41 Listed Companies Among 69 Businesses Applied
Most Have Operations in Jung (中), Daegu, and Europe
7 Companies Suspected of Delayed Delisting
[Asia Economy Reporter Park Jihwan] A total of 69 companies have applied to financial authorities for exemption from administrative sanctions, stating that it is difficult to submit business reports and other documents on time due to the spread of the novel coronavirus infection (COVID-19). Most of these companies have business sites or conduct major operations in China or in special infectious disease control areas such as Daegu and Gyeongbuk, which are directly affected by COVID-19. In some cases, concerns have been raised about policy abuse as some companies are already in a distressed state, such as receiving a 'disclaimer of opinion' from auditors.
According to financial authorities on the 19th, from the 28th of last month until the day before, a total of 69 companies applied for exemption from administrative sanctions for delayed submission of business reports and other documents. Among them, 41 were listed companies: 7 on KOSPI, 29 on KOSDAQ, and 5 on KONEX. The remaining 28 companies were unlisted.
The Financial Services Commission decided last month, in cooperation with the Financial Supervisory Service and the Korean Institute of Certified Public Accountants, to exempt administrative sanctions if business reports and other documents cannot be submitted on time due to the impact of COVID-19.
Looking at the reasons for application, 47 companies had major business sites or subsidiaries located in China, the largest group. Six companies had major business sites or subsidiaries located in domestic special infectious disease control areas such as Daegu and Gyeongbuk. Ten companies applied citing delays in settlement and audits of local subsidiaries located in the U.S., Europe, Southeast Asia, and other regions.
Notably, seven companies currently undergoing delisting review procedures due to adverse audit opinions in 2018 were included. These include Hwajin, Lightron, Crova Hightech, East Asia Holdings, and KJ Pretech. Many of these applied for deadline extensions citing reasons such as manufacturing products in Chinese factories or conducting business activities in China.
In the case of Lightron, although the delisting cause has been resolved, the company is embroiled in litigation triggered by a recent management dispute. The company stated, "A subsidiary located in Wuhan, China, accounts for a significant portion of the consolidated financial statements, causing delays in external audits and financial statement preparation," but it had already disclosed a net profit of 4.2 billion KRW including the Chinese subsidiary at the end of February.
Crova Hightech also has business sites in China but announced a consolidated net loss of 7.4 billion KRW including its Chinese subsidiary at the end of last month. The company cited "a decrease in sales due to poor performance of the Chinese (subsidiary) and domestic power business" as the reason for the poor results. Both companies applied for exemption from delayed submission despite reflecting most of the financial information from their Chinese business sites.
A Financial Supervisory Service official said, "We will carefully review whether the delay is unavoidable due to the impact of COVID-19 or if there is an intention to deliberately delay the delisting review process by abusing the exemption, and will consider whether to grant the exemption from sanctions in the future."
The financial authorities plan to conduct document reviews for the companies that applied this time and decide on the final exemption from sanctions through the Securities and Futures Commission meeting scheduled for the 25th. If selected for exemption, business reports can be submitted up to 45 days late from the end of March, and audit reports up to 45 days late from the end of April without sanctions.
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