PART I GENERAL PROVISIONS
The purpose of this Act is to efficiently rehabilitate debtors facing distress due to financial difficulties, and their businesses through coordination of legal relations among interested persons, including creditors, shareholders and equity holders, etc. and to fairly realize and divide properties of debtors who are deemed difficult to rehabilitate.
| Article 2 (Status of Foreigners and Foreign Corporations) |
In the application of this Act, foreigners and foreign corporations shall have the same status as that of peoples of the Republic of Korea or corporations of the Republic of Korea.
| (1) | Rehabilitation cases, simplified rehabilitation cases and bankruptcy cases, or individual rehabilitation cases shall be placed under the exclusive jurisdiction of the rehabilitation court having jurisdiction over any of the following places: <Amended on May 20, 2014; Dec. 30, 2014; Dec. 27, 2016> |
| 1. | The general jurisdiction of the debtor; |
| 2. | The place where the debtor's principal office or place of business is located, or the place where an office or place of business at which the debtor is continuously employed is located; |
| 3. | The location of the debtor's property (in the case of a claim, referring to the place in which a judicial claim may be filed), where any place falling under subparagraph 1 or 2 is unascertainable. |
| (2) | Notwithstanding paragraph (1), a petition for rehabilitation or bankruptcy may be filed with the rehabilitation court in the city in which is located the high court having jurisdiction over the location of the debtor's principal office or place of business. <Amended on May 20, 2014; Dec. 27, 2016> |
| (3) | Notwithstanding paragraph (1), any of the following petitions may be filed with the rehabilitation court in the following classifications: <Amended on May 20, 2014; Dec. 30, 2014; Dec. 27, 2016> |
| 1. | Where a rehabilitation case or bankruptcy case involving any affiliated company under subparagraph 3 of Article 2 of the Monopoly Regulation and Fair Trade Act is pending, an application for the commencement of rehabilitation procedures or the commencement of simplified rehabilitation procedures, or a petition for bankruptcy for another affiliated company: the rehabilitation court in which the rehabilitation case or bankruptcy case concerning the former affiliated company is pending; |
| 2. | Where a rehabilitation case or bankruptcy case involving any corporation is pending, either an application for the commencement of rehabilitation procedures or the commencement of simplified rehabilitation procedures, or a petition for bankruptcy against the representative of such corporation or an application for the commencement of individual rehabilitation procedures: the rehabilitation court in which the rehabilitation case or bankruptcy case of that corporation is pending; |
| 3. | Where a rehabilitation case, bankruptcy case, or individual rehabilitation case for any of the following persons is pending, an application for the commencement of rehabilitation procedures or the commencement of simplified rehabilitation procedures, a petition for bankruptcy, or an application for commencement of individual rehabilitation procedures for the other person provided for in the relevant item: the rehabilitation court in which the rehabilitation, bankruptcy or individual rehabilitation case is pending: |
| (a) | The principal debtor and his or her guarantor; |
| (b) | A debtor and the person who is jointly liable with the debtor; |
| (c) | A debtor and his or her spouse. |
| (4) | Notwithstanding paragraph (1), rehabilitation cases and bankruptcy cases involving corporations which have at least 300 creditors and are liable for a debt amount above the amount prescribed by Presidential Decree may be filed also with the Seoul Rehabilitation Court. <Newly Inserted on May 29, 2016; Dec. 27, 2016> |
| (5) | A rehabilitation or bankruptcy case concerning the debtor who is not an individual shall be placed under the exclusive jurisdiction of the collegiate division of the rehabilitation court under paragraphs (1) through (4). <Amended on May 20, 2014; May 29, 2016; Dec. 27, 2016> |
| (6) | A bankruptcy case concerning any inherited estate shall be placed under the exclusive jurisdiction of the rehabilitation court having jurisdiction over the place where the inheritance of such property commences. <Amended on May 20, 2014; May 29, 2016; Dec. 27, 2016> |
