[1] Grounds for delisting listing regulations of the KOSDAQ market and the purport that the corporation should notify the corporation of the grounds for delisting in writing, and the contents and degree of the notification to be specified or indicated

[2] The case holding that, in a case where the notice of the decision of delisting in question contains only a provision on the basis of delisting and the ground for the eligibility for listing, but did not indicate specific facts to the extent that the company can find out the existence of a provision on the basis of a certain act, the decision of delisting is unlawful and that the decision of delisting is in violation of Article 40 (1)

[3] Requirements for the determination of delisting on the ground that it constitutes a ground of delisting under Article 38(2)5(a) of the Regulations on Listing of the KOSDAQ market

[4] The case holding that although a company notified of the de-listing decision on the ground that it falls under the grounds of de-listing under Article 38 (2) 5 (a) of the Regulations on Listing of the KOSDAQ market, it is recognized that part of the funds raised through the implementation of wording was used regardless of the improvement of its financial structure, it cannot be deemed that it avoided the de-listing requirement on the grounds that the remaining funds raised can be

[5] In making a decision of delisting, whether it is permissible to add a ground that did not constitute the act of avoiding the requirements of delisting to a lawsuit disputing the validity of the decision of delisting (negative in principle)

[6] The case holding that the company notified of delisting has the right to be preserved against the validity of the decision, and that there is also an urgent need to suspend the progress of the procedure for liquidation of share certificates due to a provisional disposition

[1] The purport of the KOSDAQ listing regulations that the company should notify the company in writing of the grounds and grounds for the delisting is to prevent arbitrary and convenient decisions by considering the company's own decision process and content and to properly inform interested parties, such as the company, etc. of the reasons leading to the company's decision of delisting. In addition, in light of the above purport of the provisions, the Korea Exchange must indicate not only the grounds for delisting and its grounds, but also the specific facts to the extent that it can know about whether the company's grounds for delisting and grounds for delisting are the grounds for delisting, and it can not be cured even if the company knew or knew of the purport at the time of notification of delisting.

[2] The case holding that since the Korea Exchange violated Article 40 (1) of the Listing Regulations and the notification of the grounds for delisting made to the company subject to review of delisting on the ground that the Korea Exchange falls under the grounds for delisting under Article 38 (2) 5 (a) of the KOSDAQ Listing Regulations and the notification of the grounds for delisting is unlawful on the ground that it did not clearly state all the specific facts to the extent that it could have known that the company was able to avoid any act of delisting and that it could not sufficiently dispute the reasons selected as the subject of review of delisting at the time of filing an objection, since it violates Article 40 (1) of the Listing Regulations.

[3] In order for a decision of delisting to be recognized as legitimate on the ground that it falls under the grounds of delisting under Article 38(2)5(a) of the Regulations on Listing of the KOSDAQ market, first, since the implementation of the wording by the KOSDAQ-listed company is intended to avoid the requirements of delisting regardless of the improvement of the financial structure, the company should be subject to the examination of delisting quality (see current listing regulations are limited to cases where the listing regulations can be conducted regardless of whether they are qualified for listing), second, considering the continuity of the company, transparency in its management, and soundness of the KOSDAQ, etc., the company's eligibility as a listing company of the KOSDAQ market should be recognized as necessary because it is not qualified for delisting.

[4] The case holding that even if a company notified of the de-listing decision on the ground that it falls under the grounds of de-listing under Article 38 (2) 5 (a) of the Regulations on Listing of the KOSDAQ market, is recognized to use part of the funds raised through the implementation of wording regardless of the improvement of its financial structure, it cannot be deemed to have avoided the de-listing requirement on the ground that the remaining funds raised by the company can

[5] In light of the purport of Article 40(1) and (2) of the KOSDAQ Market Listing Regulations that provides that the company should notify the company of the reason for delisting in writing and that it is allowed to raise an objection against it, adding the reason that is not considered as the act of avoiding the requirements of delisting to the lawsuit disputing the validity of the delisting decision shall not be permitted unless the basic factual basis is identical between the original reason and the additional reason.

