CORPORATE RESTRUCTURING PROMOTION ACT
Act No. 6504, Aug. 14, 2001
Amended by Act No. 6891, May 29, 2003
Act No. 6991, Dec. 11, 2003
Act No. 7428, Mar. 31, 2005
Act No. 8572, Aug. 3, 2007
Act No. 8863, Feb. 29, 2008
Act No. 10684, May 19, 2011
Act No. 10866, Jul. 21, 2011
Act No. 12155, Jan. 1, 2014
Act No. 14075, Mar. 18, 2016
Act No. 15855, Oct. 16, 2018
CHAPTER I GENERAL PROVISIONS
The purpose of this Act is to facilitate constant corporate restructuring and promote the stabilization of financial markets and the development of the national economy, by providing for matters necessary to promptly and efficiently implement corporate improvement of enterprises with signs of insolvency.
The terms used in this Act shall be defined as follows:
| 1. | The term "financial claim" means a claim that can be exercised against an enterprise with respect to a credit provided to the enterprise or to a third party; |
| 2. | The term "financial creditor" means a person who has a financial claim; |
| 3. | The term "creditor financial institution" means a person specified by Presidential Decree from among the institutions under Article 38 of the Act on the Establishment of Financial Services Commission and other institutions that engage in financial business or corporate restructuring pursuant to any Act; |
| 4. | The term "creditor bank" means a financial institution that engages in banking business regularly and systematically, among financial creditors; |
| 5. | The term "principal creditor bank" means the principal creditor bank of the relevant enterprise (or the bank that has provided the greatest amount of credit, if no principal creditor bank exists). In such cases, matters concerning the selection, change, etc. of a principal creditor bank shall be prescribed by Presidential Decree; |
| 6. | The term "enterprise" means a company defined in the Commercial Act or any other person who engages in profit-making activities: Provided, That the following persons shall be excluded herefrom: |
| (b) | A financial company or a person specified by Presidential Decree, among other persons who engage in financial business; |
| (c) | An enterprise established under the law of a foreign country; |
| (d) | A person specified by Presidential Decree from among other persons excluded from those subject to credit risk assessment under Article 4 (4); |
| 7. | The term "enterprise with signs of insolvency" means an enterprise that its principal creditor bank discovers, based on credit risk assessment, having difficulties performing its obligations in the normal course of business, such as repayment of a loan borrowed from a financial creditor (hereinafter referred to as "signs of insolvency"), without an additional cash inflow from outside in addition to ordinary borrowings; |
| 8. | The term "provided credit" means any of the following transactions that fall within the scope prescribed by the Financial Services Commission: |
| (b) | Purchasing a note or a bond; |
| (d) | Guaranteeing payment; |
| (e) | Payment of an advance under a payment guarantee; |
| (f) | A direct or indirect financial transaction that might cause a loss to the counter-party if an enterprise becomes insolvent; |
| (g) | A transaction that might bring about a consequence practically equivalent to any consequence of a transaction under items (a) through (f), above, although the transaction does not fall within any of the aforementioned items; |
| 9. | The term "claim adjustment" means that a financial creditor extends the due date for the repayment of financial claims it has; reduces or remits the principal of claims and interest thereon; converts its claims into investment; or changes the substance of claims in any other similar manner. |
| Article 3 (Relationship to other Acts) |
CHAPTER II RESTRUCTURING OF ENTERPRISES WITH SIGNS OF INSOLVENCY
| Article 4 (Credit Risk Assessment) |
| (1) | A principal creditor bank shall assess the credit risk of its customer enterprises. |
| (2) | If any creditor bank that is not a principal creditor bank finds, based on its assessment of credit risk of a customer enterprise, that the enterprise has any sign of insolvency, the bank shall promptly notify the principal creditor bank thereof. |
| (3) | Upon receipt of notice under paragraph (2), the principal creditor bank shall examine whether the customer enterprise has any signs of insolvency. In such cases, the principal creditor bank may request the relevant creditor bank to present necessary data and to cooperate therewith. |
| (4) | The subject-matter and timing for the credit risk assessment under paragraphs (1) and (2), and other necessary matters shall be prescribed by Presidential Decree. |
| Article 5 (Notification of Results of Credit Risk Assessment) |
| (1) | When a principal creditor bank finds, based on its assessment of credit risk of a customer enterprise, that the enterprise has signs of insolvency, the bank shall notify the relevant enterprise of such fact and reasons therefor. |
| (2) | Upon receipt of notice under paragraph (1), the enterprise with signs of insolvency may file an application for commencement of either of the following administrative proceedings with the principal creditor bank, along with a plan for self-rehabilitation (hereinafter referred to as "self-rehabilitation plan") for corporate improvements and a list of financial creditors: |
| 1. | A joint administrative proceeding conducted by the council of financial creditors under Article 8 (hereinafter referred to as "joint administrative proceeding"); |
| 2. | An administrative proceeding conducted by the principal creditor bank under Article 21 (hereinafter referred to as "administrative proceeding by the principal creditor bank"). |
| Article 6 (Objection to Results of Credit Risk Assessment) |
| (1) | If an enterprise notified as an enterprise with signs of insolvency under Article 5 (1) has an objection to the findings of the assessment, it may file an objection with the principal creditor bank within 14 days from the date it receives such notice. In such cases, the enterprise shall state reasons for the objection, as prescribed by Presidential Decree. |
| (2) | A principal creditor bank shall notify the relevant enterprise of the results of the review on an objection within one month from the date the objection is filed. |
| Article 7 (Monitoring of Enterprises with Signs of Insolvency) |
If an enterprise notified as an enterprise with signs of insolvency fails to file an application for administrative proceedings under this Act or the rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act, without good cause, during the period specified by Presidential Decree, which shall not exceed six months, the principal creditor bank shall continuously monitor changes in the relevant enterprise's credit risk and capability to pay debts and shall take measures to prevent the de-stabilization of financial markets by the credit risk of the enterprise with signs of insolvency.
