C&K International Co., Ltd. (Law Firm Jungjin, Attorney Jeong-jin, Counsel for the plaintiff-appellant)

Korea Exchange (Attorney Ha Sung-jin et al., Counsel for the plaintiff-appellant)

October 30, 2015

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

On March 31, 2015, the Defendant confirmed that the decision of delisting made against the Plaintiff’s issued share certificates is null and void.

1. Basic facts

A. Status of the parties

The defendant is a company that carries out the business of opening and operating the securities market, the KOSDAQ market, etc., and the plaintiff is a company that performs the business of exploration and development of domestic and overseas resources such as Damond Won, gold, and SP, and whose shares are listed in the KOSDAQ market operated by the defendant, but whose shares have been ruled de-listing by the defendant.

B. Delisting procedures for the KOSDAQ market based on the regulations on listing of the KOSDAQ market (hereinafter “Listing Regulations”) and the regulations on listing of the KOSDAQ market (hereinafter “Enforcement Regulations”), etc.

1) Article 38 of the Listing Regulations lists reasons why the Defendant may make a decision of delisting on the securities of a company listed on KOSDAQ. Among them, Paragraph 1 of the same Article stipulates the reason why the listing should be removed as necessary, and Paragraph 2 of the same Article stipulates the reasons why the listing may be abolished following the substantive examination of the KOSDAQ Enterprise Examination Committee (hereinafter “Corporate Examination Committee”)’s eligibility for listing.

2) The reason for commencing the substantive examination of listing eligibility under Article 38(2) of the Listing Regulations is the case where the suspicion of embezzlement and breach of trust in the size prescribed by the Listing Regulations is confirmed through public disclosure, etc., and it is deemed necessary to de-listing by comprehensively taking into account the continuity of the company, transparency in its management, and the soundness of the KOSDAQ market, etc. (Article 33(11)2 of the Enforcement Rule provides for an “executive with respect to the scale of embezzlement and breach of trust, which serves as the reason for commencing the substantive examination of listing eligibility, if the amount of embezzlement and breach of trust exceeds 3/100 of his/her equity capital, or the amount of embezzlement and breach of trust exceeds one billion won.”

3) Detailed delisting procedures applicable in the event that reasons set forth in Article 38(2) of the Listing Regulations arise are as follows:

Article 38(2) of the Listing Regulations provides that the ○ Corporate Review Committee shall decide whether to delisting through the substantive review of listing eligibility (Article 38(2) of the Listing Regulations). Before the Corporate Review Committee decides whether to delisting, it may grant the improvement period to the relevant listed corporation (Article 3

○ Corporate Review Committee shall notify in writing a corporation subject to delisting of the reasons and grounds for the abolition of listing, the purport that it may raise an objection against delisting, etc. after determining whether to delisting (Article 40(1) of the Listing Regulations).

A corporation subject to de-listing may file an objection with the defendant within seven days from the date of receipt of the above notification, and if there is an objection, the defendant shall decide whether to de-listing after deliberation and resolution by the KOSDAQ Market Committee (hereinafter referred to as the “Market Committee”).

○ The Defendant may allow the transaction of the securities in question to the extent that it does not exceed seven days (based on the date of the approval of delisting) from the date of approval of delisting with respect to the final securities for which delisting has been decided (Article 47 of the Listing Regulations and the provisions for protecting the interests of shareholders who invested in the securities subject to delisting. As above, the said temporary transaction takes place

C. Progress of delisting procedure against the Plaintiff’s share certificates

The Defendant followed the procedures for delisting of the Plaintiff’s share certificates (hereinafter referred to as “instant delisting”) in accordance with the following procedures:

(1) Deliberation by the Corporate Review Committee and granting the improvement period;

On July 9, 2014, the Defendant’s Corporate Review Committee was indicted for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) on the ground that the Nonparty’s representative director incurred property loss equivalent to KRW 11 billion against the Plaintiff on the ground that he/she committed a breach of trust, etc. (the foregoing case was consolidated with Seoul Central District Court Decision 2014Dahap812). On July 10, 2014, the Plaintiff selected the Plaintiff as a subject of the substantive examination of listing eligibility under Article 38(2)5(b) and Article 33(11)2 of the Enforcement Rule, and on September 2, 2014, the period for improvement for business normalization was granted to the Plaintiff for six months.