[6] The case holding that a provisional disposition, separately from the voluntary will of the Korea Exchange, is necessary to suspend the progress of the procedure, so long as the company notified of the decision has a right to dispute over its validity, and furthermore, the measure to abolish the certificate of stock listing is being taken in accordance with the pertinent provision, to protect the existing investors who actively cooperate in the resolution of the reorganization and capital erosion of the company, and thus have a legitimate expectation, it is recognized that the provisional disposition, in order to protect the existing investors who have caused a legitimate expectation

[1] Article 390 of the Financial Investment Services and Capital Markets Act, Articles 38 (2), 40 (1) and (2) of the Regulations on Listing of the KOSDAQ / [2] Article 390 of the Financial Investment Services and Capital Markets Act, Articles 38 (2) 5 (a), and 40 (1) and (2) of the Regulations on Listing of the KOSDAQ / [3] Article 390 of the Financial Investment Services and Capital Markets Act, Article 38 (2) 5 (a) of the Regulations on Listing of the KOSDAQ / [4] Article 390 of the Financial Investment Services and Capital Markets Act, Article 38 (2) 5 (a) of the Regulations on Listing of the KOSDAQ / [5] Article 390 of the Regulations on Securities and Capital Markets, Article 40 (1) and (2) of the Regulations on Listing of the KOSDAQ / [6] Article 300 of the Civil Execution Act, Article 390 of the Financial Investment Services and Capital Markets Act, Article 390 (2) 40 (1) and (2)

Applicant Co., Ltd. (Law Firm Square, Attorneys Hong Sung-ho et al., Counsel for the plaintiff-appellant)

Korea Exchange (Law Firm, Kim & Lee LLC, Attorneys Ba-han et al., Counsel for the defendant-appellant)

1. Until the judgment on the merits becomes final and conclusive, the effect of the Respondent’s decision of delisting on June 4, 2009 on the issuance of the applicant stock certificates shall be suspended.

2. The respondent shall not proceed with the procedure of liquidation and purchase of the above share certificates;

3. On March 2, 2009, the respondent shall resume the transaction of the stock certificates issued by the applicant and suspended on March 2, 2009.

4. Litigation costs shall be borne by the respondent.

The same shall apply to the order.

1. Case summary

In full view of the records and the overall purport of the examination of the case, the following facts are substantiated.

(a) Designation of management items;

The applicant, as a KOSDAQ-listed company, was designated as an administrative issue on the basis of Article 28(1)4(a) of the KOSDAQ Market Listing Regulations (hereinafter “Listing Regulations”), on the grounds that the capital erosion rate of the entire 2008 is more than 50%, and the enforcement rules thereof were designated as an administrative issue on the basis of Article 28(1)4(a) of the Enforcement Rule. At the end of the business year 2008, the amount of capital of KRW 34.498 billion (the unit omitted; hereinafter the same shall apply), total capital of KRW 750 million (the unit omitted), and total capital of KRW 102.1% (State 1) of the Listing Regulations, which fell under delisting the grounds provided for in Article 38(1)10(a) and (b) of the Listing Regulations.

(b) Helping the applicant;

On March 30 of the same year, the Claimant submitted to the Respondent a balance sheet to the effect that, as of March 16, 2009, 2009, 92% of the capital reduction, 5 billion won of the compulsory convertible bonds, etc. were met, and that, as of March 16, 2009, 200 million won of the capital as of March 16, 2009, 3.357 billion won of the total amount of capital, and an audit report thereon by the same auditor. Meanwhile, the details of the Claimant’s compulsory issuance of convertible bonds are as shown in Table 1, and the major details of the use of 5 billion won of the outstanding convertible bonds raised thereby are as described in Table 2.

1. Details on the issuance of compulsory convertible bonds;

본문내 포함된 표 ？ 발행일자 발행가액 전환가액 제9회 전환사채 2009. 1. 20. 20억 원 1,000원 제10회 전환사채 2009. 2. 16. 30억 원 1,120원

Table 2. Details of the use of the obligatory convertible bonds fund;

본문내 포함된 표 항목 일 시 내 역 금 액 ㉠ 2009. 1. 20. 소외 1 주식회사(주 2)에 차입금 상환 6억 9,300만 원 ㉡ 2009. 1. 20. 소외 1 주식회사에 위탁보관 11억 9,000만 원 ㉢ 2009. 1. ~ 2009. 2. 소외 3 주식회사 등에 상환 23억 3,000만 원 ㉣ 2009. 2. 16. 소외 4 주식회사에 대여 3억 원 2009. 4. 9. 1억 원 ㉤ 2009. 5. 7. 소외 5 주식회사 주식 인수 2억 원