| Article 8 (Joint Administrative Proceeding by Council of Financial Creditors) |
| (1) | Upon receipt of an application filed by an enterprise with signs of insolvency for a joint administrative proceeding, a financial creditor shall examine the self-rehabilitation plan and assess the number of financial creditors, the size of financial claims, etc., and may commence the joint administrative proceeding, following a resolution adopted by the council of financial creditors established under Article 22 (hereinafter referred to as the "Council"). |
| (2) | If a financial creditor deems it necessary for the assessment under paragraph (1), it may request the relevant enterprise through the principal creditor bank, to supplement data submitted by the enterprise. |
| Article 9 (Convening of Council for Commencement of Joint Administrative Proceeding) |
| (1) | Upon receipt of an application filed by an enterprise with signs of insolvency, for joint administrative proceedings, a principal creditor bank shall give notice of convening a meeting of the Council (hereinafter referred to as the "first session of the Council") to determine whether to commence the joint administrative proceedings within 14 days from the date the application is filed: Provided, That it need not give notice of convening the first session of the Council in either of the following cases: |
| 1. | Where it is concluded that the signs of insolvency of the relevant enterprise can be resolved through the administrative proceeding by the principal creditor bank; |
| 2. | Where it is concluded that it is impracticable to resolve the signs of insolvency of the relevant enterprise even by the joint administrative proceeding. |
| (2) | When a principal creditor bank intends to convene the first session of the Council, it shall give notice of the following matters to financial creditors and the relevant enterprise: |
| 1. | Date, time and venue of the meeting; |
| 2. | Items on the agenda of the meeting; |
| 3. | Matters concerning the list of financial creditors; |
| 4. | Other matters necessary for convening and presiding over the meeting of the Council. |
| (3) | When a principal creditor bank gives notice under paragraph (2), it may request financial creditors to suspend the exercise of financial claims (including netting, the exercise of a security right, and the acquisition of additional collateral, but excluding the presentation of a note for the interruption of prescription) against the relevant enterprise until the closing of the first session of the Council. |
| (4) | If a financial creditor upon receipt of a request to suspend exercise of a financial claim under paragraph (3) has exercised the financial claim, it shall promptly reinstate the financial claim after the commencement of the joint administrative proceeding, and the principal creditor bank may request the financial creditor to perform the reinstatement in accordance with a resolution adopted by the Council. |
| (5) | If a principal creditor bank deems it necessary to conduct a joint administrative proceeding promptly and efficiently, it need not give notice of convening the first session of the Council to any of the following persons, notwithstanding paragraph (2): |
| 1. | A financial creditor not engaged in financial business (referring to financial or insurance business according to the Korea Standard Industrial Classification prepared and published by the Commissioner of the Statistics Korea under Article 22 (1) of the Statistics Act); |
| 2. | A small financial creditor, the financial claim of which is less than 1/100 of the total amount of financial claims stated in the list of financial creditors (if at least two small financial creditors are involved, small financial creditors shall be limited to those whose financial claims do not exceed 5/100 of the total amount of financial claims stated in the list of financial creditors); |
| 3. | Other financial creditors specified by Presidential Decree, considering the necessity to participate in joint administrative proceedings, etc. |
| (6) | If a financial creditor to whom notice of convening a meeting of the Council has not given under paragraph (5) wishes to participate in the Council, the principal creditor bank shall not exclude such financial creditor from the Council. In such cases, the financial creditor shall be regarded as a financial creditor to whom notice of convening the first session of the Council has been given but shall not protest against resolutions adopted by the Council until the day before the date such financial creditor participates in the meeting. |
| (7) | Where a financial creditor to whom notice of convening the first session of the Council was given transfers the financial claims (including stocks converted into investment in a joint administrative proceeding under this Act) it has against the relevant enterprise to a third party, the transferor shall give notice thereof to the principal creditor bank without delay. In such cases, except as otherwise stipulated by a resolution adopted by the Council, the transferee shall succeed to the status of the transferor under this Act. |
| (8) | Notwithstanding paragraph (7), the transferor shall assume obligations that have arisen to the transferor under this Act or according to a resolution by the Council before transferring a financial claim: Provided, That, if the transferor and the transferee jointly request, the Council may require the transferee to succeed to the transferor's obligations by its resolution. |
| (9) | When a principal creditor bank convenes the first session of the Council, it shall give notice of the fact and details thereof to the mediation committee of financial creditors under Article 29 and the Governor of the Financial Supervisory Service established under the Act on the Establishment of Financial Services Commission. |
| Article 10 (Request for Providing Data) |
| 1. | Names, addresses and telephone numbers of financial creditors; |
| 2. | The amount of financial claims of financial creditors. |
| (2) | A principal creditor bank shall request the provision of data to the minimum extent necessary to convene the first session of the Council and shall not use any of such data for other than its intended purposes for providing the data. |
| (3) | When a person provides data to a principal creditor bank upon receipt of a request to provide data under paragraph (1), the person shall notify the relevant financial creditor of the provision of data, as prescribed by Presidential Decree. |
| (4) | When a principal creditor bank attains the objectives of data that it has received for convening the first session of the Council, it shall control and delete the relevant data in accordance with the Credit Information Use and Protection Act. |
| (5) | No person in receipt of a request to provide data under paragraph (1) shall divulge information he or she becomes aware of in the course of performing duties about the commencement of joint administrative proceedings of an enterprise with signs of insolvency, to any other person and shall not use such information for an unauthorized purpose. |
| Article 11 (Commencement of Joint Administrative Proceeding) |
