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.

It has been just over two months since one of South Korea's largest shipowners and operators, Hanjin Shipping Co Ltd (“Hanjin”), applied for court rehabilitation. On 1 September 2016, the Bankruptcy Division 6 of the Seoul Central District Court (the “court”) issued a decision accepting that application and commencing rehabilitation proceedings.

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

South Korea’s Hanjin Shipping Co Ltd. filed for court receivership on Wednesday, August 31st in South Korea after losing the support of its banks, setting the stage for its assets to be frozen as West Coast ports deny access to its vessels. This recent development will have an immediate impact on a number of Buchalter’s clients, including manufacturers, retailers and asset based lenders.

We have all heard that the world is, once again, flat, given the importance of global trade and the interconnectivity of the supply chain. With Hanjin Shipping Co. Ltd. ("Hanjin"), South Korea's largest shipping company and the world's seventh largest container operator in terms of capacity, filing for receivership in connection with its bankruptcy proceeding in South Korea this week, new complications are appearing throughout the global supply chain.

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

You may recognise the quote in the title from the film "Ron Burgundy – Anchorman" about our favourite newsreader from San Diego in the 80's. Of course he was talking about a street fight with news teams from other San Diego stations but could just as easily been talking about the seemingly sudden financial demise of the Hanjin shipping line.

In 2009, a certain savings bank (“S Savings Bank”) issued subordinated bonds (the “Subordinated Bonds”).  Subsequently, the Financial Services Commission designated it as an insolvent financial institution and issued a management reform order, which included the suspension of its business.  Eventually, bankruptcy proceedings were commenced against S Savings Bank in around 2011, and the representative director of S Savings Bank was indicted for financial statement fraud and eventually found guilty.

Since the inauguration of electronic litigation or e-litigation (hereinafter “e-litigation”) services for patent cases in April 2010, the  Korean Supreme Court has gradually expanded the scope of availability of e-litigation services to civil, family law and  administrative cases, and provisional attachment and injunction cases. With the completion of the e-litigation system for  rehabilitation and bankruptcy cases, those proceedings and their ancillary proceedings can be administered electronically from  April 28, 2014, as described below.

The Debtor Rehabilitation and Bankruptcy Act (“DRBA”) amended on October 15, 2014 for the purpose of prohibiting business owners responsible for the bankruptcy of a company from reacquiring such company under reorganization through individual(s) who have aligned economic interests after the company receives a large amount of debt relief though rehabilitation proceedings, will be enacted on January 16, 2015.