The Korean stock market operator decided to keep Kyung Nam Pharm listed on KOSDAQ, reversing its earlier decision to delist the firm due to accounting violations. The local drugmaker is known for vitamin C supplement Lemona.
The regulator ordered Kyung Nam to improve management transparency during a one-year grace period. The Korea Exchange (KRX) will decide on whether to delist the firm a year later.
The KRX’s KOSDAQ Market Committee said it decided to give the company a one-year grace period until January 8, 2020.
The company is obliged to draw up a plan to improve transparency and execute the plan. During the grace period, the KRX still suspends transactions of Kyung Nam stocks.
In March last year, 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 ($35,737), designated an auditor for a three-year audit, and referred the case to the prosecution.
The KRX had given six months to improve the largest shareholder’s governance structure, correct abnormal management structure, exclude executives from management decisions who are involved in speculative capital, install an auditor’s room, and hire a chief financial officer.
However, the pharmaceutical firm failed to execute improvement plans. In December, the KRX’s corporate review panel decided to delist the company.
The company then rushed to dismiss executives Yim Il-woo and Kim Sang-jin and four other directors. It also installed an auditor’s room.
Within seven business days from Jan. 8, 2020, Kyung Nam has to submit to the KRX a confirmation of an expert on improving the largest stakeholder’s governance structure and management transparency.
The KRX will hold a meeting of the KOSDAQ Market Committee within 15 days to decide whether it would kick the firm out of the stock market.
If the company does not improve transparency or completes improvement early, the stock market operator can decide on delisting before the end of the grace period.
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