| (1) | Financial creditors may adopt a resolution on the following matters at the first session of the Council, which shall be held during the period specified by Presidential Decree within three months from the date the notice of convening the meeting is given under Article 9 (1): |
| 1. | Composition of financial creditors who shall participate in a joint administrative proceeding; |
| 2. | Commencement of the joint administrative proceeding; |
| 3. | Determination as to whether to suspend the exercise of claims against the enterprise with signs of insolvency and the period of suspension; |
| 4. | Other matters necessary for commencing the joint administrative proceeding. |
| (2) | No period of suspension under paragraph (1) 3 shall exceed one month from the date of commencement of the joint administrative proceeding (or three months, if it is necessary to conduct a due diligence review on assets and liabilities under Article 12) but may be extended only once within one month, following a resolution of the Council. |
| (3) | The joint administrative procedure under this Act shall not apply to any financial creditor who does not participate in a joint administrative proceeding according to a resolution adopted pursuant to paragraph (1) 1 (hereinafter referred to as "financial creditors excluded from application"). |
| (4) | Notwithstanding Article 24 (2), a resolution on the composition of financial creditors under paragraph (1) 1 requires the concurring votes of financial creditors holding at least 3/4 of the total amount of financial claims of the financial creditors who are notified of the convening of the first session of the Council. |
| (5) | Even after a joint administrative proceeding commences, the relevant enterprise or a financial creditor may file an application for rehabilitation proceedings or bankruptcy proceedings under the Debtor Rehabilitation and Bankruptcy Act. In such cases, if a decision to commence a rehabilitation proceeding or a declaration of bankruptcy against the relevant enterprise is made, a joint administrative proceeding shall be deemed interrupted. |
| Article 12 (Due Diligence Review on Assets and Liabilities) |
| (1) | The Council may request an enterprise against whom a joint administrative proceeding has commenced (hereinafter referred to as "enterprise under joint administratorship") to undergo a due diligence review on assets and liabilities, an assessment of the ability to continue to exist as a going concern, which shall be conducted by an outside specialized institution, such as an accounting firm appointed under an agreement with the enterprise. |
| (2) | An enterprise under joint administratorship shall submit data necessary for the due diligence review and assessment conducted by an outside specialized institution under paragraph (1) and shall fully cooperate with such institution. |
| Article 13 (Formulation of Corporate Improvement Plan) |
| (1) | A principal creditor bank shall formulate a plan for corporate improvement of an enterprise under joint administratorship (hereinafter referred to as "corporate improvement plan"), taking into consideration the results of the due diligence review conducted by an outside specialized institution on assets and liabilities of the enterprise under joint administratorship; and shall submit the plan to the Council. In such cases, the principal creditor bank shall pre-consult with the relevant enterprise on the corporate improvement plan, and the corporate improvement plan shall include a scheme for fairly apportioning losses among the persons significantly liable for insolvency of the enterprise. |
| (2) | A corporate improvement plan may include the following matters: |
| 1. | Adjustment of obligations; |
| 3. | A self-rehabilitation plan of the enterprise under joint administratorship; |
| 4. | Penalty charges to be imposed on a financial creditor who fails to perform the matter specified in subparagraph 1 or 2; |
| 5. | Other matters necessary for corporate improvement of the enterprise under joint administratorship. |
| (3) | If the Council fails to adopt a corporate improvement plan during the period of suspension of the exercise of claims under Article 11 (2), the joint administrative proceeding against the enterprise under joint administratorship shall be deemed interrupted on the day immediately after the end of the period of suspension. |
| (4) | If a principal creditor bank deems it necessary for corporate improvement of an enterprise under joint administratorship even after a corporate improvement plan is adopted, it may amend the corporate improvement plan according to a resolution adopted by the Council. |
| Article 14 (Agreement on Implementation of Corporate Improvement Plan) |
| (1) | The Council shall make an agreement on the implementation of a corporate improvement plan (hereinafter referred to as "Agreement") with an enterprise under joint administratorship within one month from the date the Council adopts the corporate improvement plan under Article 13. |
| (2) | The Agreement may provide for the following matters for corporate improvement, etc. of the enterprise under joint administratorship, in addition to the corporate improvement plan adopted by the Council: |
| 1. | The business goals of the relevant enterprise, including sales, operating income, etc.; |
| 2. | A detailed implementation plan necessary to attain the goals under subparagraph 1, including a restructuring plan for the adjustment of the personnel, organization, and wages of the relevant enterprise; and a plan for improving the financial structure, such as issuance of new stocks and reduction of capital. In such cases, the period for implementation shall not exceed one year but may be extended by a resolution of the Council; |
| 3. | An implementation plan that the relevant enterprise shall implement additionally, such as the adjustment of personnel expenses, if it fails to attain the goals under subparagraph 1; |
| 4. | A written consent to the matters that require consent of interested parties, such as stockholders or the trade union of the relevant enterprise, with respect to the matters under subparagraphs 2 and 3; |
| 5. | Matters concerning investments that significantly affect cash flow of the enterprise, and the acquisition, transfer, etc. of important property; |
| 6. | Where the enterprise intends to normalize its business through a sale to a third party or entrustment of business, etc., a detailed plan therefor; |
| 7. | Matters concerning the improvement of its governance structure, including composition of the board of directors; |
| 8. | Matters resolved on by the Council as necessary for corporate improvement and a future implementation plan; |
| 9. | Where the enterprise fails to implement the Agreement, matters concerning measures to be taken against the enterprise; |
| 10. | Matters concerning interruption and closing of the joint administrative proceedings; |
| 11. | Other matters agreed upon by the Council and the enterprise under joint administratorship as necessary for corporate improvement. |
| (3) | If the Council fails to conclude an Agreement by the deadline specified in paragraph (1), the joint administrative proceeding shall be deemed interrupted on the day immediately after the deadline. In such cases, matters concerning the adjustment of claims and new credit provided, which are included in the corporate improvement plan, shall become ineffective retroactively. |
