"Capital Increase: Strengthened Review Including Face-to-Face Consultation When Shareholder Rights Are at Risk"

If Any of Seven Criteria Such as Stock Value Dilution Apply, Case Will Be Selected for Priority Review
IPO Review Procedures Including Face-to-Face Consultations to Be Applied to 'Priority Review Paid-In Capital Increases'

In the future, paid-in capital increases that raise concerns about shareholder rights infringement will be selected as 'priority review' cases, with strengthened examinations including weekly face-to-face consultations. The Financial Supervisory Service (FSS) expects this to enhance investor protection.

On the 27th, the Financial Supervisory Service held a meeting with securities firms regarding initial public offerings (IPO) and paid-in capital increase underwriting tasks, revealing the review direction for securities registration statements related to paid-in capital increases.

The meeting was attended by Lee Seung-woo, Deputy Director in charge of disclosure investigation, the Director of the Disclosure Review Bureau, and representatives from 16 securities firms, discussing the review direction for paid-in capital increase disclosures, IPO system improvements, unfair trading cases related to underwriting tasks, and inspection directions.

The FSS announced that for paid-in capital increases that may harm shareholder rights, it will review examination cases to ensure the securities registration statement serves as an official communication channel with shareholders, and will revise and disclose the review procedures and standards accordingly.

Additionally, if any of seven reasons such as stock value dilution, concerns over infringement of general shareholders' rights, or negligence of underwriters' duties apply, the case will be designated as a 'priority review paid-in capital increase.' This includes issuance of stock-related bonds such as convertible bonds (CBs).

Specifically, these reasons include △capital increase ratio △discount rate △new business investment △occurrence of management disputes △marginal companies △excessive estimation of IPO performance △negligence in due diligence.

If selected as a priority review paid-in capital increase, the current IPO review procedures will be applied, including intensive review within one week of submission and at least one face-to-face consultation.

Furthermore, common review items for priority review paid-in capital increases and review items by designation reasons will be prepared to intensively examine the necessity of the capital increase, decision-making process, board of directors' discussions, and shareholder communication plans.

Deputy Director Lee Seung-woo stated, "By conducting transparent and prompt reviews of priority review paid-in capital increase types, we will enhance the predictability of companies," adding, "We expect to strengthen investor protection and raise underwriters' sense of responsibility."

Also, according to last year's IPO underwriting improvement plan, underwriters must establish internal control standards and internal regulations for public offering price calculation. The FSS conducted on-site inspections and held working-level meetings to listen to industry difficulties. As a result, underwriters generally have related internal regulations in place, but some parts lacking specificity need to be supplemented.

Going forward, the FSS will monitor and actively support the prompt establishment of IPO-related system improvements in the industry. It also plans to continuously supplement deficiencies identified through evaluations of the system improvement effects and on-site inspection results.

Moreover, upon receipt of securities registration statements, the FSS will verify whether the case meets the criteria for priority review paid-in capital increases and will closely examine whether the company's investment risks are thoroughly disclosed, focusing on priority review items.

Deputy Director Lee Seung-woo said, "IPO system improvements should quickly take root in the industry, and investment risks related to paid-in capital increases, which have recently attracted significant interest from minority shareholders, must be sufficiently disclosed," adding, "The FSS will carry out disclosure review tasks such as securities registration statements with a balanced approach to corporate fundraising and investor protection."