| (7) | A bankruptcy case concerning any property which belongs to a limited-liability trust (hereinafter referred to as "limited-liability trust property"), which is created pursuant to Article 114 of the Trust Act, shall be placed under the exclusive jurisdiction of the rehabilitation court having jurisdiction over the general jurisdiction of the trustee (where at least two trustees exist, it refers to the general jurisdictional location of any one such person). <Newly Inserted on May 28, 2013; May 20, 2014; May 29, 2016; Dec. 27, 2016> |
| (8) | Where no competent court prescribed under paragraph (7) exists, the bankruptcy case shall be placed under the exclusive jurisdiction of the rehabilitation court having jurisdiction over the location of the limited liability trust property (in the case of a claim, the place in which a judicial claim may be filed shall be deemed such location). <Newly Inserted on May 28, 2013; May 20, 2014; May 29, 2016; Dec. 27, 2016> |
| (9) | Deleted. <Dec. 27, 2016> |
| (10) | Notwithstanding paragraph (1), where the general jurisdictional location of an individual debtor under subparagraph 1 of Article 579, is Gangneung-si, Donghae-si, Samcheok-si, Sokcho-si, Yangyang-gun, or Goseong-gun, a petition for a bankruptcy declaration for the individual debtor or an application for commencement of an individual rehabilitation procedure may be filed with the Gangneung branch of the Chuncheon District Court. <Newly Inserted on May 20, 2014; May 29, 2016> |
| Article 4 (Transfer Aimed at Avoiding Damage or Delay) |
When it is deemed necessary for avoiding any substantial damage or delay, the court may, ex officio, transfer a rehabilitation case, bankruptcy case, or individual rehabilitation case to any of the following rehabilitation courts: <Amended on May 20, 2014; Dec. 27, 2016>
| 1. | The rehabilitation court having jurisdiction over the debtor's other place of business or other office, or the location of the debtor's property; |
| 2. | The rehabilitation court having jurisdiction over the domicile or residence of the debtor; |
| 3. | The rehabilitation court under Article 3 (2) or (3); |
| 4. | When the rehabilitation case, the bankruptcy case, or the individual rehabilitation case is pending in the relevant rehabilitation court pursuant to pursuant to Article 3 (2) or (3), the rehabilitation court under Article 3 (1). |
| Article 5 (Cooperation among Courts) |
In the procedures provided for in this Act, courts may seek legal cooperation among themselves.
| Article 6 (Declaration of Bankruptcy Following Discontinuation of Rehabilitation Procedures) |
| (1) | Where a decision on discontinuation of rehabilitation procedures or the discontinuation of simplified rehabilitation procedures becomes final and conclusive after the rehabilitation plan is authorized for a debtor who is not declared bankrupt, the court shall, when it is recognized that facts leading to bankruptcy exist with respect to the debtor, declare him or her bankrupt ex officio. <Amended on Dec. 30, 2014> |
| (2) | Where the decision falling under any of the following subparagraphs becomes final and conclusive on the debtor who is not declared bankrupt, the court may, when it is recognized that facts leading to bankruptcy exist with respect to the debtor, declare him or her bankrupt, at the request of the debtor or any custodian or ex officio: <Amended on Dec. 30, 2014> |
| 1. | A decision of dismissal of an application for the commencement of rehabilitation procedures or an application for the commencement of simplified rehabilitation procedures (excluding cases where a decision is made to commence rehabilitation procedures under Article 293-5 (2) 2 (a)); |
| 2. | A decision on discontinuation of rehabilitation procedures or a decision on discontinuation of rehabilitation procedures made before the rehabilitation plan is authorized (excluding cases where rehabilitation procedures have been proceeded with in accordance with Article 293-5 (3) on the basis of a decision on discontinuation of simplified rehabilitation procedures under the paragraph (4) of the same Article); |
| 3. | The decision not to authorize the rehabilitation plan. |
| (3) | Where the bankruptcy is declared pursuant to the provisions of paragraphs (1) and (2), the commission of the register or the registration falling under any of the following subparagraphs shall be made together with the commission of the register or the registration of any bankruptcy: |
| 1. | The commission of the register provided for in the provisions of Articles 23 (1), and 24 (4) and (5); |
| 2. | The commission of the registration provided for in the provisions of Article 24 (4) and (5) that are applied mutatis mutandis under Article 27. |
