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.

“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. Hanjin Shipping applies for rehabilitation proceedings

I.      The Bankruptcy Court’s commencement of rehabilitation proceedings and announcement of timetable