Nonparty 1 Company 2)

(c) Determination of the suspension of trading and delisting quality examination;

On the same day, based on Article 29 of the Listing Regulations and Article 29 of the Enforcement Rule 29 of the Listing Regulations, the respondent changed the period of suspension of trading to “not later than the date of decision on whether the applicant is subject to the substantive examination of the abolition of listing” on the grounds of “the change of the period of suspension following the submission of evidentiary materials proving that the ratio of capital has been 50% or more,” and pursuant to the proviso of Article 38(1)10 and Article 38(2)5(a) of the Listing Regulations, the respondent decided on April 17, 2009 whether the applicant’s self-performance of the wording would avoid the delisting requirement regardless of the improvement of the financial structure.

D. Determination of the De-listing Quality Review Committee (hereinafter referred to as the “De-listing Review Committee”) on the “Standards for Elimination of Listing”

피신청인은 2009. 5. 8. 실질심사위원회를 개최하여 먼저 신청인이 의무전환사채발행을 통해 조달한 자금 50억 원 중 최대주주인 소외 1 주식회사에 상환한 6억 9,300만 원(1-나 표 2. ㉠)과 소외 4 주식회사에 대여한 4억 원(같은 표. ㉣)은 재무구조의 개선과 무관하게 사용된 것으로 보고, 위 금액의 합계 10억 9,300만 원(= 6억 9,300만 원 + 4억 원)이 신청인의 자기자본에 비추어 그 규모가 상당하므로 신청인은 상장폐지실질심사 대상이 된다고 판단하고, 나아가 신청인의 상장적격성(기업경영의 계속성, 지배구조 및 경영의 투명성, 내부통제기능, 공시체계 등)을 심의한 뒤, 이를 종합적으로 고려한 결과 신청인은 상장규정 제38조 제2항 제5호의 상장폐지기준에 해당한다고 주5) 결정하였다.

(e)Notification of the decision regarding delisting standards;

On May 25, 2009, the respondent notified the applicant on May 25, 2009 that "I have been determined to fall under the de-listing criteria under Article 38 (2) 5 of the Regulations on Listing of the KOSDAQ by reflecting the results of deliberation by the de-listing Actual Review Committee on May 8, 09, and attached documents stating the reasons that it is difficult to recognize the listing eligibility as a KOSDAQ-listed corporation in terms of the continuity, transparency, and soundness of the company to the applicant.

F. Determination of delisting an applicant’s objection and the respondent

On May 19, 2009, the applicant filed an objection against the above decision of the de facto review committee. Accordingly, the respondent deliberated on June 4, 2009 by examining the improvement plan submitted by the applicant. On the same day, the Respondent finally decided delisting (from June 8, 2009 to June 16, 2009, from delisting date: June 17, 2009) the applicant’s share certificates issued (hereinafter “delisting decision of this case”).

G. Details of the statutes, listing regulations, enforcement regulations, etc. relating to the instant case are as listed in attached Form 1.

2. Determination:

A. procedural illegality of the delisting decision of this case

(i)the reasons and presentation of grounds for delisting;

According to the Listing Regulations, where the company is determined to fall under de-listing standards through a review of the substantive review committee, the respondent shall notify the company in writing of the reason and ground for de-listing (Articles 40(1) and 38(2)), and where the company in receipt of the notification has an objection against de-listing, the company in receipt of the notification may file an objection with the respondent within seven days from the date of receipt of the notification (Article 40(2)).

The purport of the Listing Regulations, as above, that the company should notify the company in writing of the grounds for delisting, is to prevent arbitrary and convenient decision-making by the respondent by reviewing the process and contents of the decision-making process by considering the significant disadvantage that the delisting affects the company, and to enable interested parties, such as the company, etc., to properly cope with the procedures for filing an objection against delisting or judicial remedy.

In addition, in light of the above purport of the provision, in presenting the grounds and grounds for delisting, the respondent must indicate not only the law and regulations that are the grounds for delisting but also the specific facts to the extent that the company can know about whether it constitutes a ground provision due to any of the facts. The defect that lacks the grounds and grounds for delisting cannot be cured even if the company knew or became aware of such purport at the time of notification of delisting.