| (4) | Where the bankruptcy is declared pursuant to the provisions of paragraph (1) or (2), when neither the suspension of payments nor a petition for bankruptcy is made prior to the declaration of such bankruptcy, for purposes of applying the provisions of Part III, any of the following acts shall be deemed that the suspension of payments or the petition filed for bankruptcy is made, and priority claims shall constitute estate claims: <Amended on Dec. 30, 2014> |
| 1. | An application for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures; |
| 2. | An act that is performed by a director (including any managing general partner and any other person equivalent thereto; hereinafter the same shall apply) of a corporate debtor that constitutes an offense of fraudulent bankruptcy as provided for in the provisions of Article 650. |
| (5) | Where the bankruptcy provided for in the provisions of paragraph (2) is declared before it is decided to authorize the rehabilitation plan, in the application of the provisions of Part III, the report on rehabilitation claims and the inspection or the confirmation of the objection provided for in Part II shall be deemed the report on the bankruptcy claims and the inspection or the confirmation of the objection that are all performed under the bankruptcy procedures: Provided, That the same shall not apply to the objection raised to any claim, the inspection or the confirmation provided for in the provisions of Articles 134 through 138. |
| (6) | When the declaration of bankruptcy referred to in the provisions of paragraph (1) or (2) is made, the litigation procedures that are taken by any custodian and any protective custodian shall be suspended. In such cases, any trustee in bankruptcy and any other party may subrogate such litigation procedures. |
| (7) | The bankruptcy is declared pursuant to the provisions of paragraph (1) or (2), any disposition, act, etc. that is taken and performed by any person falling under any of the following subparagraphs in the rehabilitation procedures pursuant to the provisions of Part II shall be deemed valid under the bankruptcy procedures in so far as they are not contrary to their nature. In this case, when it is deemed necessary, the court may prescribe the scope of the disposition, act, etc. that are deemed valid by its decision at the time that it declares bankruptcy: <Amended on Dec. 30, 2014> |
| 2. | The custodian, the protective custodian, an inspection commissioner, an simplified inspection commissioner, the Custodial Committee, a member of the Custodial Committee and the creditors' consultative council; |
| 3. | The creditor, the secured creditor, a shareholder and an equity right holder (referring to members of a company that is not a stock company and any other person who holds the position similar to that of the former; hereinafter the same shall apply); |
| 4. | Other interested parties. |
| (8) | Where a decision on discontinuation of rehabilitation procedures or a decision on discontinuation of rehabilitation procedures becomes final and conclusive in accordance with Article 288 after the bankruptcy procedures for a debtor declared bankrupt lose their effect on the grounds of a decision to authorize the rehabilitation plan, the court shall declare such debtor bankrupt ex officio. <Amended on Dec. 30, 2014> |
| (9) | In cases falling under paragraph (8), in the application of the provisions of Part III, it shall be deemed that a petition for bankruptcy is filed at the time that a petition for bankruptcy is filed under the bankruptcy procedures that lose their effect by a decision to authorize the rehabilitation plan and priority claims shall constitute estate claims. |
| (10) | The provisions of paragraphs (3), (6) and (7) shall apply mutatis mutandis to cases falling under paragraph (8). |
| Article 7 (Priority Claims Where Bankruptcy Procedures Continue) |
| (1) | When any of the following decisions becomes final and conclusive on a debtor declared bankrupt and the bankruptcy procedures continue, priority claims shall constitute estate claims: <Amended on Dec. 30, 2014> |
| 1. | A decision of dismissal of an application for the commencement of rehabilitation procedures or an application for the commencement of simplified rehabilitation procedures (excluding cases where a decision is made to commence rehabilitation procedures under Article 293-5 (2) 2 (a)); |
| 2. | A decision on discontinuation of rehabilitation procedures before an authorization is granted for a rehabilitation plan (excluding cases where rehabilitation procedures have been proceeded with in accordance with Article 293-5 (3) after a decision on discontinuation of simplified rehabilitation procedures under the paragraph (4) of the same Article); |