| Article 15 (Inspection of Implementation of Agreements) |
| (1) | Parties to the Agreement shall comply with the Agreement concluded in good faith. |
| (2) | The principal creditor bank shall inspect results of implementation of the Agreement on a quarterly basis [or on a periodic basis as determined by the Council where an enterprise under joint administratorship is a small and medium enterprise under Article 2 of the Framework Act on Small and Medium Enterprises (hereinafter referred to as “small and medium enterprise”)], report the results to the Council, and disclose the progress of performance of the corporate improvement plan at least once a year, as prescribed by Presidential Decree: Provided, That the information falling under either of the following need not be disclosed: |
| 1. | The information deemed trade secrets, or deemed likely to cause depreciation of assets or difficulties in implementing corporate improvement efficiently; |
| (3) | A principal creditor bank may request an enterprise under joint administratorship to submit a report or data concerning business or property and to have related persons attend and make statements, as necessary for the inspection under paragraph (2); and the enterprise in receipt of such request shall comply therewith, except in extenuating circumstances. |
| (4) | A person who has submitted a written consent under Article 14 (2) 4 may request the principal creditor bank, through the enterprise under joint administratorship, to explain the progress of implementation of the Agreement and relevant plans as specified by Presidential Decree; and the principal creditor bank and the relevant enterprise shall comply with the request without delay, except in extenuating circumstances. |
| Article 16 (Evaluation of Joint Administrative Proceeding and Disclosure Thereof) |
| (1) | If a joint administrative proceeding is not completed three years after the date of conclusion of the Agreement with an enterprise under joint administratorship, the principal creditor bank shall form a business evaluation committee; evaluate the efficiency of the joint administrative proceeding, the possibility of corporate improvement of the enterprise, the necessity for continuing the joint administrative proceeding, etc.; and report findings thereof to the Council, as prescribed by Presidential Decree: Provided, That where an enterprise under joint administratorship is a small and medium enterprise, the period of evaluation may be separately determined by the principal creditor bank following a resolution of the Council. |
| (2) | A principal creditor bank shall disclose findings of the evaluation by the method specified by Presidential Decree within seven days from the date of reporting under paragraph (1): Provided, That the information falling under either of the following need not be disclosed: |
| 1. | The information deemed trade secrets, or deemed likely to cause depreciation of assets or difficulties in implementing corporate improvement efficiently; |
| Article 17 (Claim Adjustment) |
| (1) | If financial creditors deem it necessary for corporate improvement of an enterprise under joint administratorship, they may adjust the enterprise's claims according to a resolution of the Council. In such cases, the resolution of the Council on the adjustment of claims shall be made fairly and equitably, taking into consideration the priority of each right. |
| (2) | In order for a resolution of the Council on the adjustment of claims under paragraph (1) to be effective, it requires the concurring votes of financial creditors who have at least 3/4 of the total amount of secured claims of financial creditors (referring to the claims amounting to the valid security value up to the maximum of the liquidation value of relevant assets; the same shall apply hereinafter). |
| (3) | Except as otherwise expressly provided for in a resolution of the Council, the extension of the due date for the payment of financial claims and the reduction or remission of principal and interest thereon, among measures for the adjustment of claims, shall become effective when the enterprise under joint administratorship is notified of the resolution. |
| Article 18 (New Credit Provided) |
| (1) | If financial creditors deem it necessary for corporate improvement of an enterprise under joint administratorship, they may provide new credit (excluding changes of conditions of the existing credit provided; the same shall apply hereinafter) to the enterprise according to a resolution of the Council. In such cases, except as otherwise expressly provided for in a resolution of the Council, the amount of new credit provided shall be determined in proportion to the amount of financial claims reported pursuant to Article 26. |
| (2) | Financial claims arising from the new credit provided under paragraph (1) shall have a preferential right to be repaid prior to the financial claims of other financial creditors who compose the Council (referring to the financial creditors that participate in the joint administrative proceeding under Article 11), subsequent to statutory security rights. |
| (3) | When the Council resolves to provide new credit to an enterprise under joint administratorship, it may determine matters concerning the apportionment of losses that shall be borne by financial creditors that do not provide any new credit for financial creditors that provide a new credit. In such cases, losses on new credit provided shall be apportioned fairly and equitably. |
| (4) | A financial creditor's duty to provide a new credit to an enterprise under joint administratorship shall arise when the financial creditor concludes an agreement on the new credit provided with the enterprise. |
| Article 19 (Interruption of Joint Administrative Proceedings) |
The Council may interrupt a joint administrative proceeding according to its resolution, in any of the following cases:
| 1. | If any intentional omission or false statement is made with regard to an important matter in the list of financial creditors or the self-rehabilitation plan submitted by the enterprise under joint administratorship; |
| 2. | If the enterprise under joint administratorship fails to cooperate with an outside specialized institution in conducting a due diligence review or assessment under Article 12, without good cause; |
| 3. | If the enterprise under joint administratorship fails to perform any important matter specified in the Agreement, without good cause, or if it is found that the Agreement is unlikely to be implemented; |
| 4. | If it is found, based on an inspection conducted under Article 15 (2) or the evaluation under Article 16 (1), that it is improper to continue the joint administrative proceeding or if it is found impracticable to resolve signs of insolvency of the enterprise under joint administratorship; |
| 5. | If the enterprise under joint administratorship requests interruption; |
| 6. | If any other cause or event specified in the Agreement to interrupt the joint administrative proceeding occurs. |
| Article 20 (Closing of Joint Administrative Proceedings) |
