protection for investors to bolster market confidence.
An upgrade to the delisting rules being introduced today is aimed at boosting dynamism in the KOSDAQ market by facilitating a seamless entry of innovative companies and ensuring a swift and strict removal of unviable companies. In this regard, the KOSDAQ delisting process has been made more efficient last year with the streamlining of the delisting review process from the three-tier review system with two years of improvement period previously to the two-tier review system with one and a half year improvement period. Last year, the market capitalization and revenue thresholds for delisting were also proposed to be adjusted upward in stages.
In 2025, the number of delisting decisions increased to thirty-eight, rising significantly from eight in 2023 and twenty in 2024. Nonetheless, there continue to exist problems regarding underperforming and unviable companies (so-called “zombie companies”). In effect, over the past twenty years, a total of 1,353 companies entered the KOSDAQ market, but only 415 companies were removed from the market. During this period, KOSDAQ market cap rose 8.6 times, but its index price increased only 1.6 times. In order to make the KOSDAQ market more reliable and boost confidence for investors, it is thus necessary to more swiftly and strictly remove unviable companies.
Against this backdrop, the government plans to (a) operate an intensive delisting management period, (b) bolster four specific standards for delisting, and (c) enhance efficiency in the delisting process to make sure that unviable companies no longer corrode market confidence and present a room for unfair trading activities.
Intensive Delisting Management Period
The KRX will set up an intensive delisting management unit (led by the head of the KOSDAQ market division) and operate an intensive delisting management period between February 2026 and June 2027. The intensive delisting management unit will be staffed with four KOSDAQ delisting review teams composed of twenty personnel (existing three teams plus a recently established team) at first, and there will be increased staffing if it becomes necessary in the future.
During the intensive delisting management period, the head of the intensive delisting management unit will closely manage the delisting process, and the unit’s performance during this period will be weighted more heavily when carrying out the performance evaluation for KRX’s KOSDAQ market division for 2026. Since the KOSDAQ market division will be evaluated separately from the KOSPI market division starting from this year, with an aim to strengthen the independence and autonomy of the KOSDAQ market division, it is expected to boost the performance and operation of the intensive delisting management unit.
Bolstering Four Specific Standards for Delisting
a) Moving up implementation of upward adjustment of market cap threshold
Through a revision to KRX listing rules last July, the market capitalization threshold for delisting has been raised to KRW15 billion from the previous level of KRW4 billion starting from January this year. Subsequent upward adjustments were initially scheduled to take place from January 1, 2027 and January 1, 2028, with the market cap threshold rising to KRW20 billion and KRW30 billion, respectively. However, the scheduled upward adjustments will move up six months each time. As a result, the market cap threshold for delisting will be raised from KRW15 billion currently to KRW20 billion from July 1, 2026, and then to KRW30 billion from January 1, 2027.
Additionally, relevant standards and procedures and market monitoring will be strengthened to prevent the occurrence of temporary stock price pumps to avoid delisting. Currently, companies go on the delisting watch list if they fail to stay above the market cap threshold for thirty consecutive trading days during a period of ninety trading days from the time of going on the watch list, but can avoid delisting if they are able to stay above the market cap threshold for ten consecutive trading days and thirty cumulative trading days during that time. However, this market cap requirement will be strengthened from now on. During the period of ninety trading days after going on the watch list, companies will need to stay above the market cap threshold for forty-five consecutive trading days or face delisting immediately.
b) Establishing delisting standard for micro-cap stocks (also applied to KOSPI)
There will be a new delisting standard established for micro-cap stocks (so-called “penny stocks”) trading below KRW1,000 per share. These micro-cap stocks tend to show high price volatility with low market capitalization and are often exposed to the risk of market manipulation. In the U.S., the NASDAQ market also has delisting rules for penny stocks trading below USD1.00.
Thus, from July 1, micro-cap stocks trading below KRW1,000 will become subject to delisting. In this regard, companies will not be able to consolidate shares to bypass this rule and avoid delisting through reverse stock splits as the par value of stocks after share consolidation will also be considered. Specific period requirements will be identical to the aforementioned market cap threshold as follows. Companies trading below KRW1,000 for thirty consecutive trading days will go on the watch list, and during the period of ninety trading days thereafter, they need to be able to stay above KRW1,000 for forty-five consecutive trading days to remain listed or otherwise face delisting immediately.
c) Strengthening requirement on capital impairment (also applied to KOSPI)
Currently, a company’s total capital impairment is considered as a condition for delisting only at the end of each fiscal year. This condition for desilting will be expanded to a semi-annual basis. However, whereas a company’s total capital impairment at FYE (fiscal year end) qualifies for immediate delisting, its total capital impairment at mid-year will go through a review process before a delisting decision.
d) Strengthening standards regarding disclosure violations (also applied to KOSPI)
The delisting condition for disclosure violations will also be strengthened. Companies with fifteen demerit points cumulatively for disclosure violations within a year are currently subject to delisting. This threshold will be lowered to ten demerit points cumulatively within a year. However, serious and intentional violation of disclosure requirements will become subject to delisting immediately.
Enhancing Efficiency in Delisting Process
The current delisting review process will be made more efficient. Through a regulatory improvement last year, the total improvement period afforded to companies during the KOSDAQ delisting review process has been reduced to one year and six months from the previous level of two years. This year, the improvement period will be further reduced to one year.
In addition, there will be increased cooperation with the judiciary to more swiftly and efficiently proceed with injunctions on delisting. Although it remains highly unlikely for injunctions to be granted by the court, as the volume of injunction cases rises, the period of time it takes for the court to decide on injunctions becomes longer, which only delays the removal of unviable companies from the market.
KRX Simulation
Having these reform measures in place, a simulation conducted by the KRX demonstrates that the number of KOSDAQ-listed companies subject to delisting this year is expected to rise to some 150 companies (in a range of 100 to 220 companies). This is an increase of about 100 companies from the previously forecast number of about 50 companies.
Further Plan
Starting from today, the FSC and the KRX will immediately commence the intensive delisting management period. The measures to make the delisting process more efficient will take effect from April 1, 2026 after making a relevant update to KRX rules. The measures to bolster the four specific delisting standards will take effect from July 1, 2026. In the meantime, the FSC and related authorities will step up efforts to monitor and manage unfair activities, such as window dressing in accounting practices and market manipulation.
At the same time, the financial authorities will also seek to upgrade relevant rules to facilitate the listing of innovative and promising companies. Toward the end of last year, a technology specialized listing track was adopted in the KOSDAQ market to meet the needs of technology-intensive industries, such as the artificial intelligence, aerospace, and energy sectors. This year, the scope of applicable innovative technologies qualified for this tech specialized listing track will be expanded further.
Moreover, the financial authorities will continue to work to bring about improvements to boost the global competitiveness of domestic stock exchanges and help to position them as a leading trading hub in Asia. The authorities will promptly prepare a comprehensive set of measures to overhaul domestic exchanges to make them more reliable for investors and more attractive for companies.