| 3. | A decision not to authorize the rehabilitation plan. |
| (2) | The provisions of Articles 6 (5) through (7) shall apply mutatis mutandis where the bankruptcy procedures continue after the decision falling under any of each subparagraph of paragraph (1) becomes final and conclusive on a debtor declared bankrupt. |
| (1) | Every judgment that is given pursuant to the provisions of this Act shall be delivered ex officio. |
| (2) | Documents may be delivered by post to the domiciles of the debenture holders, shareholders or equity right holders of a corporate debtor, when they report such domiciles pursuant to this Act and to the domiciles that are contained on the debenture register, the shareholders' roll, the list of members or the register book or to the domiciles of which they notify the corporate debtor. |
| (3) | Documents may be delivered by post to the domiciles of secured creditors who hold registered security rights when they report such domiciles pursuant to the provisions of this Act or to the domiciles that are contained on the register book when they fail to report such domiciles. |
| (4) | When the documents are delivered by post pursuant to the provisions of paragraphs (2) and (3), delivery shall be deemed to be made at the time which the mail would, in the ordinary course, be delivered. |
| (5) | In cases falling under paragraphs (2) and (3), court officials of Grade IV, V, VI, or VII (hereinafter referred to as "court officials of Grade V, etc.") shall each prepare a written statement setting out the following matters and shall each sign his or her name and affix his or her seal thereto: |
| 1. | The names and domiciles of persons who are eligible to accept the service of documents; |
| 2. | The date on which such documents are delivered by post. |
| (6) | The provisions of paragraphs (1) through (5) shall not apply when this Act expressly prescribes otherwise. |
| Article 9 (Public Notice) |
| (1) | The public notice provided for in the provisions of this Act shall be by way of the Official Gazette or according to methods that are prescribed by the Supreme Court Regulations. |
| (2) | The effect of the public notice referred to in the provisions of paragraph (1) shall accrue on the day following the day on which it is publicly notified in the Official Gazette or on the day following the day on which it is made according to the methods that are prescribed by the Supreme Court Regulations. |
| (3) | When any judgment is publicly notified pursuant to the provisions of paragraph (1), all persons concerned shall be deemed notified of such judgment: Provided, That the same shall not apply when this Act expressly prescribes otherwise. |
| Article 10 (Public Notice in Lieu of Service) |
| (1) | Where the provisions of this Act require service, when it is difficult to identify the place at which such service has to be made and the grounds that are prescribed by the Supreme Court Regulations exist, public notice thereof may substitute such service. |
| (2) | The provisions of paragraph (1) shall not apply when this Act expressly prescribes otherwise. |
| Article 11 (Cases Where Both Public Notice and Service are Required) |
| (1) | Where both public notice and service are required pursuant to the provisions of this Act, such service may be made by delivering documents by post. |
| (2) | The public notice referred to in the provisions of paragraph (1) shall have the effect of service of such documents upon all of the persons concerned. |
| Article 12 (Optional Argument and Ex Officio Inspection) |
| (1) | Any trial provided for in the provisions of this Act may proceed without oral argument. |
| (2) | The court may conduct necessary inspections in regards of any rehabilitation case, bankruptcy case, individual rehabilitation case and international bankruptcy case. |
| Article 13 (Immediate Appeal) |
| (1) | Anyone who is interested in any judgment provided for in the provisions of this Act may immediately file an appeal against such judgment only when the provisions of this Act so prescribe. |
| (2) | The immediate appeal referred to in the provisions of paragraph (1) shall be filed within 14 days from the date on which the judgment is publicly notified, when the judgment has been publicly notified. |
| (3) | The immediate appeal referred to in the provisions of paragraph (1) shall have the effect of suspending any enforcement: Provided, That the same shall not apply where this Act expressly prescribes otherwise. |
| Article 14 (Methods of Raising Objection) |
Any objection to a judgment made pursuant to the provisions of this Act shall be raised in writing.