2) Determination of delisting by the Corporate Review Committee

On March 31, 2015, the Corporate Review Committee made a decision of delistinging the Plaintiff’s share certificates based on the following: ① from the perspective of business continuity, the business entity continues to be in existence; ② there is uncertainty in business continuity by failing to implement the improvement plan such as new gold and multimon distribution business; ② from the perspective of financial soundness, from the perspective of financial soundness, the financial structure is weak by continuing capital erosion; ③ has not been implemented by the improvement plan such as liquidation of insolvent related companies; ③ has implemented the improvement plan such as replacement of management, internal control regulation, and the improvement of internal accounting management system; ③ has been implemented from the perspective of business transparency, three of the resigned directors such as the non-party to the non-party, etc., who committed the breach of trust, are in office as an unregistered executive; and there is vulnerability in business stability due to non-party’s non-performance of share acquisition.

3) Plaintiff’s objection and review result of the market committee

On April 10, 2015, the Plaintiff filed an objection against a company review committee’s de-listing decision on the grounds that it is unreasonable to make a judgment of the company review committee on business continuity, financial soundness, and business transparency. However, on May 6, 2015, the Market Committee decided to de-listing of the Plaintiff’s issued share certificates on the premise that the business sustainability, the vulnerability of the financial structure continues to exist, and the vulnerability of the financial structure exists. The Market Committee set the period for filing the Plaintiff’s share certificates as “from May 8, 2015 to May 18, 2015” and the de-listing date as “from May 19, 2015,” respectively, and the said reorganization trading procedure was fully implemented.

D. Progress of a criminal case against the Nonparty

On January 23, 2015, the Seoul Central District Court sentenced the non-party to a suspended sentence of two years in imprisonment for one year and six months against the non-party in relation to a criminal case against the non-party (including the case of the same court 2013 senior 160, 2014 senior 413, 812 (merged) and 812 (merged). The above court found the non-party guilty on the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) that the non-party committed a breach of trust with property damage equivalent to about 11 billion won against the plaintiff, and judged the non-party guilty on the remaining part, and the prosecutor appealed on the above judgment, and currently the above case is pending in the Seoul High Court.

[Reasons for Recognition] Facts without dispute, entry of Gap evidence 1 through 8, 23 (each number is included; hereinafter the same shall apply) and the purport of the whole pleadings

2. Determination on the defense prior to the merits

The Defendant has already completed the reorganization trading procedure, which is a subsequent procedure following the decision of delisting of this case, and thus it is de facto impossible to recover from the decision of delisting of this case. Thus, the Defendant’s objection to the purport that there is no benefit to seek confirmation for invalidation of the decision of delisting of this case.

In light of the following facts: (a) the reorganization trading procedure is limited to the procedure that gives the Plaintiff an opportunity to make a transaction in the KOSDAQ for a certain period in order to refund the stock certificates for which de-listing becomes final and conclusive; and (b) the validity of the Plaintiff’s stock certificates is not extinguished since the procedure was completed; (c) the Plaintiff’s stock certificates issued by the Plaintiff are likely to be traded in the KOSDAQ if the decision of de-listing becomes invalid; and (b) a stock-listed corporation may enjoy special exceptions such as the issuance and allocation of stocks, the limit of non-voting stocks, etc. when governed by the Financial Investment Services and Capital Markets Act (see, e.g., Articles 165-6, 165-15).

3. Judgment on the merits

A. The plaintiff's assertion

1) The decision of delisting of the instant case was made based on the invalid listing regulations as follows, and has no effect.

A) Article 38(2)5(b) of the Listing Regulations provides that when the crime of embezzlement and breach of trust is confirmed through public disclosure, etc., the company’s continuity, transparency in its management, and the soundness of the KOSDAQ market is deemed necessary, the decision of delisting is based on the above provision. However, the above provision is against the presumption of innocence in that it may be subject to the substantive examination of listing eligibility solely on the ground that the crime of breach of trust is prosecuted. The above provision is against the principle of presumption of innocence in that it may be subject to the substantive examination of listing eligibility. Furthermore, even if the application for commencing the procedure for commencing the procedure for commencing the examination is not subject to the substantive examination, the fact that the crime of embezzlement and breach of trust occurred, even if compared to the case that is not subject to the substantive examination, it is against the principle of equity. ③ It is difficult to determine that the application falls under the requirement of the substantive examination of listing eligibility, such as the continuity of the company, transparency in its management, or soundness in the KOSDAQ, and thus, it is difficult to determine that the application of listing eligibility is invalid or invalid.

