2016Da243405 Nullification of the decision of delisting

A Stock Company

Law Firm Jeong-jin (LLC, Counsel for defendant-appellant)

Attorney Jeong-jin, Counsel for the plaintiff-appellant

B A.

Attorney Kim Jong-sik, Justice Ha Sung-jin, Counsel for the plaintiff-appellant-appellant

Seoul High Court Decision 2016Na2002473 Decided July 15, 2016

December 12, 2019

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. The Securities Listing Regulations established by an Exchange established with the permission of the Exchange under the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”). The Securities Listing Regulations, which was established by delegation of autonomous matters to the Exchange under the Financial Investment Services and Capital Markets Act, are the self-governing provisions established by the Financial Investment Services and Capital Markets Act. In relation to the listing contract, the Exchange, which is a party to the contract, has the nature of the terms and conditions in advance to enter into a listing agreement with a large number of applied corporations.

However, as can be seen from the fact that the formation of fair prices of securities and exchange-traded derivatives, the trade thereof, and the stability and efficiency of other transactions are objectives of the Exchange, the Exchange has a high level of public interest. Moreover, the Securities Listing Regulations, based on the provisions of the Financial Investment Services and Capital Markets Act, have a practical normative character as a provision that naturally applies to all listed companies and companies applying for listing. In light of such special characteristics, if a specific provision of the Securities Listing Regulations violates the concept of justice as it seriously violates the principle of proportionality or the principle of equity, or contains any content contrary to the legislative purpose or intent of other laws by excessively restricting the rights of listed companies that guarantee other laws, such provision is null and void (see Supreme Court Decision 2007Da11, Nov

15. Supreme Court Decision 2007Da1753 Decided February 9, 2017, and Supreme Court Decision 2015Da8797 Decided February 9, 2017, etc.

In particular, the Securities Listing Regulations shall include matters regarding listing standards and listing review of securities as well as matters regarding listing abolition standards and delisting (Article 390(2)2 of the Capital Markets Act). This is to take measures to enhance market soundness and to protect potential large number of investors by discontinuing listing of a listed corporation’s business, financial situation, corporate governance, etc. However, since delisting impedes the reputation of the corporation subject to delisting and may cause damage to investors due to the loss of circulation of securities, the review of delisting should be conducted in a transparent and fair manner, and the right to participate in the procedure of the company subject to delisting should be fully guaranteed.

2. As to the grounds of appeal Nos. 1 and 3

A. The lower court determined as follows on the grounds stated in its reasoning. 1) In the event that the grounds under each item of Article 38(2)5 of the KOSDAQ Market Listing Regulations (hereinafter “Listing Regulations”) arise, the Defendant is obliged to determine an enterprise subject to the substantive examination of listing eligibility by comprehensively taking into account the continuity of the enterprise, transparency in its management, and soundness in the KOSDAQ market, etc. In the reality where it is impossible to conduct the substantive examination of listing eligibility for all listed corporations, it is necessary to provide that a company subject to the substantive examination should be subject to the substantive examination in consideration of the continuity of the enterprise, transparency in its management, soundness in the KOSDAQ market, etc.

2) According to the guidelines for the substantive examination of listing eligibility in the KOSDAQ market [Attachment 2] providing specific detailed items for the substantive examination of listing eligibility in the KOSDAQ market, a listed corporation as an entity subject to the substantive examination of listing eligibility can sufficiently take into account what aspects it should be subject to the assessment in the substantive examination of listing eligibility. This is because the guidelines for the substantive examination of listing eligibility did not assign marks to each item of the examination because it is difficult to take measurements due to the characteristics of the items assessed in the substantive examination, and it is not difficult to predict the objectivity or to predict the items of examination because they were not allocated marks. Therefore, it is difficult to deem that there was an error of law to the extent that each item of examination has to be invalidated by making it invalid under Article 38(2)5 (b) of the Listing Regulations on the ground that each item of examination was not more concrete.

B. Examining in light of the aforementioned legal principles, the lower court did not err by misapprehending the legal doctrine on the validity of the Securities Listing Regulations, thereby adversely affecting the conclusion of the judgment, on the grounds that Article 38(2)5 (b) of the Listing Regulations and the content of the above Table providing detailed items for examination of its substance are all valid.

3. Regarding ground of appeal No. 2

Based on the reasoning of the judgment of the first instance court, the lower court determined to the effect that it is difficult to view that the Defendant’s failure to guarantee procedural rights, such as the right to submit opinions, in the stage of selecting a corporation subject to the substantive examination of listing eligibility, is against the concept of justice or to excessively limit the rights of a listed corporation, on the grounds that the procedure for selecting a corporation subject to the substantive examination of listing eligibility is difficult to be deemed to constitute an act that imposes disadvantages on the listed corporation, and that the implementation rule of the listing regulations of this case provides for the right to attend and state opinions after the commencement of the substantive examination of listing eligibility,

In light of the circumstances that the listing regulations of this case sufficiently guarantee the right to participate in the procedure of the corporation subject to the substantive examination of listing eligibility and that the defendant's determination on whether to commence the substantive examination of listing eligibility needs to be promptly implemented, the lower court did not err by misapprehending the legal doctrine on the validity of the listing regulations of securities, thereby adversely affecting the conclusion of the judgment, in the process of selecting the corporation subject to the substantive examination of listing eligibility, which did not consider procedural errors in the conclusion of the judgment

4. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa

Justices Kwon Soon-il

Justices Lee Ki-taik

Justices Kim Jong-soo