Cabinet OKs revised law for smaller firms' stock market debut

SEOUL, June 18 (Yonhap) -- The Cabinet passed a revised bill on Tuesday aimed to help smaller companies raise money more easily through initial public offerings on the country's new stock market, as part of a broader policy effort to shore up growth of small and medium enterprises (SMEs).

According to the Financial Services Commission (FSC), South Korea's top financial regulator, the revised law will ease rules for venture companies or start-ups wishing to be listed on the Korea New Exchange (KONEX), a stock market set up to exclusively cater to smaller firms.

The KONEX, which is scheduled to open on July 1, will be the country's third stock market after the main bourse Korea Exchange and the tech-laden KOSDAQ market.

The so-called revised Capital Market Act, taking effect immediately, exempts a KONEX-listed firm from having to submit a registration of securities if it has sold its shares to at least 50 investors.

The revised law also exempts a candidate company for KONEX listing from a mandatory audit by an outside auditor designated by the Securities Futures Committee. The bill will also allow a KONEX-listed company to merge with an unlisted rival without an evaluation from a third party, the FSC said.

The government's move came after SMEs in Korea have been struggling to secure liquidity through selling stocks and bonds due to the slowing economy and a sluggish direct financing market.

In the first four months of this year, corporate direct financing sank to 40.7 trillion won (US$36.0 billion) from 46.9 trillion won a year ago, according to the Financial Supervisory Service (FSS). In 2012, IPOs and rights offerings hit a four-year low.

In a bid to revive the financing market, the regulator unveiled a set of measures early this year to foster a healthy environment for smaller companies to raise funds, including the plan to establish the KONEX.

Firms qualified to be listed on the KONEX market must either have equity capital above 500 million won, annual sales of more than 1 billion won or a net profit of more than 300 million won.

Earlier this month, the Korea Exchange (KRX), the main bourse operator, received applications from 21 companies wanting to be listed on the KONEX. The KRX plans to attract 50 firms with a combined market capitalization of 1.5 trillion won on the new bourse by the end of this year.

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