B) Article 33-4(4) of the Enforcement Rule provides that a period of not more than one year (Article 38(2)3 of the Listing Regulations shall be extended if a reason for the substantive examination of listing eligibility arises (Article 38(2)3 of the Listing Regulations, and a period of not more than six months if a reason for the substantive examination of listing eligibility arises (Article 38(2)1). However, compared with the fact that a grace period of not less than one year is granted to “where a corporation listed on the KOSDAQ market is less than three billion won in sales,” which is one of the reasons for delisting prescribed in the Listing Regulations, the said period is contrary to the principle of equity and proportionality, and

C) Examining the listing regulations and enforcement regulations, there is a provision that the right to state opinions or to submit data after examining the substance of the listing eligibility is granted, while the right to state opinions or to submit data is not guaranteed until before the listing eligibility is subject to the substantive examination. The failure of the listing regulations to guarantee the right to state opinions or to submit data at the stage prior to the substantive examination of the listing eligibility is against the concept of justice or is excessively restrictive to the rights of the listed company.

2) In addition, aside from the validity of the listing regulations and the enforcement regulations that served as the basis for the decision of delisting in this case, even if there is no validity, most of the charges of the Nonparty’s breach of trust committed by the Defendant as the beginning of the commencement of the substantive examination of listing eligibility was pronounced not guilty, and as to the amount of the breach of trust against which the Defendant was convicted, the damage was not realized. As such, the Plaintiff’s act of taking the Plaintiff as the object of the substantive examination of listing eligibility itself as the object of the substantive examination of listing eligibility itself goes against equity. Furthermore, the Plaintiff’s profitability of the Damond business that the Plaintiff proceeds in Kamera and the company’s continuity is recognized. Therefore, the decision of delisting in

(b) Markets:

1) Determination as to the assertion that the provision on delisting decision of this case is invalid

A) Determination as to the assertion of invalidation under Article 38(2)5(b) of the Listing Regulations

On the other hand, the Listing Regulations cannot be denied that the provisions are naturally applicable to all listed corporations or applying corporations for listing, based on the provisions of the Act, and have a substantial normative character. As such, matters that do not conform to the purport of the relevant Act cannot be said to be its content. If a specific provision of the Listing Regulations violates the concept of justice by significantly violating the principle of proportionality or the principle of equity, or violates the legislative purpose or purport of other Acts by excessively restricting the rights of listed corporations, such provision shall be deemed null and void (see Supreme Court Decision 2007Da1753, Nov. 15, 2007, etc.).

However, in a case where the suspicion of embezzlement and breach of trust of the size prescribed by the Rule is confirmed through public disclosure, etc., and it is deemed necessary to delisting considering the continuity of the company, transparency in its management, and soundness of the KOSDAQ market, etc., the Plaintiff’s assertion in this part is not acceptable, since in the case of Article 38(2)5(b) of the Listing Regulations, which covers the substantive examination of listing eligibility, its contents are contrary to the concept of justice or have reached the degree of excessive restriction on the rights of the listed company. The specific grounds are as follows.

① The presumption of innocence refers to the principle that a criminal suspect who has not yet been prosecuted as well as a criminal suspect who has not yet been prosecuted shall, in principle, be treated as a person without a crime until a final and conclusive judgment of conviction has been rendered, and shall not be treated as a disadvantage, and even if having inflicted a family disadvantage, it shall be limited to the minimum necessary extent (see, e.g., Constitutional Court Order 90Hun-Ga48, Nov. 19, 190; Constitutional Court Order 2010Hun-Ma418, Sept. 2, 2010). However, in order to protect investors in good faith in the future, the defendant has the duty to consider whether to maintain the listing eligibility of a listed corporation, and the listed corporation also has the duty to allow the defendant to perform the above duties. Thus, it is difficult to say that the above provision is likely to have been disadvantaged by the fact that a listed corporation is unable to conduct the listing eligibility examination for all listed corporations, and it is difficult to comprehensively consider the possibility that it might be subject to the listing eligibility examination and its disclosure.

