Corporate bankruptcy in Busan: winding up a company through the court

The bankruptcy estate is limited to the assets the company held at the time of the bankruptcy declaration (Debtor Rehabilitation and Bankruptcy Act, Article 382). The personal assets of the CEO or family are separate from the corporation and do not enter the estate, but if the company transferred assets to family or others before bankruptcy knowing it would harm creditors, the bankruptcy trustee can avoid that transaction and recover them (Article 391). If the CEO stood as a joint surety, that liability remains separately.

If you file them as bankruptcy claims, you can take part in the distribution. Together with the bankruptcy declaration, the court sets a claim filing period of between 2 weeks and 3 months from the declaration date and the date of the first creditors' meeting (Debtor Rehabilitation and Bankruptcy Act, Article 312(1)), and creditors report the amount and cause of their claims with supporting documents within that period (Article 447). How much you receive depends on the assets left after estate claims are paid and differs from case to case.

The bankruptcy trustee chooses whether to end the contract or perform it. For a bilateral contract that neither side has finished performing, the trustee may rescind or terminate it, or perform the company's obligations and demand performance from the other side (Debtor Rehabilitation and Bankruptcy Act, Article 335(1)). The other party can demand a definite answer within a set period, and if there is no answer, the contract is deemed terminated (Article 335(2)). Return of the deposit and unpaid rent are handled separately according to the nature of each claim.

Bankruptcy itself is not punishable. What the law punishes is hiding company assets or disposing of them unfavorably with intent to harm creditors, and failing to keep books or making false entries (Debtor Rehabilitation and Bankruptcy Act, Article 650). Acts such as paying only a particular creditor to give it a special benefit are also treated as the crime of negligent bankruptcy (Article 651). For this reason, any disposal of assets and bookkeeping before filing should be done with records kept.

In principle these are debts of the corporation. However, if the corporation's assets are not enough to cover national taxes, an oligopolistic shareholder who, as of the date the tax liability arose, owns more than 50 percent of the total issued shares and controls management bears secondary tax liability up to that shareholding ratio (Framework Act on National Taxes, Article 39). If the CEO is the controlling shareholder of a one-person company, the taxes can pass to the individual, so we start by checking the shareholding structure.

Yes. When bankruptcy is declared, the court clerk commissions the registry office at the company's head office location to register the bankruptcy on the court's own initiative (Debtor Rehabilitation and Bankruptcy Act, Article 23(1)1), and when a decision to terminate or close the bankruptcy is made, that is registered as well (Article 23(1)5). A Busan corporate bankruptcy case is handled by the Busan Bankruptcy Court from declaration to closing, and the case ends with the closing decision after distributions are made.