(2) In the instant case:

As seen earlier, the respondent decided on May 8, 2009 that the applicant constitutes de-listing standards under Article 38(2)5 of the Listing Regulations through a review of eligibility for listing by the substantive examination committee, and notified the applicant of the grounds and grounds for de-listing as described in the above 1-Ma. This is merely the provision that serves as the basis for de-listing and the grounds for de-listing eligibility, and it does not indicate all specific facts to the extent that the respondent could have known that the applicant would have been deemed to circumvent any of the de-listing requirements.

Therefore, the Respondent's decision on de-listing standards as of April 17, 2009 is unlawful because it is against Article 40 (1) of the Listing Regulations, since the reason selected as the object of de-listing review cannot be sufficiently contested at the stage of raising an objection. Therefore, the Respondent's decision on de-listing standards as of April 17, 2009 is against the procedure stipulated in the Listing Regulations. Accordingly, the decision on de-listing in this case is also unlawful.

B. The substantive illegality of the delisting decision of this case

(1) The respondent deemed that the applicant falls under the grounds for delisting under Article 38 (2) 5 (a) of the Listing Regulations, and thus, in order to recognize the applicant as lawful, the respondent should first be recognized as being subject to de-listing since the applicant’s self-performance of the wording is aimed at avoiding the de-listing requirement regardless of the improvement of the financial structure and thus, the applicant should be subject to de-listing quality examination (the current Listing Regulations limit the cases where the de-listing quality examination can be conducted). Second, in full view of the continuity of the company, transparency of its management, and the soundness of the KOSDAQ market, the applicant should be recognized as having no eligibility for de-listing because of the applicant’s lack of eligibility.

(2) Whether it is subject to de-listing

(A) Criteria to determine whether self-help implementation constitutes a evasion of de-listing requirements

Article 38(2)5(a) of the Listing Regulations provides that “When it is deemed that the capital increase or division, etc. of a corporation listed on the KOSDAQ market is to circumvent the requirement of delisting because it is irrelevant to the improvement of the financial structure” as one of the objects of de-listing examination, Article 38(2)5(a) of the Listing Regulations provides that the specific standards for the act of avoiding the requirement of delisting shall be prescribed by the detailed regulations. Accordingly, Article 33(11)1 of the Enforcement Rule provides that “i.e., (b) related to the de-listing of the funds” refers to a case where the capital increase is resolved due to capital increase, etc. after a business year or a half-year settlement date, and such capital increase is not used for the improvement of the financial structure of the company, which is not used for the improvement of the financial structure of the company, even if it is reasonable to have a size of the funds raised through the implementation of new financial structure such as capital increase, it may not be concluded that the remaining funds were used for the improvement of the financial structure without any reasonable reason.”

(B) In the instant case:

According to the records and the purport of the whole examination, it is reasonable to view that the applicant's KRW 693 billion repaid to the non-party 1 corporation, the largest shareholder among KRW 5 billion funds raised through the issuance of compulsory conversion bonds, and KRW 400 million loaned to the non-party 4 corporation, and KRW 1 billion in total, KRW 93 billion used regardless of the improvement of the financial structure.

However, if the applicant excludes the applicant from the capital raised through carrying out his/her wording, the applicant's capital erosion rate of 2.26 billion won (=357 billion won - 1.093 billion won) is less than 17.9% per week. Thus, the applicant cannot be deemed to have avoided the de-listing requirement, since the applicant’s capital erosion rate of 3.35 billion won is less than 17.9 billion won, excluding the above 1.093 billion won, by means of the remaining financing, the applicant cannot be deemed to have avoided the de-listing requirement.

Therefore, applying the above listing regulations and enforcement regulations to the applicant's self-help performance, referring the applicant to the de facto examination of de-listing, and determining the de-listing or de-listing is illegal without any need to further examine whether the applicant is eligible for listing.

(C) Judgment on the respondent's assertion

이에 대하여 피신청인은 위 표 2. ㉠, ㉣항목 뿐만 아니라 같은 표 ㉡항목 즉, 신청인이 의무전환사채발행으로 조달한 자금 중 11억 9,000만 원을 출자자인 소외 1 주식회사에 위탁하여 보관한 행위 또한 재무구조개선과 무관한 것이고, 이들 행위로 인한 금액의 합계 22억 8,300만 원(= ㉠ + ㉣ + ㉡)을 자구이행을 통해 조달한 자본에서 제외할 경우 신청인의 자본잠식률은 약 61%에 육박하므로 결국 신청인의 자구이행은 재무구조 개선과 무관한 것으로서 상장폐지 요건을 회피한 경우에 해당한다고 주장한다.