② It is presumed that the failure to take an application for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure is likely to make a listed corporation settle the insolvency early through an application for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure for commencing a procedure, and this would rather be contrary to the ideology of delisting system (see Supreme Court Decision 2007Da1753, Nov. 15, 2007). On the other hand, it is difficult to find the policy need not be considered as the beginning of the procedure for commencing a procedure for determining a procedure for public disclosure of embezzlement or breach

③ Article 38(2)5 of the Listing Regulations provides that “the continuity of a company, transparency in business management, and soundness of the KOSDAQ market” as the requirements for the substantive examination of listing eligibility. In addition, the guidelines for the substantive examination of listing eligibility for the KOSDAQ market provide more detailed examination items in [Attachment 2], and if so, it can be sufficiently determined that a listed corporation is subject to the substantive examination of listing eligibility. Although the listing regulations or the guidelines for the substantive examination of listing eligibility for the KOSDAQ market does not give any allocated points to each of the examination items, it is difficult to say that the assessment is not easy due to the characteristics of the items to be assessed in the substantive examination of listing eligibility, and that it is difficult to deem that there was lack of objectivity of the items or that the examination items cannot be predicted because it did not have been allocated points, it is difficult to deem that the above provisions have been invalidated merely on the ground that each examination item was not allocated.

B) Determination on the assertion of invalidation under Article 33-4(4) of the Enforcement Rule

Article 28(1)2 of the Listing Regulations provides that “Where the turnover of the latest business year is less than three billion won,” it shall be subject to the designation of administrative issues, and Article 38(1)4 of the Listing Regulations provides that “Where a corporation listed on the KOSDAQ market, which was designated as administrative issues under Article 28(1)2, is less than three billion won in the turnover of the latest business year,” it shall be subject to delisting.

On the grounds that “the sales amount of a listed corporation is less than 3 billion won” under each of the above provisions, the Plaintiff first designated the listed corporation as a management issue and, even after the designation of the management issue, should have the improvement period of not less than one year, considering that the listed corporation is subject to delisting when the same cause arises after the designation of the management issue. However, the Plaintiff asserts that Article 33-4(4)2 of the Enforcement Rule is against equity to ensure that the improvement period of not less than six months should be set if there are grounds for the substantive examination of listing eligibility under Article 38(2)5 of

(1) However, “the designation of a category of business subject to management” is a measure taken against a listed company that has a cause not to be evaluated as a subject of delisting, and it is not appropriate to compare two cases, since it is a separate system that is imposed on the listed company that is subject to the examination of delisting, it is inappropriate to consider the two cases as the subject of the comparison. ② “When the suspicion of embezzlement and breach of trust is confirmed through public disclosure, etc., and the company’s continuity, transparency in its management, and soundness in the KOSDAQ market is deemed necessary” rather than “when the sales amount of a listed company is less than KRW 3 billion,” it should be excluded from the subject of investment. As such, the former’s designation as the subject of the designation of the category of business, while it is difficult to evaluate the latter as subject to the substantive examination of listing eligibility in violation of the principle of equity; ③ Article 33-4(4) of the Enforcement Rule provides that “The improvement period may not exceed the following periods unless there is any special reason,” and Article 33-4(4) of the Enforcement Rule provides that the improvement period may not exceed six months.

Therefore, it is difficult to accept this part of the Plaintiff’s assertion.

