Dual listing guidelines should not entertain alternatives other than MoM of parent shareholders
- Even if a subsidiary's listing results in a decline in parent stock prices, the controlling shareholder suffers no loss, while only the minority shareholders are adversely affected
- It is peculiar for Korean controlling shareholders to exercise their voting rights in cases of clear conflicts of interest, such as dual listings
- The 3% rule is illogical concerning dual listings and has many circumvention methods, rendering it inappropriate
The announcement of the dual listing guidelines by the Financial Services Commission (FSC) and the Korean Exchange (KRX) is imminent. Local press suggests that a listed company must meet three criteria for listing a subsidiary: operational independence, managerial independence, and investor protection.
The frameworks of 'independence' and 'investor protection' are desirable and on the right track. However, it is concerning that the simplest and most straightforward method of obtaining consent from parent company shareholders- namely, the majority vote of common shareholders - has been excluded for unspecified reasons.
The Forum has consistently highlighted through various channels that the MoM is the most appropriate and logically sound method for obtaining parent company shareholder consent for dual listings. In conclusion, when a subsidiary's listing leads to a decline in the parent company's stock price, a clear conflict of interest arises between the controlling and minority shareholders, necessitating the MoM.
First, controlling shareholders are not harmed by the decline in stock prices resulting from a subsidiary's listing. If the controlling shareholder is a corporation, they do not suffer financial loss from the stock price drop, since performance metrics such as sales and earnings are reflected in consolidated financial statements. The decline in the parent company's stock price due to dual listing is a market issue, unrelated to the company's financial performance.
Even if the controlling shareholder is an individual, they incur no harm. Individual controlling shareholders typically hold their shares for control and rarely sell them. In some cases, they might even favor a stock price decline, as this can reduce taxes when gifting or transferring shares.
In contrast, minority shareholders of the parent company directly suffer from the decline in stock prices, regardless of whether they are individuals or corporations. The value of their invested assets diminish. This is a straightforward case of property rights infringement.The interests of shareholders who hold shares for control and those who hold them for investment purposes diverge clearly due to stock price declines resulting from dual listings.
Therefore, why is it strange that those (controlling) shareholders who suffer no harm should not decide, while those who will be harmed should? The appropriateness of compensation for the subsidiary's listing can only be judged by shareholders exposed to the risk of harm. Can shareholders, who have no stake in the outcome, decide on property rights issues affecting other harmed shareholders? This is a matter of common sense.
Notably, all companies that have listed subsidiaries, including LG Energy Solution, have uniformly explained that "the listing of a subsidiary benefits parent company shareholders." There would be no reason for parent company shareholders to oppose matters that are beneficial to them.
While some opinions cite negative reasons based on the Ministry of Justice’s Guidelines released on February 25th 2026, it is clear that these guidelines pertain to "organizational restructuring" scenarios such as mergers and delistings. They are unrelated to the pervasive issue of dual listings distorting the capital market in Korea.
Moreover, the issue of dual listings is not one that necessitates oversight of the controlling shareholder's and board's abuse of power, such as with auditors or audit committee members. This is not a matter to which the 3% rule should apply.
The 'interests' of controlling shareholders and minority shareholders are inherently conflicting, making it inappropriate for controlling shareholders to participate in decisions. Why should neighbors get a vote in discussions about the depreciation of my home’s value? It is perplexing to consider a process where controlling shareholders, who suffer no harm from the stock price drop due to a subsidiary's listing, participate in decision-making.
Furthermore, the 3% rule is complicated and has many circumvention methods involving controlling shareholders' trading. It is clear who the controlling shareholders and related parties are, leaving no practical issues regarding shareholder verification for the MoM. Thus, there are no logical, simple, and clear alternatives to the MoM for determining parent company shareholder consent regarding dual listings.
June 15th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Dual listing guidelines should not entertain alternatives other than MoM of parent shareholders
The announcement of the dual listing guidelines by the Financial Services Commission (FSC) and the Korean Exchange (KRX) is imminent. Local press suggests that a listed company must meet three criteria for listing a subsidiary: operational independence, managerial independence, and investor protection.
The frameworks of 'independence' and 'investor protection' are desirable and on the right track. However, it is concerning that the simplest and most straightforward method of obtaining consent from parent company shareholders- namely, the majority vote of common shareholders - has been excluded for unspecified reasons.
The Forum has consistently highlighted through various channels that the MoM is the most appropriate and logically sound method for obtaining parent company shareholder consent for dual listings. In conclusion, when a subsidiary's listing leads to a decline in the parent company's stock price, a clear conflict of interest arises between the controlling and minority shareholders, necessitating the MoM.
First, controlling shareholders are not harmed by the decline in stock prices resulting from a subsidiary's listing. If the controlling shareholder is a corporation, they do not suffer financial loss from the stock price drop, since performance metrics such as sales and earnings are reflected in consolidated financial statements. The decline in the parent company's stock price due to dual listing is a market issue, unrelated to the company's financial performance.
Even if the controlling shareholder is an individual, they incur no harm. Individual controlling shareholders typically hold their shares for control and rarely sell them. In some cases, they might even favor a stock price decline, as this can reduce taxes when gifting or transferring shares.
In contrast, minority shareholders of the parent company directly suffer from the decline in stock prices, regardless of whether they are individuals or corporations. The value of their invested assets diminish. This is a straightforward case of property rights infringement.The interests of shareholders who hold shares for control and those who hold them for investment purposes diverge clearly due to stock price declines resulting from dual listings.
Therefore, why is it strange that those (controlling) shareholders who suffer no harm should not decide, while those who will be harmed should? The appropriateness of compensation for the subsidiary's listing can only be judged by shareholders exposed to the risk of harm. Can shareholders, who have no stake in the outcome, decide on property rights issues affecting other harmed shareholders? This is a matter of common sense.
Notably, all companies that have listed subsidiaries, including LG Energy Solution, have uniformly explained that "the listing of a subsidiary benefits parent company shareholders." There would be no reason for parent company shareholders to oppose matters that are beneficial to them.
While some opinions cite negative reasons based on the Ministry of Justice’s Guidelines released on February 25th 2026, it is clear that these guidelines pertain to "organizational restructuring" scenarios such as mergers and delistings. They are unrelated to the pervasive issue of dual listings distorting the capital market in Korea.
Moreover, the issue of dual listings is not one that necessitates oversight of the controlling shareholder's and board's abuse of power, such as with auditors or audit committee members. This is not a matter to which the 3% rule should apply.
The 'interests' of controlling shareholders and minority shareholders are inherently conflicting, making it inappropriate for controlling shareholders to participate in decisions. Why should neighbors get a vote in discussions about the depreciation of my home’s value? It is perplexing to consider a process where controlling shareholders, who suffer no harm from the stock price drop due to a subsidiary's listing, participate in decision-making.
Furthermore, the 3% rule is complicated and has many circumvention methods involving controlling shareholders' trading. It is clear who the controlling shareholders and related parties are, leaving no practical issues regarding shareholder verification for the MoM. Thus, there are no logical, simple, and clear alternatives to the MoM for determining parent company shareholder consent regarding dual listings.
June 15th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee