Courts grant injunctions to KMH and Joyang Tech against delisting; trading halted even for firms in the liquidation process.
4 billion to 15 billion to 20 billion won: Courts question the accelerated implementation and the evidentiary basis for the "45-day consecutive" rule.
30% of firms with market caps under 20 billion won remain profitable; the same recovery criteria applied to the 1,000 won share price floor.
The delisting regime, tightened by financial authorities and the Korea Exchange (KRX) to facilitate the swift exit of distressed companies, has been brought under judicial scrutiny just three months after its implementation. As companies targeted for delisting based on market capitalization take legal action, courts have signaled concerns regarding the accelerated timeline for these rules and the rationale behind specific recovery requirements. The repercussions are intensifying, with the courts even halting delisting procedures that were already underway for other companies.
KMH (225430) and Joyang Tech (044380) successfully obtained court injunctions on the 2nd, suspending the execution of their delisting decisions. Consequently, the delisting orders for both firms remain stayed until a final ruling on the merits is reached. However, the court did not grant Joyang Tech’s concurrent request to suspend its designation as an administrative issue (a "managed" status).
The judicial decision has sent shockwaves through the market, affecting even companies that had already entered the liquidation sale stage. The exchange has suspended trading for Sejin TS (067770) and AFW (312610), both of which were slated for delisting due to low market capitalization, as it re-evaluates the application of the relevant regulations.
These are not the only firms turning to litigation. Others, including Gold&S (035290) and Pintel (291810), have also filed for injunctions regarding their administrative status and delisting procedures.
The impact of these rules is substantial. In August, when the first round of administrative status designations triggered by the newly tightened July criteria occurred, 36 companies—9 on the KOSPI and 27 on the KOSDAQ—were flagged. Of the 27 KOSDAQ firms, 23 met the criteria based on share price, 6 based on market capitalization, and 2 qualified under both.
4 billion to 15 billion to 20 billion won: Delisting threshold advanced by six months
The KOSDAQ market capitalization maintenance requirement stood at 4 billion won until last year. It was raised to 15 billion won in January and further to 20 billion won in July.
The original roadmap called for a gradual increase: 15 billion won this year, 20 billion won in 2027, and 30 billion won in 2028. However, when financial authorities unveiled their delisting reform plan in February, they accelerated the cycle from annual to semi-annual. Consequently, the 20 billion won threshold was implemented in July, six months ahead of the original January 2027 target. The stated intent was to improve market confidence and capital allocation efficiency by swiftly removing underperforming firms. The requirement to delist stocks trading under 1,000 won was also introduced at that time.
However, KOSDAQ companies that received delisting notices for market cap deficiencies in the latter half of this year are subject to the 15 billion won threshold. According to the KRX, eight companies fell into this category as of the 25th of last month, including Koiz, Wonpoong Mulsan, Silla SG, KMH, Gold&S, Soosung Webtoon, AFW, and Sejin TS. The 20 billion won threshold, which took effect in July, will see its first test of compliance with recovery requirements mid-month.
Beyond the threshold, recovery requirements have also been stiffened. Previously, companies could avoid delisting if they maintained their market cap above the limit for 10 consecutive days or 30 cumulative days within a 90-trading-day period. Under the new rules, they must maintain the threshold for 45 consecutive days within that same 90-day window.
The court questioned not the increase in the market cap threshold itself, but the process of its accelerated implementation and the rationale for the "45 consecutive trading days" recovery requirement. The bench observed that the exchange failed to provide sufficient empirical data to justify the 45-day duration. The court also scrutinized whether the need for the six-month acceleration to the 20 billion won threshold had been adequately demonstrated. The ruling also took into account the procedural rights of companies, noting that these are formal requirements that can lead to delisting without a separate appeal process.
This decision is particularly notable because injunctions against delistings have historically been rare. According to the Financial Services Commission, out of 85 delisting-related injunction requests filed between 2021 and 2025, only two were granted. This time, the requests from both KMH and Joyang Tech were granted in rapid succession.
Is low market cap synonymous with insolvency? 30% of firms below 20 billion won are profitable
Another issue raised during the tightening process is that market capitalization does not necessarily reflect a company’s actual business health.
Analysis by Small Insight Research, utilizing data from the Korea Federation of SMEs, the KOSDAQ Association, and the KRX, showed that as of late July, 149 KOSDAQ-listed firms (excluding SPACs and foreign entities) had market caps below 20 billion won. Among them, 45 firms—or 30.2%—were profitable.
While profitability alone does not define a company's financial soundness, market capitalization is a market-driven price and not always a reliable indicator of a company’s business foundation or potential for recovery.
Corporate responses have been mixed. While some headed to court, others succeeded in meeting the recovery requirements to escape "administrative" status, or opted to move their listing to the KONEX market.
The suspension of trading for firms already in the liquidation process has heightened uncertainty. While the measure is intended to allow the exchange to re-examine regulatory applications, for existing shareholders, it remains impossible to predict when trading might resume or whether the companies will eventually be delisted.
From market cap to share price: Controversy spreads across the delisting regime
Although this court ruling pertains specifically to market capitalization, its ripple effects could reach share price-based criteria. The "under 1,000 won" share price delisting requirement, introduced in July, also utilizes the same "45 consecutive trading days" recovery condition. While the recent injunction did not explicitly rule on the share price criteria, the possibility remains that the same issue could be raised in future litigation.
In the first round of administrative designations, more companies were flagged for share price issues than market capitalization. Of the 27 KOSDAQ companies that faced designation in August, 23 fell under the 1,000 won share price threshold, while 6 fell under the market cap threshold; two met both criteria.
This list includes profitable firms. JMI (035050), which recorded 89.8 billion won in sales and 4.1 billion won in operating profit last year, was flagged because its share price fell below 1,000 won. The company subsequently opted for a 5-to-1 reverse stock split.
A significant number of shareholders are affected. According to data compiled by Small Insight Research, the total number of minority shareholders in 32 of the 36 firms flagged under the new criteria reached 470,367.
Financial authorities have already slowed the pace of raising the threshold once, postponing the 300 billion won KOSDAQ market cap criterion—originally slated for next January—by six months to July of next year. While they have allowed firms targeted for delisting to transfer to the KONEX market, it remains to be seen whether moving to the lower-liquidity KONEX market actually serves to protect existing shareholders.
As the court's decision is at the injunction stage, the outcome could change in a full trial. However, the successive granting of the KMH and Joyang Tech requests could influence other ongoing litigation. It is hard to rule out the possibility that other companies in similar straits will knock on the court's door.
The exchange must now decide how to handle the stalled delisting procedures. Given that the court has taken issue with the accelerated implementation process and the "45 consecutive day" recovery requirement, it is no longer simple to just finalize delistings on a case-by-case basis. Should further injunctions be granted, the controversy could expand to the overall application of delisting criteria and future implementation schedules, placing significant pressure on the exchange’s institutional management.
