Dual Listings: Companies Must Now Win Over Minority Shareholders

Dual-listing guidelines strengthen protections for parent-company minority shareholders…Shareholder approval required for subsidiaries created through carve-outs

As companies grow, separating a business into a new entity and then listing it on the stock market is a common practice in capital markets. Listing a subsidiary can be part of a company's growth strategy, allowing it to raise substantial funds and strengthen specialized management of individual businesses.

But the situation changes if the parent company is already listed. Once the subsidiary goes public, a single economic entity must be viewed as two listed companies. In particular, when a parent company carves out its core business into a subsidiary and then lists it, concerns have arisen that existing parent-company shareholders must share the benefits of growth with the subsidiary's shareholders without directly owning the business.

Ultimately, the central issue in the dual-listing debate is the potential erosion of value for the parent company's minority shareholders.

When a subsidiary grows, that value is reflected in its share price, but the value of the parent's stake in the subsidiary may not be fully reflected in the parent's share price. This is because the market may apply a so-called “parent-company discount.” The exchange also notes that dual listings could lead to a discount in the parent company's share price, explicitly stating that its minority shareholders therefore need protection.

There is also a conflict of interest between controlling and minority shareholders. From a company's perspective, raising new funds through a subsidiary listing while retaining control may be rational. For existing parent-company shareholders, however, it may mean sharing the value of the business they invested in with shareholders of a separately listed company.

While such matters have traditionally been left to companies' business judgment, the dual-listing guidelines taking effect on August 3, 2026, mark a significant shift in the focus of decision-making from corporate interests to the protection of minority shareholders.

Parent-company boards are also accountable for subsidiary listings

The biggest change in the guidelines is that dual listings are no longer treated simply as decisions made at the subsidiary level.

Under the guidelines, parent companies must assess the impact of dual listings on minority shareholders and develop corresponding shareholder protection measures. They must also communicate with shareholders or ascertain their approval, have the board decide whether to support the listing, and disclose the relevant details. This process must also include deliberation and a resolution by an independent special committee.

In particular, assessing the impact on shareholders goes beyond simply calculating the subsidiary's corporate value. The guidelines require a comprehensive assessment of factors including the potential for the subsidiary's listing to cause a discount in the parent's share price, the extent of dilution of the parent's stake, the subsidiary's dividend policy and expected dividend income, and potential changes in the subsidiary's corporate value.

Shareholder protection measures must also be specific. The guidelines provide examples such as cash and in-kind dividends, cancellation of treasury shares, and plans to enhance corporate value. The key is to go beyond simply declaring an intention to “increase shareholder value” and specify the actual timing, methods, and conditions of implementation.

This significantly strengthens companies' responsibility to explain their dual-listing decisions.

Whereas saying “we are listing the subsidiary to ensure the business's independence” may once have been enough, companies must now address “Why is this listing also necessary for the parent company's minority shareholders?”as a question they must answer.

Not all dual listings are regulated in the same way

This does not mean, however, that the exchange is blocking dual listings altogether.

Rather than imposing a blanket ban on dual listings, the guidelines take a case-by-case approach to assessing the need for a listing and the level of shareholder protection. Reviews of subsidiary listings also use operational independence, managerial independence, and investor protection as their main criteria.

First, the exchange examines whether the subsidiary operates a genuinely independent business. Its independence may be considered limited if its products or services are too similar to the parent's or if it relies heavily on the parent's technology, brand, or customer base. In particular, a subsidiary is presumed to lack operational independence if transactions with the parent account for 50% or more of its sales or purchases.

Managerial independence also matters. The exchange examines whether the parent's largest shareholder, executives, or employees concurrently serve as executives of the subsidiary, whether the subsidiary has established independent personnel and management systems, and whether its board substantively decides on major investments, financing, and other matters.

Ultimately, separately listing a company that is a subsidiary in name only but effectively no different from a division of its parent is expected to become more difficult.

Shareholder approval is key to listing subsidiaries created through carve-outs

The strongest safeguard in the guidelines applies to subsidiaries created through carve-outs.

The exchange will require approval from parent-company shareholders when listing a subsidiary created through a carve-out by a listed company. This reflects its judgment that dual listings following carve-outs are the type most in need of minority shareholder protection.

By contrast, for ordinary dual listings not involving carve-outs, obtaining shareholder approval creates a presumption that shareholder protection requirements have been met, but a listing is not necessarily impossible without it. In such cases, the exchange rigorously examines whether shareholder protection efforts have been sufficient, considering the need to raise funds, industry characteristics, how and when the parent-subsidiary relationship was formed, and the subsidiary's significance within the parent company.

Listings may be more readily justified in high-tech industries with substantial funding needs or businesses requiring large-scale capital investment. Conversely, stricter standards may apply when a company seeks to list a subsidiary to retain control even though it has no difficulty raising funds through the parent.

Another feature is that small subsidiaries are not subject to identical requirements. An exemption from shareholder approval may be granted if a subsidiary's sales, operating profit, and assets are each less than 10% of the parent's and it is not considered significant in terms of corporate value. Subsidiaries created through carve-outs, however, are excluded from this exemption regardless of their size.

The point is not to block listings

These guidelines do not ban dual listings themselves.

There are clearly cases in which listing a subsidiary is necessary for corporate growth and financing. Particularly in high-tech industries requiring rapid research and development and large-scale investment, a financing channel separate from the parent can help a business stay competitive. The guidelines likewise call for case-by-case decisions that consider industry characteristics, financing needs, and other factors.

Ultimately, the approach of the new framework is less about “banning dual listings” and more about “demonstrating that dual listings are justified”.

To list a subsidiary, companies must now go beyond simply saying “we need funding” and explain why a separate listing is necessary, how it will affect existing parent-company shareholders, and what measures will address those effects. Subsidiaries created through carve-outs, in particular, must obtain shareholder approval.

The framework's effectiveness, however, will depend on how it is applied. Developing shareholder protection measures does not necessarily translate into a meaningful increase in shareholder value. It will be important to monitor whether promises such as dividends and treasury share cancellations are actually fulfilled, whether shareholder communication goes beyond a formality, and whether the exchange applies its case-by-case reviews consistently.

Ultimately, the question posed by these guidelines is clear.

They seek to go beyond asking “Is listing this subsidiary good for the company?” to ask “Is the listing also good for existing shareholders?”

The recurring controversy over dual listings in the Korean stock market has ultimately been about balancing corporate growth with the rights and interests of minority shareholders. Whether these guidelines can establish that balance will depend on actual listing reviews and companies' responses going forward.

One thing, however, is clear. Listing a subsidiary is no longer solely a corporate matter. It is becoming a major capital-market decision that requires companies to explain how the interests of the parent's minority shareholders are affected and win their support.