However, taking into account the purport of the listing regulations prior to allowing the Respondent to notify the pertinent company of the grounds for delisting and to file an objection against it, adding the grounds that the Respondent does not constitute the act of avoiding the initial requirements of delisting to the litigation disputing the validity of the delisting decision of this case shall be deemed not to be permitted unless the basic facts are identical between the initial grounds for delisting decision and the additional grounds.

살피건대, 피신청인이 이 사건 신청절차에 이르러 비로소 상장폐지 요건의 회피행위로 삼고 있는 사유인 위 표 2. ㉡항목의 사유는 당초 피신청인이 상장폐지 요건의 회피행위로 삼았던 위 표 2. ㉠, ㉣항목의 사유와 기본적 사실관계가 전혀 동일하지 아니할 뿐만 아니라, 기록에 의하여 인정되는 다음과 같은 사정 즉, 신청인은 2009. 1. 20. 소외 1 주식회사 명의의 계좌에 11억 9,000만 원을 위탁보관하였다가 별지 2 ‘위탁보관금 회수 및 사용내역’ 기재와 같이 그 익일인 2009. 1. 21.부터 같은 해 3. 16.에 이르기까지 약 10회에 걸쳐 이를 모두 신청인 명의의 계좌로 회수하여 최대주주 이외의 자에 대한 차입금 상환이나 직원들의 급여지급 기타 회사운영자금으로 지출한 점 등을 종합하면, 해당금액은 일응 재무구조개선과 관련하여 사용된 것으로 보일 뿐이고, 위와 같이 신청인이 위 금액을 적절히 지출한 이상 출자자에 일시보관하였다는 사정만으로는 이를 재무구조 개선과 무관하다고 보기 어려우므로, 이러한 행위를 재무구조 개선과 무관한 상장폐지 요건 회피행위라고 단정할 수 없다. 따라서 피신청인의 위 주장은 이유 없다.

C. Determination as to whether the procedure for reorganization transactions is suspended and whether the transaction is resumed

As seen earlier, the de-listing decision of this case is procedural or substantively unlawful, so the applicant has a right to dispute its validity. Furthermore, as long as the measures for the abolition of stock listing are in progress in accordance with the relevant provisions, a provisional disposition is deemed to have been taken separately from the respondent’s voluntary will in order to protect the existing investors who have a legitimate expectation by actively cooperating with the applicant’s rehabilitation and the resolution of capital erosion. In order to protect the existing investors, the need to suspend the progress of the procedure is also recognized.

3. Conclusion

Thus, the application of this case is accepted because it is clearly explained the right to be preserved and the necessity of preservation thereof is well-grounded.

[Attachment 1] Relevant Acts and subordinate statutes, regulations: omitted

Judges Yoon Jin-ho (Presiding Judge)

Note 1) Capital potential ratio = (Capital - Total amount of capital) ¡À Capital 】 100%

Note 2) As of March 31, 2009, “Nonindicted 1 Co., Ltd.” was the largest shareholder of the applicant as of March 31, 2009, and the largest shareholder was changed to Nonparty 2 Co., Ltd.

3) On February 25, 2009, based on Article 25 of the Regulations on the KOSDAQ market and Article 30 of the Enforcement Rule of the Regulations, the respondent has already suspended the sale and purchase transaction of the applicant stock certificates with the period fixed from March 2, 2009 to the day before the date of listing new stock certificates.

4) Accordingly, the reason for suspending the transaction of the applicant’s share certificates was changed to “the subject of the substantive examination of the abolition of listing (Article 29(1)2 of the Listing Regulations)” and the period was changed to “the date of cancellation of listing (Article 29(1)2 of the Enforcement Rule).”

5) Accordingly, the reason for suspending the transaction of the applicant’s share certificates was re-exploited as “a cause for the abolition of listing (Article 29(1)2 of the Listing Regulations)” and the period was changed to “before the expiration of the period for raising an objection against the abolition of listing or the decision of delisting of an objection (Article 29(1)2 of the Listing Regulations).”

Note6) (Capital of KRW 2,759,845,50 - Equity capital of KRW 2,264,861,963) ± Capital of KRW 2,759,845,50 = approximately 17.9%