The Council may close a joint administrative proceeding according to its resolution in any of the following cases:
| 1. | If it is concluded that the insolvency of the enterprise under joint administratorship has been resolved; |
| 2. | If the Agreement has been performed as planned; |
| 3. | If an enterprise under joint administratorship requests closure; |
| 4. | If any other cause or event specified in the Agreement to close the joint administrative proceeding occurs. |
| Article 21 (Administrative Proceeding by Principal Creditor Bank) |
| (1) | Upon receipt of an application filed by an enterprise under joint administratorship for an administrative proceeding by the principal creditor bank, the principal creditor bank shall review the self-rehabilitation plan, etc. and may solely commence an administrative proceeding for the enterprise, if it concludes that corporate improvement is possible. |
| (2) | Articles 11 (5), 12 through 15, and 17 through 20 shall apply mutatis mutandis where administrative proceedings by a principal creditor bank commence pursuant to paragraph (1). In such cases, "the Council" shall be construed as "the principal creditor bank." |
CHAPTER III COUNCIL OF FINANCIAL CREDITORS
| Article 22 (Council of Financial Creditors) |
| (1) | A council of financial creditors comprised of financial creditors of an enterprise with signs of insolvency shall be established in order to promote efficient corporate improvement of the enterprise. |
| (2) | The principal creditor bank shall take charge of convening and operating the Council and represent the Council with regard to resolutions adopted by the Council. |
| (3) | The principal creditor bank may convene meetings of the Council in order to deliberate on the matters under Article 23 (1) and to adopt resolutions thereon. If the sum of financial claims held solely or jointly by at least two financial creditors who are not a principal creditor bank exceeds 1/4 of the total amount of financial claims held by the financial creditors who compose the Council (including the amount of claims converted into investment in a joint administrative proceeding under this Act; hereinafter referred to as "total amount of financial claims of the Council"), such financial creditor(s) may request the principal creditor bank to convene a meeting of the Council; and the principal creditor bank in receipt of the request shall promptly take necessary measures to convene the meeting of the Council. |
| (4) | Except as otherwise expressly provided for in this Act, matters necessary for the operation of the Council shall be determined by the Council within the extent prescribed by Presidential Decree. |
| Article 23 (Business Affairs of Council) |
| (1) | The Council shall deliberate and resolve on the following matters: |
| 1. | Commencement, extension, interruption, and closure of joint administrative proceedings; |
| 2. | Determination, extension, and interruption of the grace period for exercising a claim; |
| 3. | Selection of financial creditors excluded from application; |
| 4. | Formulation and amendment of a corporate improvement plan; |
| 5. | Conclusion of the Agreement; |
| 6. | Inspection of outcomes from performing the Agreement and measures therefor; |
| 7. | Examination and assessment of possibility of business normalization of the relevant enterprise and measures therefor; |
| 8. | Formulation of a plan for the adjustment of claims or for new credit provided; |
| 9. | Imposition of penalty charges under Article 13 (2) 4; |
| 10. | Determining the estimated amount of compensation for loss incurred by non-performance of the Agreement concluded under Article 14 (1); |
| 11. | Formulation and amendment of operating regulations of the Council; |
| 12. | Matters related to subparagraphs 1 through 11; |
| 13. | Other matters necessary for resolutions of the Council under this Act. |
| (2) | When the Council intends to deliberate and resolve on a case under paragraph (1), it shall provide an opportunity to express opinions, orally or in writing, to the management of the relevant enterprise and the persons who have submitted a written consent under Article 14 (2) 4. |
| (3) | If the Council deems it necessary for efficient corporate improvement of an enterprise under joint administratorship, it may entrust all or part of the business affairs specified in paragraph (1) to the steering committee comprised of the representatives from financial creditors who comprise the Committee or the principal creditor bank, by its resolution. |
| Article 24 (Methods of Resolution of Council) |
| (1) | The Council may adopt a resolution in writing. |
| (2) | Except as otherwise expressly provided for in this Act or resolved by the Committee, a resolution by the Council requires the concurring votes of financial creditors who have at least 3/4 of the total amount of financial claims of the Council: Provided, That, if the amount of financial claims that a single financial creditor has is not less than 3/4 of the total amount of financial claims of the Council, a resolution requires the concurring votes of at least 2/5 of the number of all financial creditors that compose the Council, including the aforementioned financial creditor. |
| (3) | Where the Council adopts a resolution on the matter specified in Article 23 (1) 9, the financial creditor subject to the imposition of a penalty charge and the financial claims held by such financial creditor shall be excluded from the determination of either of the ratios specified in paragraph (2). |
| (4) | The Council may determine any method different from those specified in paragraph (2) by specifying the scope of particular cases through adopting a resolution. |
| Article 25 (Lawsuit for Cancellation of Resolution of Council) |
| (1) | If the procedure the Council follows in convening a meeting or the method that the Council applies in adopting a resolution violates this Act, a financial creditor or enterprise under joint administratorship may file a lawsuit seeking the cancellation of the resolution against the principal creditor bank with the competent court within 14 days from the date the Council adopts the resolution. |
| (2) | Paragraph (1) shall also apply where a resolution adopted by the Council in regard to the adjustment of claims under Article 17 or new credit provided under Article 18 violates this Act: Provided, That the period for filing a lawsuit shall be one month from the date the Council adopts such resolution. |
| (3) | The judgment that cancels a resolution adopted by the Council shall also be enforceable against financial creditors who comprise the Council. |
| Article 26 (Reporting of Financial Claims) |
| (1) | Upon receipt of notice of convening the first session of the Council from the principal creditor bank, a financial creditor shall report the details and amount of financial clams against the relevant enterprise to the principal creditor bank as at the day immediately preceding the date of notice of convening the meeting, within five days from the date the creditor is notified thereof. |
| (2) | Each financial creditor shall exercise voting right at the Council in proportion to the amount of financial claims reported under paragraph (1). |