| Article 15 (Establishment of Custodial Committee) |
The Custodial Committee shall be set up in such rehabilitation courts as prescribed in the Supreme Court Regulations to properly and speedily perform the procedures provided for in this Act. <Amended on Dec. 27, 2016>
| Article 16 (Composition of Custodial Committee) |
| (1) | The Custodial Committee shall be composed of at least three but no more than fifteen members, including one chairperson. |
| (2) | The term of office of the members of the Custodial Committee shall be three years. |
| (3) | The members of the Custodial Committee shall be appointed by the head of a rehabilitation court, from among any of the following persons: <Amended on May 17, 2010; Dec. 27, 2016> |
| 1. | Persons who are qualified as attorneys-at-law or certified public accountants; |
| 2. | Persons who have at least 15 years of experience in a bank provided for in the Banking Act or any other corporation prescribed by the Presidential Decree; |
| 3. | Persons who have experience as executive officers for a listed company; |
| 4. | Persons having acquired a master's or higher degree in law, business administration, economics, or any other similar academic field, who have at least seven years of experience in any field related thereto; |
| 5. | Persons having qualifications equivalent to those referred to in any of subparagraphs 1 through 4, who have sufficient knowledge of and experience in the relevant field. |
| (4) | No person falling under the following shall be appointed as a member of the Custodial Committee: <Amended on May 29, 2016> |
| 1. | A person under adult guardianship or limited guardianship, or a person who has been declared bankrupt, who has not yet been reinstated; |
| 2. | A person in whose case five years have not elapsed since his or her imprisonment without labor or heavier punishment declared by a court was completely executed (including where the punishment is deemed to be completely executed) or exempted; |
| 3. | A person sentenced to imprisonment without labor or heavier punishment, in whose case two years have not elapsed since the period of the suspension of the execution of such punishment expired; |
| 4. | A person who is under the suspension of the execution of imprisonment without labor or heavier punishment declared by a court; |
| 5. | A person whose qualification for member of the Custodial Committee is suspended or relinquished pursuant to any other statute or by a court judgment. |
| (5) | Any decision of the Custodial Committee shall require a majority of its members and the concurrent votes of a majority of those present. |
| (6) | The establishment, organization, and operation of the Custodial Committee, the required qualifications of the members of the Custodial Committee, the guarantee of their status, and the disciplinary action against them, etc. shall be prescribed by the Supreme Court Regulations. |
| (7) | The members of the Custodial Committee shall be deemed to be public officials for purposes of applying the penalty provisions of the Criminal Act and other statutes. |
| Article 17 (Work and Authority of Custodial Committee) |
| (1) | The Custodial Committee shall perform the work falling under each of the following subparagraphs under the direction of the court: <Amended on Dec. 30, 2014> |
| 1. | The presentation of its opinions on the appointment of custodians, protective custodians, inspection commissioners, simplified inspection commissioners, trustees in bankruptcy, rehabilitation commissioners and international bankruptcy custodians; |
| 2. | The supervision and evaluation of the appropriateness of the work performed by custodians, protective custodians, inspection commissioners, simplified inspection commissioners, trustees in bankruptcy and rehabilitation commissioners; |
| 3. | The examination of the rehabilitation proposal and the draft repayment plan; |
| 4. | The composition of the creditors' consultative council and the furnishing of information pertaining to creditors; |
| 5. | The assessment of the progress in the procedures provided for in this Act; |
| 6. | The work of the assembly of related persons and the meeting of creditors; |
| 7. | Other work that is prescribed by the Supreme Court Regulations or other courts. |
| (2) | The Custodial Committee may delegate part of its work to its members in order to efficiently perform the work provided for in each subparagraph of paragraph (1). |
| (3) | When the court recognizes that the work performed by any member of the Custodial Committee under paragraph (2) is inappropriate, the court may ask the Custodial Committee to delegate such work to another member. |
| (4) | When the Custodial Committee is not constituted, the matters falling under each of the following subparagraphs shall not apply: |
| 1. | Matters concerning the members of the Custodial Committee in Articles 6 (7), 18, 19 and 30 (1); |
| 2. | Matters concerning the Custodial Committee in Articles 6 (7), 42, 43 (1), (3) and (4), 50 (1), 62 (2), 87 (1). 92, 114 (4), 132 (3), 257 (3) and (4), 287 (3), 288 (2) and 355 (1). |
| Article 18 (Delegation of Clerical Services Involving Permission to Members of Custodial Committee) |
From among acts provided for in each subparagraph of Article 61 (1), the court may delegate the clerical services involving permission for ordinary business and the clerical services involving permission for bankruptcy procedures to members of the Custodial Committee. In this case, necessary matters concerning the scope of the commission of the clerical services and the procedures for commissioning the clerical services shall be prescribed by the Supreme Court Regulations.
