Jooyontech wins injunction suspending 'below market cap' delisting decision
Court finds blanket exclusion of appeal rights and early application of new threshold violate proportionality principle
A court has ordered a suspension of the decision to delist Jooyontech from the stock exchange.
The ruling found that related regulations violated the proportionality principle and were therefore invalid. Those regulations had applied a market capitalization standard ahead of its originally scheduled date and stripped companies of their right to appeal or present a defense solely on the grounds of falling below the market cap threshold.
According to Lin Law Firm, which represented Jooyontech in the litigation, the Seoul Southern District Court on Friday granted Jooyontech's application for a provisional injunction against Korea Exchange, suspending the delisting decision and prohibiting the liquidation trading period from proceeding.
The court identified two main problems with the regulations. The first was a provision that denied companies any right to appeal or opportunity to present a defense solely because a single indicator — market capitalization — fell below the threshold. The second was a transitional measure that moved the effective date of the 30 billion won ($22.1 million) market cap standard forward from Jan. 1, 2027, to July 1, 2026.
The court found that these measures had restricted companies' ability to respond without providing a sufficient grace period. Accordingly, it ruled that both the provision excluding the right to appeal and the opportunity to present a defense, and the transitional clause advancing the effective date of the 30 billion won standard, were invalid as violations of the proportionality principle.
The ruling stems from amendments Korea Exchange made to its listing regulations. The exchange raised the market capitalization threshold for delisting to between 30 billion and 50 billion won and moved the effective date of the 30 billion won standard forward by six months from its original schedule.
Jooyontech was designated a watch-list stock on July 21 and had its delisting confirmed on Monday, with liquidation trading imminent.
Founded in 1988 and listed in 2006, Jooyontech manufactures and sells computers. The company had sought to restore its market capitalization through improved earnings, but sources said the sharp drop in its share price and weakened investor sentiment following its watch-list designation made a short-term recovery difficult.
In its injunction application, Jooyontech raised several key arguments: that the regulations categorically denied any right to appeal or opportunity to present a defense based solely on a market cap shortfall; that the threshold for restoring market capitalization had been tightened to require the company to maintain the level for 45 consecutive days; and that the early application of the standard — without adequate notice — had made it difficult to pursue recapitalization or other normalization plans.
The ruling is likely to prompt other companies currently undergoing watch-list designation or delisting procedures under the same market capitalization standard to examine the timing and procedural aspects of how those regulations apply to them.
Nam Gwang-min, an accountant, and Kim Young-hoon, an attorney, who lead Lin Law Firm's listed-company support task force, said that "excluding a company's listing eligibility based solely on a short-term market capitalization figure calls for careful consideration in the interest of the healthy development of capital markets." They added that "any company facing a delisting crisis should immediately examine the relevant regulations and procedures upon receiving notice of the decision, before liquidation trading begins."
gilbert@heraldcorp.com
