Seoul Bankruptcy Court will be established and replace the Bankruptcy Division of the Seoul Central District Court as of March 1, 2017.
The Seoul Bankruptcy Court will be the first and the only bankruptcy court in Korea until other bankruptcy courts are established in areas other than Seoul. Until then, local district courts will continue to oversee bankruptcy cases in areas other than Seoul.
On March 22, 2018, Sungdong Shipbuilding & Marine Engineering (“Sungdong”), a mid-sized shipyard in South Korea, filed a petition to commence a “rehabilitation proceeding” with the Changwon District Court. A rehabilitation proceeding is a court-administered reorganization proceeding comparable to a Chapter 11 proceeding in the United States. In a rehabilitation proceeding, the debtor continues to do business while restructuring its pre-existing debt.
On 16 October 2018, a new Corporate Restructuring Promotion Act("CRPA") was promulgated, with immediate effect. The CRPA was first enacted in 2001 as a response to the Financial Crisis that began in 1997, causing hundreds of businesses in Korea to close down. Concerned that bankruptcies of larger companies may lead to bankruptcies of lender financial institutions, the CRPA was enacted as a temporary measure to facilitate speedy restructuring of larger businesses, while allowing the businesses to continue operation under supervision of creditor financial institutions.
On September 12, 2016, the Bankruptcy Division of the Seoul Central District Court in charge of the rehabilitation proceedings of Hanjin Shipping Co., Ltd. amended the initial schedule of the rehabilitation proceedings as follows:
Submission of List of Creditors (by receiver): On or before October 10, 2016
Submission of Secured and/or
Unsecured Rehabilitation Claims (by creditors): October 11 – October 25, 2016
Investigation of the Reported Rehabilitation Claims: October 26 – November 15, 2016
The three once-major Korean shipping and shipbuilding companies - Hanjin Shipping Co., Ltd. (Hanjin Shipping), STX Offshore & Shipbuilding Co., Ltd. (STX O&S), and Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) - today stand at crossroads of destiny between rehabilitation and bankruptcy. Given the global nature of the operations by the companies, their fate will have a substantial impact on the economy globally.
Seoul Central District Court, or the Korean bankruptcy court handling rehabilitation proceedings of Hanjin Shipping Co., Ltd. (Hanjin Shipping) recently took several noteworthy measures. Pursuant to the Court’s decision, the fate of Hanjin Shipping will not be unraveled until February next year. The upcoming dates and deadlines for extended time pursuant to the aforementioned decision are as follows:
- Extended deadline for the claim inspection period: December 5, 2016
The once great shipping giant, Hanjin Shipping Co., Ltd. is now facing liquidation. The appraised liquidation value is 19 trillion won.
“Workout” in Korea is generally accepted as an out-of-court corporate restructuring process aimed at speedy business normalization of financially distressed companies by cooperation between the debtor company and its creditors.
On 19 May 2016, the National Assembly passed the bill to amend the Debtor Rehabilitation and Bankruptcy Act (“DRBA”). Key amendments include (1) improvements to the early proposed rehabilitation plan submission policy; (2) broadened scope of creditor participation in the proceedings; and (3) stronger protection of creditors with commercial claims. The revised DRBA is expected to enter into force 3 months after promulgation.
I. Improvements to the early rehabilitation plan proposal submission policy
I. The Bankruptcy Court’s commencement of rehabilitation proceedings and announcement of timetable