| Article 19 (Raising of Objection to Acts by Members of Custodial Committee) |
| (1) | Anyone who is dissatisfied with a decision or disposition made or taken by any member of the Custodial Committee under delegation pursuant to the provisions of Article 18 shall file written objection with such member of the Custodial Committee. |
| (2) | When the relevant member of the Custodial Committee considers that the objection raised according to the provisions of paragraph (1) has the justifiable grounds, he or she shall promptly take an appropriate disposition therefor and then notify the court thereof. |
| (3) | When the relevant member of the Custodial Committee recognizes that the objection raised according to the provisions of paragraph (1) has no justifiable grounds, he or she shall transmit the written objection to the court within 3 days from the date on which he or she receives such objection. |
| (4) | The objection that is raised according to the provisions of paragraph (1) shall not have the effect of suspending any execution. |
| (5) | The court shall, upon receiving the written objection transmitted pursuant to the provisions of paragraph (3), determine based on the justifiable grounds and if the court considers that the objection has the justifiable grounds, it shall order the relevant member of the Custodial Committee to take an appropriate disposition to address such objection and then notify the person who raises the objection of such fact. |
| Article 19-2 (Publication of Reports and Reporting to Standing Committees of National Assembly) |
| (1) | The head of each rehabilitation court shall report the performance of administrative and supervisory affairs conducted by the Custodian Committee to the head of the National Court Administration each year. |
| (2) | The head of the National Court Administration shall publish an annual report including the performance of administrative and supervisory affairs mentioned in paragraph (1) and promotion plans of the following year, and report the annual report to the Standing Committees of the National Assembly. |
[This Article Newly Inserted on Dec. 27, 2016]
| Article 20 (Composition of Creditors' Consultative Council) |
| (1) | The Custodial Committee (referring to the court when the Custodial Committee is not constituted; hereafter in this Article the same shall apply) shall establish a creditors' consultative council composed of major creditors of the debtor after an application for commencement of rehabilitation procedures an application for commencement of simplified rehabilitation procedures or a petition for bankruptcy is filed: Provided, That when the debtor is an individual or a small and medium business entrepreneur under Article 2 (1) of the Framework Act on Small and Medium Enterprises (hereinafter referred to as “small and medium business entrepreneurs”), the Custodial Committee may elect not to set up such creditors' consultative council. <Amended on Dec. 30, 2014> |
| (2) | The creditors' consultative council shall be composed of not more than 10 persons. |
| (3) | When it is deemed necessary, the Custodial Committee may cause any minority creditor to participate in the creditors' consultative council as its member. |
| (4) | In cases falling under paragraph (1), major creditors of each debtor may propose opinions on the composition of the creditors' consultative council to the Custodial Committee. <Newly Inserted on May 29, 2016> |
| Article 21 (Function of Creditors' Consultative Council) |
| (1) | The creditors' consultative council may perform each of the following acts by coordinating opinions among creditors: |
| 1. | The presentation of opinions with respect to rehabilitation procedures and bankruptcy procedures; |
| 2. | The presentation of opinions with respect to the selection, appointment or dismissal of custodians, trustees in bankruptcy and protective custodians; |
| 3. | The presentation of opinions with respect to the appointment of the auditor (including the members of the audit committee provided for in the provisions of Article 415-2 of the Commercial Act) of a corporate debtor; |
| 4. | A claim brought for the physical inspection of the actual governance of any company after an authorization is granted for its rehabilitation plan; |
| 5. | Other matters concerning the rehabilitation procedures and the bankruptcy procedures, as required by the court; |
| 6. | Other acts that are prescribed by the Presidential Decree. |
| (2) | The agenda of the creditors' consultative council shall be decided with the concurrent vote of a majority of the total members present. |
| (3) | The court may rule the debtor to bear expenses necessary for the creditors' consultative council to carry out its activities. |
| (4) | Matters necessary for the composition and operation of the creditors' consultative council shall be prescribed by the Supreme Court Regulations. |
| (5) | When the creditors' consultative council is not constituted, matters concerning the creditors' consultative council in the provisions of Articles 50 (1), 62 (2), 132 (3), 203 (4), 259, 287 (3) and 288 (2) shall not apply. |
| Article 22 (Provision of Materials to Creditors' Consultative Council) |
