DP lawmaker introduces two bills to protect minority shareholders from 'split listings'

By Joo So-hyun, The Herald Business

Rep. Park Hong-bae of the Democratic Party of Korea announced Thursday that he had introduced amendments to the Capital Markets Act and the External Audit Act aimed at protecting minority shareholders from deliberate delistings and physical spin-offs.

The External Audit Act amendment would require auditors to report to not only the audit committee but also the general shareholder meeting and the Securities and Futures Commission when a company refuses, obstructs or evades an auditor's request for documents or otherwise interferes with the auditor's duties. The bill is intended to deter deliberate delisting attempts and minimize investor losses.

The Capital Markets Act amendment centers on introducing a minority shareholder majority vote system. Under the proposed regime, a listed company pursuing a physical spin-off would need the approval of a majority of attending shareholders other than the controlling shareholder, as well as the consent of holders of at least one-quarter of total issued shares excluding those held by the controlling shareholder. If enacted, the amendment would require companies to obtain the genuine consent of minority shareholders in transactions where the interests of controlling and minority shareholders conflict — such as "split listings," in which a core business unit is spun off through a physical division and the resulting subsidiary is separately listed.

"These amendments go beyond protecting minority shareholders — they are a systemic reform to enhance the fairness and transparency of the capital markets," Park said. "We cannot allow a situation to keep repeating itself where controlling shareholders retain control and pocket the gains while minority shareholders are left bearing the burden of falling share prices and eroded value."