| (3) | If a financial creditor who has been notified of convening the first session of the Council fails to report financial claims during the period given for reporting under paragraph (1), voting rights shall be exercised in proportion to the amount of financial claims stated in the list of financial claims submitted by the relevant enterprise until such creditor files a report. |
| (4) | If a dispute arises in regard to whether financial claims reported by a financial creditor under paragraph (1) exist, the Council may restrict such financial creditor's exercise of voting right until the existence of financial claims is confirmed. |
| (5) | A financial creditor subject to restriction on the exercise of voting right under paragraph (4) may exercise voting rights as of the date the existence of financial claims is confirmed but shall not protest against any resolution adopted by the Council before the date of confirmation. In such cases, the period for filing a claim for the purchase of claims under Article 27 (1) shall be counted as of the date the existence of financial claims is confirmed. |
| (6) | A person who reports the amount of financial claims after the end of the period for reporting under paragraph (1) may exercise voting rights from the day on which the amount is confirmed but shall not protest against any resolution adopted by the Council before the date of confirmation. |
| (7) | This Act shall also apply to a financial creditor who was unable to report the amount of financial claims under paragraph (1) because the creditor is omitted from the list of financial creditors submitted by the relevant enterprise. In such cases, the period for filing a claim for the purchase of claims under Article 27 (1) shall be counted as of the date the amount of financial claims is confirmed. |
| Article 27 (Dissenting Creditors' Right to Claim Purchase of Claims) |
| (1) | If the Council adopts a resolution on any of the following matters, a financial creditor who dissents from the resolution (hereinafter referred to as "dissenting creditor") may file a claim against the principal creditor bank for the purchase of all financial claims that the creditor has (including stocks converted into investment in a joint administrative proceeding), through a written statement of the kind and number of claims, within seven days from the date the Council adopts the resolution (hereinafter referred to as "period for filing a claim for purchase"). In such cases, the financial creditors eligible for filing a claim for the purchase of claims shall be limited to the persons who express their dissent in writing by not later than the date the Council adopts the resolution, and the persons who fail to file a claim for the purchase of claims during the period for filing such claim shall be deemed to consent to the relevant resolution of the Council: |
| 1. | Commencement of a joint administrative proceeding; |
| 2. | Formulation and amendment of a corporate improvement plan; |
| 5. | Extension of joint administrative proceedings; |
| 6. | Other matters determined by a resolution of the Council. |
| (2) | Consenting creditors shall jointly purchase relevant claims within six months from the end of the period for filing a claim for purchase prescribed in paragraph (1): Provided, That this shall not apply where either party to the purchase of dissenting claims files a petition for mediation with the Mediation Committee pursuant to paragraph (5) or files a complaint with a court. |
| (3) | The purchase price for claims of which a dissenting creditor files a claim for the purchase and the conditions of the purchase shall be determined by agreement made between consenting creditors (including the Council to whom the purchase is delegated by consenting creditors) and the dissenting creditors who file a claim for the purchase of claims. In such cases, the purchase price shall be determined at a fair value, based on the matters specified by Presidential Decree, including the value of the relevant enterprise, so as to ensure that the purchase price is not lower than the amount that dissenting creditors can recover through liquidation of the enterprise. |
| (4) | If a dissenting creditor reaches agreement with consenting creditors, the dissenting creditor may have the relevant enterprise or a third party purchase the dissenting creditor's claims. |
| (5) | If no agreement under paragraph (3) is reached, either consenting creditors or dissenting creditors who filed a claim for the purchase of claims may file a petition for mediation on the purchase price for claims and the conditions of the purchase with the Mediation Committee under Article 29. In such cases, the Mediation Committee shall determine a fair price, based on outcomes assessed by the accounting expert appointed by an agreement between the consenting creditors and the dissenting creditors who filed a claim for the purchase of claims in view of the value and property of the relevant enterprise, the possibility of performing the Agreement, and other circumstances. |
| (6) | When a principal creditor bank gives notice of convening a meeting of the Council concerning a matter specified in any subparagraph of paragraph (1), it shall give information about the details of the right to claim the purchase of claims and the method of exercising such right. |
| Article 28 (Compliance with Resolutions of Council) |
| (1) | Financial creditors (excluding financial creditors who file a claim for the purchase of claims under Article 27 (1); the same shall apply hereafter in this Article) shall comply, in good faith, with resolutions adopted by the Council under Article 23 (1). |
| (2) | The Council may request financial creditors to comply with resolutions. |
| (3) | The Council may impose penalty charges upon financial creditors who fail to comply with any resolution according to its resolution. |
| (4) | Financial creditors who inflict losses upon other financial creditors by non-compliance with a resolution of the Council or non-performance of the Agreement under Article 14 shall be jointly liable to compensate them for such losses, within the scope of losses that other financial creditors sustain. |
| (5) | The Council may determine the estimated amount of compensation for losses caused by non-compliance with a resolution, by its resolution. |
| Article 29 (Mediation Committee of Financial Creditors) |
| (1) | A mediation committee of financial creditors (hereafter referred to as the "Mediation Committee" in this Act) shall be established in order to facilitate efficient and fair corporate improvement of enterprises with signs of insolvency and to adjust differences in opinions among financial creditors. |
| (2) | The Mediation Committee shall be comprised of seven members appointed from among the following persons, as prescribed by Presidential Decree: |
| 1. | A person who has at least 10 years’ experience working for a financial institution or in a finance-related area; |
| 2. | A person who is qualified as an attorney-at-law or a certified public accountant; |
| 3. | A person who holds at least a master's degree in an area related to finance or law and has worked for a research institute or university as a researcher or at least assistant professor for at least 10 years with expertise in corporate restructuring; |