| (1) | The court shall provide the creditors' consultative council with copies of documents concerning rehabilitation procedures or bankruptcy procedures, written decisions, audit reports and other major materials that are prescribed by the Supreme Court Regulations. |
| (2) | Custodians or trustees in bankruptcy shall submit such major documents as designated by the court to the creditors' consultative council, from among the documents that they submit to the court, on a quarterly basis. |
| (3) | The creditors' consultative council may ask any custodian or any trustee in bankruptcy to provide necessary materials to it, as prescribed by the Supreme Court Regulations. |
| (4) | Anyone who is requested to provide the necessary materials under paragraph (3) shall provide such necessary materials under the conditions prescribed by the Supreme Court Regulations. |
| (5) | When any creditor who is not affiliated with the creditors' consultative council requests materials, the creditors' consultative council shall provide him or her with such materials that it has received pursuant to the provisions of paragraphs (1) through (3). |
| Article 22-2 (Right of Lenders of New Funds to Propose Opinions and Provision of Materials Thereon) |
| (1) | Any rehabilitation creditor who lends a fund under Article 179 (1) 5 and 12 may conduct the following acts: |
| 1. | Proposing an opinion on the takeover of the whole or important parts of debtor's business; |
| 2. | Proposing an opinion on rehabilitation proposals; |
| 3. | Proposing an opinion on the discontinuation or termination of rehabilitation procedures. |
| (2) | Any rehabilitation creditor who has lent a fund under Article 179 (1) 5 and 12 may request the custodian to provide necessary materials as prescribed by the Supreme Court Regulations. In such cases, the custodian shall provide the materials, as prescribed by the Supreme Court Regulations. |
[This Article Newly Inserted on May 29, 2016]
| Article 23 (Commission of Registers of Corporations) |
| (1) | In each of the following cases, which involves a corporate debtor, court official of Grade V, etc. shall, ex officio and without delay, commission the registry office at the seat of the office and place of business place (referring to his or her office or place of business located in the Republic of Korea, when his or her principal office or place of business is located in any foreign country) of such debtor to register the case by providing such registry office with a letter of commission accompanied by related documents including a certified copy or an abstract of the written decision: <Amended on Dec. 30, 2014> |
| 1. | Where there has been made a decision on commencement of rehabilitation procedures (including cases where rehabilitation procedures have been proceeded with in accordance with Article 293-5 (4)) or the commencement of simplified rehabilitation procedures, or a decision on declaration of bankruptcy; |
| 2. | Where a cancellation of a decision on commencement of rehabilitation procedures, a cancellation of a decision on commencement of simplified procedures, or a decision on discontinuation of rehabilitation procedures or discontinuation of simplified rehabilitation procedures, non-authorization for a rehabilitation plan becomes final and conclusive; |
| 3. | Where there has been made a decision on authorization for a rehabilitation plan or a decision on termination of rehabilitation procedures or termination of simplified rehabilitation procedures; |
| 4. | Where new shares are issued pursuant to the provisions of Article 266, bonds are issued pursuant to the provisions of Article 268, an all- inclusive exchange of shares is performed pursuant to the provisions of Article 269, an all-inclusive transfer of shares is performed pursuant to the provisions of Article 270, companies are merged pursuant to the provisions of Article 271, any company is split or companies are merged after division pursuant to the provisions of Article 272 or a new company is incorporated pursuant to the provisions of Articles 273 and Article 274; |
| 5. | Where it is decided to revoke, discontinue or terminate a bankruptcy. |
| (2) | When a disposition provided for in the provisions of Article 43 (3), 74 (1), 355 or 636 (1) 4 is taken to a corporate debtor, court official of Grade V, etc. shall, ex officio and without delay, commission the registry office at the seat of the office and place of business of such debtor to register such disposition by providing such registry office with a letter of commission accompanied by related documents including a certified copy or abstract of such disposition. The same shall apply where any registered disposition is changed or revoked. |
| (3) | The names, titles, domiciles and offices of the custodian, the protective custodian, the trustee in bankruptcy or the international bankruptcy custodian shall be entered in the register of the disposition referred to in the provisions of paragraph (2). In this case, when any entered matter is changed, the court official of Grade V, etc. shall commission the registry office at the seat of the office and the place of business the debtor to register such change. |
| Article 24 (Commission of Registering Registered Rights) |
