The nation’s stock market operator said on Friday it decided to delist Kyung Nam Pharm, a local drugmaker known for vitamin supplement Lemona.
The Korea Exchange (KRX)’s corporate review committee said it evaluated the pharmaceutical firm’s plan to improve transparency, concluding the company’s management transparency was too problematic to keep the firm on the KOSDAQ market, the KRX said.
In March, the Financial Services Commission’s securities and futures commission discovered in the Kyung Nam Pharm’s balance sheet that the firm made false reports on sales and accounts receivables. The panel fined the company 40 million won ($35,323), designated an auditor for a three-year audit, and referred the case to the prosecutors.
With the FSC’s decision, Kyung Nam Pharm was subject to the stock market operator’s review whether its KOSDAQ listing could continue.
The KRX gave the company six months to provide a chance to fix its accounting problems. However, the corporate review panel’s assessment of business continuity, management transparency, and financial stability led to the conclusion that Kyung Nam’s management transparency remained poor, the KRX said. The company did not implement its plan to improve transparency, either, it added.
Founded in 1957, Kyung Nam Pharm’s corporate value stands at about 210 billion won.
In 2007, former CEO Lee Hee-cheol took over the drug company from Green Cross. However, Lee was indicted in 2014 due to false reporting of sales worth 5 billion won between 2008 and 2013. In 2017, Lee was convicted of embezzlement of construction money and fraud.
The KRX’s decision to remove the company from KOSDAQ met with loud protests by 5,000 minor shareholders who own 70 percent stake in total.
On Cheong Wa Dae’s online petition website, shareholders uploaded over 20 petitions that mostly claim the KRX’s review on Kyung Nam was unfair, compared to the decision on Samsung BioLogics which was allowed to stay listed despite suspected accounting fraud.
The KOSDAQ market committee is to finalize the decision whether to kick Kyung Nam Pharm out of the stock market by Jan. 8. The company reportedly was to state its official position regarding the issue, on Monday.
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