| 4. | A person who has worked in the field of corporate restructuring for at least three years. |
| (3) | Any of the following persons shall be disqualified as a member of the Mediation Committee and shall forfeit the position, if he or she falls within any of the following cases after he or she becomes a member: |
| 1. | A minor, or a person under adult guardianship or under limited guardianship; |
| 2. | A person declared bankrupt but not yet reinstated; |
| 3. | A person in whose case five years have not passed yet since imprisonment without prison labor or any heavier penalty, to which he or she was sentenced, was completely executed (or is deemed to have been completely executed) or was remitted; |
| 4. | A person in whose case five years have not passed yet since a fine or any heavier penalty, to which he or she was sentenced for a violation of this Act or any finance-related statute or regulation specified by Presidential Decree, was completely executed (or is deemed to have been completely executed) or was remitted; |
| 5. | A person sentenced to the suspension of imprisonment without labor or a heavier penalty, who is still in the period of suspension; |
| 6. | A person in whose case five years have not passed since he or she was dismissed or removed from office as a disciplinary measure under a finance-related statute or regulation specified by Presidential Decree; |
| 7. | A person who works or has worked for the preceding two years for the Government or for a financial supervisory agency. |
| (4) | The term of office of the chairperson and members of the Mediation Committee shall be two years and may be renewed consecutively only once; and the chairperson shall be elected by and from among members. |
| (5) | The Mediation Committee shall carry out the following business affairs: |
| 1. | Mediation of matters prescribed by Presidential Decree concerning mediation of differences in opinion (excluding differences in opinions filed for mediation after the Council adopts resolutions) unresolved even after undergoing autonomous consultation among financial creditors; |
| 2. | Adjustment of the purchase price for claims and conditions of the purchase under Article 27 (5); |
| 3. | Adjustment of penalty charges and the estimated amount of compensation for losses under Article 28 (3) and (5); |
| 4. | Cooperation in recommendations of the Ombudsman Committee for Enterprises with Signs of Insolvency under Article 30; |
| 5. | Determination as to whether a person breaches a resolution of the Council and decision-making on the compliance with a resolution; |
| 6. | Establishment and amendment of regulations on the operation of the Mediation Committee; |
| 7. | Other matters specified by Presidential Decree with regard to the operation of the Council. |
| (6) | The Mediation Committee may request the relevant enterprise and financial creditors to make an appearance before the Committee and hear their opinions or to submit necessary documents in order to carry out the business affairs under paragraph (5). |
| (7) | The Mediation Committee shall carry out the business affairs under its jurisdiction independently. If a committee member is involved in a transaction specified by Presidential Decree with a financial creditor or an enterprise with signs of insolvency, he or she shall be excluded from the Mediation Committee's business affairs related to the financial creditor or the enterprise with signs of insolvency. |
| (8) | A resolution of the Mediation Committee requires the concurring votes of at least 2/3 of current committee members. In cases falling under the latter part of paragraph (7), the member of the Mediation Committee shall be excluded from the number of current members. |
| (9) | Other matters necessary for the formation, operation, etc. of the Mediation Committee shall be prescribed by Presidential Decree. |
| Article 30 (Ombudsman Committee for Enterprises with Signs of Insolvency) |
| (1) | An ombudsman committee for enterprises with signs of insolvency (hereinafter referred to as the "Ombudsman Committee") shall be established in order to handle grievances of enterprises with signs of insolvency. |
| (2) | The Ombudsman Committee shall be comprised of six members, including one chairperson and shall be chaired concurrently by the chairperson of the Mediation Committee, while committee members shall be appointed as prescribed by Presidential Decree from among the persons specified in Article 29 (2) (excluding persons who work for the Government, a financial supervisory agency, a financial creditor, or an enterprise with signs of insolvency). |
| (3) | The term of office of the chairperson and each member of the Ombudsman Committee shall be two years, but may be renewed consecutively only once. |
| (4) | The Ombudsman Committee shall carry out the following business affairs: |
| 1. | Collecting grievances and difficulties of enterprises with signs of insolvency; |
| 2. | Collecting grievances and difficulties of the persons who have submitted a written consent under Article 14 (2) 4; |
| 3. | Recommending schemes to handle grievances to financial creditors and monitoring performance; |
| 4. | Recommending systematic assistance to related agencies, if necessary; |
| 5. | Establishing and amending regulations on the operation of the Ombudsman Committee; |
| 6. | Other matters related to handling grievances of enterprises with signs of insolvency. |
| (5) | The Ombudsman Committee may request the relevant enterprise and financial creditors to make an appearance and hear their opinions in order to perform the business affairs specified in paragraph (4). |
| (6) | A resolution of the Ombudsman Committee requires the concurring votes of at least 2/3 of current members. |
| (7) | Other matters concerning the formation, operation, etc. of the Ombudsman Committee shall be prescribed by Presidential Decree. |
| (8) | The Council shall endeavor to adopt resolutions on the schemes for settlement recommended by the Ombudsman Committee. |
| Article 31 (Petition for Mediation) |
| (1) | A financial creditor who has an objection in relation to a matter subject to deliberation by the Council may file a petition for mediation with the Mediation Committee in writing. |
| (2) | A person who files a petition for mediation under paragraph (1) shall demonstrate that the person has made every effort for autonomous consultation. |
| Article 32 (Mediation Decision) |
| (1) | The Mediation Committee shall give notice of the details of the mediation decision on a petition filed for mediation under Article 31 to the relevant financial creditor and the Council, without delay. |
| (2) | A mediation decision of the Mediation Committee shall have the same effect as a resolution of the Council. |
| (3) | A person who has an objection to a mediation decision may file a petition for an amendment to the decision with a court within one month from the date the mediation decision is issued. |
| (4) | Article 25 (4) shall apply mutatis mutandis to a petition filed for a decision on an amendment under paragraph (3). |
CHAPTER IV SPECIAL CASES FOR FACILITATION OF CORPORATE RESTRUCTURING
| Article 33 (Special Cases concerning Restriction on Investment and Asset Management) |
