[Edaily Reporter Kim Hyung-il ] DAWONSYS Co., LTD(068240), which received a delisting resolution from the Korea Exchange’s Corporate Review Committee, has begun preparing an appeal. The company plans to appoint a law firm with the approval of the bankruptcy court and proceed with procedures to maintain its listing, while also working to normalize production by seeking a preliminary injunction to suspend the termination of contracts. Minority shareholders are also considering holding a rally and are deliberating on their response.

According to the financial investment industry on the 2nd, the Korea Exchange’s Corporate Review Committee voted to delist DAWONSYS Co., LTD on the 27th of last month. DAWONSYS Co., LTD plans to file an appeal in accordance with the exchange’s regulations, and a final decision on whether to maintain its listing will be made following a review by the Market Committee.

The Corporate Review Committee’s decision to delist the company is particularly noteworthy because DAWONSYS Co., LTD is the same firm that President Lee Jae-myung criticized last December during a briefing by the Ministry of Land, Infrastructure, and Transport, stating, “It seems government agencies were defrauded,” in reference to delays in the delivery of railway vehicles. At the time, President Lee had pointed out the problem with the structure of excessive advance payments and called for institutional reforms.

The Corporate Review Committee’s resolution does not immediately result in delisting. If DAWONSYS Co., LTD submits an appeal within the deadline, the exchange will conduct a follow-up review to make a final decision on whether to maintain its listing. As DAWONSYS Co., LTD is currently undergoing rehabilitation proceedings, the company plans to appoint a law firm with the approval of the rehabilitation court and then respond to the review. DAWONSYS Co., LTD’s official told Edaily in a phone interview, “We plan to appoint a law firm after receiving approval from the rehabilitation court to prepare our appeal.”

Some observers believe that the termination of major railway vehicle manufacturing contracts and the resulting restrictions on participation in bids were the key factors behind this delisting resolution. In response, DAWONSYS Co., LTD maintains that it intends to resume production through a provisional injunction to suspend the effect of the contract termination and proceed with the rehabilitation proceedings as normal. The company also stated that normalizing operations and implementing the rehabilitation plan will only be possible once production resumes.

There are also opinions that the business structure unique to railway vehicle manufacturing contributed to the delivery delays. Unlike general manufacturing, railway vehicle manufacturing involves a process that proceeds from basic and detailed design approvals, through the production of the first prototype set, performance testing, and railway safety verification, before mass production begins. This means that the overall production schedule can be affected by the ordering agency’s design approvals, design changes, and various testing schedules.

Rail vehicle manufacturing is a project-based business that does not end with the construction of the vehicles themselves but involves trial runs and various performance tests before final delivery. A professor of railway engineering explained, “Typically, after a contract is signed, a 10% down payment is made first, followed by sequential payments based on the project’s progress rate, and the final balance is paid only after the vehicle passes both the final test runs and performance verification.” He added, “Since the overall production schedule can be affected by the contracting authority’s design approvals, design changes, and various test schedules, it is difficult to attribute delivery delays solely to the manufacturer.”

Following the delisting resolution, minority shareholders have also begun to take action. The DAWONSYS Co., LTD Shareholders’ Alliance is monitoring the company’s appeal process while considering whether to hold a rally. The representative of the Shareholders’ Alliance stated, “We have been informed by the company that it is considering both an appeal and legal action,” adding, “Since many believe that simply submitting a petition has its limitations, there are growing calls to take direct action.”

As of the end of last year, DAWONSYS Co., LTD had 39,580 minority shareholders, accounting for 99.9% of all shareholders. The shares held by minority shareholders amount to 86.29% of the total issued shares. The Market Committee’s decision is expected to have a significant impact not only on the company’s rehabilitation and return to normal operations but also on the interests of its approximately 39,000 minority shareholders.