C) Determination as to the assertion that the right to state opinion or the right to submit materials is not granted and thus void

In light of the following: (a) the real examination of listing eligibility should be deemed as part of the process of performing the duty of evaluating the eligibility for listing by the Defendant; (b) it is difficult to deem that the commencement of the real examination itself constitutes an act imposing disadvantages on a listed corporation; (c) Article 33-2(3) of the Enforcement Rule provides that the representative of a listed corporation may attend the Corporate Examination Committee or the Market Committee and make a statement in the process of determining whether to delisting; and (c) Article 40 of the Listing Regulations provides that an objection may be filed against a decision of delisting by the Corporate Examination Committee; and (d) Article 40 of the Listing Regulations provides that an objection shall be subject to deliberation and resolution by the Market Committee if there is an objection, and thus, the Plaintiff

2) Determination as to the assertion that the delisting decision of this case is invalid

On January 23, 2015, the Seoul Central District Court rendered a guilty verdict of only KRW 1.152 billion out of approximately KRW 1.1 billion among the non-party's 1.1 billion violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation of Trust) and rendered a not guilty verdict on the remainder of the arguments as seen earlier. In full view of the entries and the overall purport of the arguments, the above court rendered a not guilty verdict on the non-party's violation of the Financial Investment Services and Capital Markets Act due to the non-party's fraudulent unfair trading (limited to part of the facts charged in the above case No. 2014Da413, the above court's 2014Dahap413), and it can not be readily concluded that the publicly announced by the plaintiff "the multimond estimated amount of the multimond store of the non-party's Kamerae mine is 420 million."

However, in full view of the facts acknowledged earlier, the following circumstances acknowledged by Gap’s evidence Nos. 6 and 29, including the overall purport of the statements and arguments, cannot be readily concluded that there exists a serious defect in the de-listing decision of this case solely with the above facts recognized, and there is no other evidence to acknowledge it. Therefore, the plaintiff’s assertion premised

① Article 38(2)5(b) of the Listing Regulations provides that where a suspicion of embezzlement or breach of trust exceeds a certain size is confirmed through public disclosure, etc., the commencement of the substantive examination of listing eligibility shall be the beginning of the public disclosure. Article 33(11)2 of the Enforcement Rule provides that “In the case of an executive, at least 3/100 of his/her equity capital or at least 1 billion won” shall be the amount of embezzlement or breach of trust, which serves as the basis for “in the case of an executive, at least 3/100 of his/her equity capital.” Here, “where it is confirmed through public disclosure, etc.” is not limited to cases where a final and conclusive judgment of conviction is rendered, and it is difficult to deem that the first instance court acquitted the Nonparty of the part of the Nonparty’s breach of trust in the criminal case, even if it was found that the first instance court was ex post facto extinguished. Moreover, even if only the part of KRW

② The fact that the suspicion of embezzlement and breach of trust above a certain size is confirmed is merely because it has the meaning as a starting point for the discovery of the causes for the substantive examination of listing eligibility, and that the main reason for the commencement of the substantive examination of listing eligibility against the Plaintiff was recognized to require delisting when comprehensively considering the continuity of the company, transparency in its management, and soundness in the KOSDAQ. The Defendant’s Corporate Review Committee and the Market Committee determined that the Plaintiff was not eligible for listing on the grounds that the sales performance was insufficient, that the production of multimond was debrised, that the production of multimond was deepened, that management transparency was damaged, and that the internal control system was weak, and that the managerial stability is weak.

③ When the Seoul Central District Court rendered a not guilty verdict on the Nonparty’s fraudulent unfair trading in the above criminal case, it is recognized that one of the grounds is that the Plaintiff’s estimated store quantity of 420 million won in the Kamera mine promulgated by the Plaintiff cannot be readily determined as false. The Plaintiff asserted that the economic feasibility of the Kamerna program was recognized in the criminal judgment. However, the Defendant’s judgment based on the premise that the concept of “presumed store quantity” in itself is ambiguous and subjective, it is merely that the Non-Party’s presumption cannot be determined as false, and that the value itself cannot be determined as true. Even if it is permitted to estimate the presumption quantity of the Kamera mine as 420 million won in the Kamera mine promulgated, it is difficult to determine that the above presumption of economic feasibility should not be determined separately from the above economic transparency decision in light of the following factors: (a) the Plaintiff’s evaluation of the economic transparency of the business in question is inappropriate.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Judges Man Chang-ro (Presiding Judge)

Note 1) Relevant provisions of the Listing Regulations and the Code of Implementation are listed in the annexed sheet.

(2) Article 33-2 (Examination and Operation of Enterprise Examination Committee, etc.) (2) The Corporate Examination Committee or the Market Committee shall examine whether a corporation listed on the KOSDAQ market falls under the de-listing criteria in accordance with the following review criteria.