| (1) | None of the following provisions shall apply where a creditor financial institution converts claims into investment or adjusts claims according to a resolution of the Council for corporate restructuring under this Act: |
| 7. | Provisions of other statutes and regulations specified by Presidential Decree, from among statutes and regulations concerning investment and restriction on asset management. |
| (2) | Notwithstanding Article 417 of the Commercial Act, where a creditor financial institution converts claims into investment under paragraph (1), an enterprise with signs of insolvency may issue stocks at lower than par value only by a resolution of its general meeting of stockholders under Article 434 of the same Act without authorization from a court therefor. In such cases, except as otherwise determined at the general meeting of stockholders, such stocks shall be issued within one month from the date of resolution at the general meeting of stockholders. |
| (3) | Paragraph (1) shall be applicable until the day immediately after the lapse of two years after an administrative proceeding under this Act is closed or interrupted, but the period may be extended by not more than two years, with approval by the Financial Services Commission. In such cases, the Financial Services Commission shall determine whether to approve the extension, taking into considerations the factors specified by Presidential Decree. |
| Article 34 (Special Cases concerning Immunity from Responsibility of Creditor Financial Institutions) |
Where a creditor financial institution or executive officers and employees thereof fully engage in affairs for corporate restructuring under this Act without intention or gross negligence, they shall be immune from responsibility for the results of the affairs and not be subject to disciplinary actions or reprimand, or request therefor under this Act, or finance-related statute or regulation including the Board of Audit and Inspection Act or the Banking Act: Provided, That the same shall not apply to cases falling under any of the following: | 1. | Where statutes or regulations related to the procedures for corporate restructuring are not observed; |
| 2. | Where necessary information is not collected and examined enough; |
| 3. | Where an improper request is made; |
| 4. | Where a personal stake is in; |
CHAPTER V CORRECTIVE MEASURES
| Article 35 (Corrective Measures to Creditor Financial Institutions) |
| (1) | When a creditor financial institution commits any of the following acts, the Financial Services Commission may request the creditor financial institution to rectify the violation: |
| 1. | Where a creditor financial institution fails to assess credit risk in violation of Article 4 (1) or (3); |
| 2. | Where a creditor financial institution fails to give notice, without good cause, in violation of Article 5 (1); |
| 3. | Where a creditor financial institution fails to take any necessary measure in violation of Article 7; |
| 4. | Where a creditor financial institution fails to convene a meeting of the Council, without good cause, in violation of Article 9 (1); |
| 5. | Where a creditor financial institution fails to inspect the performance of the Agreement or fails to disclose the progress of performance of a corporate improvement plan in violation of Article 15 (2); |
| 6. | Where a creditor financial institution fails to comply with a request for explaining the progress or plan of performance of the Agreement, without good cause, in violation of Article 15 (4); |
| 7. | Where a creditor financial institution fails to go through an evaluation of a business evaluation committee or fails to disclose the results of an evaluation in violation of Article 16 (1) or (2). |
| (2) | Where a creditor financial institution requested to rectify pursuant to paragraph (1) fails to comply with the request within a specified period without good cause, the Financial Services Commission may request or order the creditor financial institution to take the following measures: |
| 1. | Caution, warning, reprimand or salary reduction against the creditor financial institution or its executive officers and employees; |
| 2. | Suspension of performance of executive officers’ duties or appointment of an administrator who shall act on their behalf; |
| 3. | Other measures similar to those provided for in subparagraphs 1 and 2 as deemed necessary for rectifying a violation. |
| Article 36 (Administrative Fines) |
| (1) | Any of the following persons shall be subject to an administrative fine not exceeding 20 million won: |
| 1. | A person who fails to reinstate in violation of Article 9 (4); |
| 2. | A person who fails to provide an opportunity to express opinions for the management of an enterprise under joint administratorship and persons who have submitted a written consent under Article 14 (2) 4 in violation of Article 23 (2); |
| 3. | A person who fails to report financial claims in violation of Article 26 (1); |
| 4. | A person who fails to inform the details of a right to claim the purchase of claims and the method of exercising such right in violation of Article 27 (6). |
| (2) | Administrative fines under paragraph (1) shall be imposed and collected by the Financial Services Commission, as prescribed by Presidential Decree. |
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Effective Period)
| (1) | This Act shall be effective until five years pass after its enforcement date. |
| (2) | Where a principal creditor bank gives notice of convening a meeting of the Council during the effective period of this Act, this Act shall apply to such cases until administrative proceedings under any subparagraph of Article 5 (2) is closed or interrupted. |
Article 3 (Transitional Measure concerning Existing Administrative Proceedings)
As regards the administrative proceedings pending under Article 2 (2) of the Addenda to the Corporate Restructuring Promotion Act (Act No. 14075) (hereinafter referred to as “former Corporate Restructuring Promotion Act”) as at the time this Act enters into force, the former Corporate Restructuring Promotion Act shall apply until such administrative proceedings are completed or interrupted. Article 4 (Transitional Measure concerning Mediation Committee)
The Mediation Committee of Creditor Financial Institutions and the Ombudsman Committee for Enterprises with Signs of Insolvency established pursuant to the former Corporate Restructuring Promotion Act as at the time this Act enters into force shall be deemed the Mediation Committee of Financial Creditors and the Ombudsman Committee for Enterprises with Signs of Insolvency under this Act: Provided, That when the chairpersons and committee members are appointed after this Act enters into force and the provisions of this Act concerning the term of office apply, the period and the number of term of office for which they are appointed under the former Corporate Restructuring Promotion Act shall be aggregated. Article 5 (Relationship to Other Statutes or Regulations)
Any citation of the former Corporate Restructuring Promotion Act or any provision thereof by any other statute or regulation as at the time this Act enters into force shall be deemed a citation of this Act or the relevant provision of this Act in lieu of the former provisions if such relevant provision exists in this Act.