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Corporate Rehabilitation
Corporate rehabilitation in Busan: keep the company, adjust the debt
Corporate rehabilitation lets a company worth more as a going concern than in liquidation keep operating while its debts are adjusted under court supervision. A company based in Busan files with the Busan Bankruptcy Court, which decides on commencement within 1 month of a company filing.
If the business works but debt is choking it, look at corporate rehabilitation
Corporate rehabilitation lets a company whose value as an operating business exceeds its liquidation value continue operating while its debts are adjusted under court supervision. The debt is resized to a level that operating profit can repay.
A comprehensive prohibition order stops compulsory execution, and unless an exception applies, the existing representative keeps running the company. The case is handled by Attorney Lim Jae Hyun, whose specialization in Insolvency is registered with the Korean Bar Association (KBA).
To consult in Changwon or Seoul: Changwon Office · Seoul Office
How your case proceeds
Financial review
We decide whether rehabilitation or bankruptcy fits
Filing
We apply for preservation and prohibition orders at the same time
Plan submission
We submit a plan setting out the repayment sources and schedule
Vote and confirmation
The plan is voted on at the meeting of interested parties and confirmed
Deadlines set by law
| Stage | Deadline |
|---|---|
| Preservation order | Within 7 days of the filing date |
| Decision on commencement | Within 1 month of the filing date |
| Submission of the rehabilitation plan | Up to 4 months from the last day of the investigation period, extendable by up to 2 months |
| Deferral of unsecured debt | Cannot exceed 10 years |
Basis: Debtor Rehabilitation and Bankruptcy Act, Articles 43, 49, 50 and 195
Corporate Rehabilitation Frequently Asked Questions
QIf we file for corporate rehabilitation in Busan, do bank loan repayments and supplier payments stop right away?
A
Filing alone does not stop them automatically. When the court issues a preservation order together with a comprehensive prohibition order, compulsory execution based on rehabilitation claims and secured rehabilitation claims is prohibited and any pending execution is stayed (Debtor Rehabilitation and Bankruptcy Act, Article 45). After the commencement decision, paying or collecting rehabilitation claims other than under the rehabilitation plan is prohibited (Article 131). Transactions essential to the business can be paid with court permission (proviso to the same Article).
QWe were notified that a client has entered corporate rehabilitation. By when must we file our claim?
A
Within the filing period stated in the commencement decision. The court sets that period at between 1 week and 1 month from the last day of the period for the administrator to submit the creditor list (Debtor Rehabilitation and Bankruptcy Act, Article 50(1)2). The claim form states the content and cause of the claim and the amount of voting rights, with supporting documents attached (Article 148). If you missed the deadline for reasons not attributable to you, you can file a supplementary claim within 1 month after that reason ends (Article 152).
QDuring rehabilitation, can the company keep paying employee wages and new material costs?
A
Yes. Expenses arising from the company's business and asset management after commencement, employees' wages and severance pay, and the price of goods supplied in the ordinary course of business within 20 days before the filing are common-benefit claims (Debtor Rehabilitation and Bankruptcy Act, Article 179(1)2, 8-2 and 10), and they are paid as they fall due regardless of the rehabilitation proceedings (Article 180(1)). This is why the business can keep operating during rehabilitation.
QIf some creditors oppose, can the rehabilitation plan still be confirmed?
A
Unanimous consent is not required. At the meeting of interested parties, the plan passes with the consent of at least two thirds of the total voting rights in the rehabilitation creditors' class and at least three quarters in the secured rehabilitation creditors' class (Debtor Rehabilitation and Bankruptcy Act, Article 237). Even if a class does not consent, the court can confirm the plan after setting terms that protect that class's rights (Article 244(1)). With opposing creditors, the review focuses on whether the plan is fair and feasible.
QIf we file for corporate rehabilitation, will our clients and banks find out?
A
Yes. When the court issues a commencement decision, it publicly announces the decision, the administrator and the claim filing period, and sends written notice to known creditors and to those who owe money to the company (Debtor Rehabilitation and Bankruptcy Act, Article 51). The commencement decision is also recorded in the corporate register (Article 23(1)1), so it cannot be done in secret. Deciding the order in which to explain the situation to clients is part of the preparation.
QWhat happens to the company if it cannot follow the confirmed rehabilitation plan?
A
When it becomes clear that the plan cannot be carried out, the court terminates the rehabilitation proceedings (Debtor Rehabilitation and Bankruptcy Act, Article 288(1)), and if a termination decision after confirmation becomes final, the court must declare bankruptcy on its own motion as long as grounds for bankruptcy exist (Article 6(1)). A Busan corporate rehabilitation case moves into bankruptcy proceedings at the same Busan Bankruptcy Court, so if there are signs that the repayment sources are shaky, we consider modifying the rehabilitation plan before termination (Article 282).
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