| (1) | In the following cases, a court official of Grade V, etc. shall, ex officio, without delay, commission a registry office to register the commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures or register a preservative measure, submitting a letter of commission to the registry office, together with a certified copy or abstract of the written decision. The same shall apply where the preservative measure referred to in subparagraph 2 or 3 is changed or revoked or loses its effect: <Amended on Dec. 30, 2014> |
| 1. | Where there has been made a decision on commencement of rehabilitation procedures or the commencement of simplified rehabilitation procedures for a non-corporate debtor when there has been registered any right that belongs to the debtor's property; |
| 2. | The preservative measure provided for in the provisions of Article 43 (1) is taken over any registered right that belongs to the debtor's property to be disposed of; |
| 3. | The preservative measure provided for in the provisions of Article 114 (1) or (3) is taken over the registered right. |
| (2) | Where the registered right is acquired, lost or changed before the implementation of a rehabilitation plan is carried out or a rehabilitation procedures provided for in this Act are completed, the court shall use its authority to promptly commission the registry office to register the acquisition, loss or change of such registered right: Provided, That the same shall not apply where anyone other than the debtor, any creditor, any secured creditors, any shareholder, any equity right holder, or any newly incorporated company is registered as a rightful claimant. |
| (3) | The court official of Grade V, etc. shall, when they learn of the register of a non-corporate debtor who has been declared bankrupt, use their authority to commission without delay the registry office to register his or her bankruptcy by providing the registry office with a letter of commission accompanied by the certified copy of the written bankruptcy decision. The same shall apply where the court official of Grade V, etc. are aware of any registered right that belongs to the bankruptcy estate. |
| (4) | Where any trustee in bankruptcy renounces his or her right over which his or her bankruptcy is registered from the bankruptcy estate and files an application for commissioning the register thereof, the court official of Grade V, etc. shall commission the registry office to register the waiver of such right by providing the registry office with a letter of commission accompanied by a certified copy of the written permission for the waiver of the right. |
| (5) | The provisions of paragraphs (1) and (3) shall apply mutatis mutandis to cases falling under Article 23 (1) 1 through 3 and 5. |
| (6) | When a preservative measure is taken, canceled or changed with respect to a registered right that belongs to a debtor's property under individual rehabilitation procedures, the court official of Grade V, etc. shall, ex officio and without delay, commission the registry office to register such preservative measure by providing the registry office with a letter of commission accompanied by a certified copy or abstract of the written decision. |
| (7) | Where an disposition provided for in the provisions of Article 636 (1) 3 or 4 is granted, when the court official of Grade V, etc. is aware of the registered right that belongs to the debtor's property, they shall, ex officio and without delay, commission the registry office to register such disposition by providing the registry office with a letter of commission accompanied by a certified copy or abstract of the written decision. The same shall apply where the disposition provided for in the provisions of Article 636 (1) 3 is granted before it is decided to approve the foreign bankruptcy procedures provided for in the provisions of Article 635 (1). |
| Article 25 (Duties of Registry Offices and Exemption of Registration Tax) |
| (1) | A registry office shall, when it is commissioned to perform the registration pursuant to the provisions of Article 23 or 24, perform without delay the commissioned registration. |
| (2) | When it intends to register the authorization of a rehabilitation plan, the relevant registry office shall, ex officio, cancel the registration of the bankruptcy of such debtor, if any such registration has been made. |
| (3) | Where it intends to register the revocation of any rehabilitation plan authorization, if any registration has been cancelled pursuant to the provisions of paragraph (2), a registry office shall restore such register, ex officio. |
| (4) | Registration tax shall not be levied on the registers referred to in the provisions of paragraphs (1) through (3). |
| Article 26 (Register of Avoidance) |
| (1) | When the act of causing registration is avoided, any custodian, any trustee in bankruptcy or any holder of avoidance power in the individual rehabilitation procedures shall each file an application for the registration of such avoidance. The same shall apply where the register is avoided. |
| (2) | Registration tax shall not be levied on the register referred to in the provisions of paragraph (1). |
| (3) | The provisions of Article 23 (1) 1 through 3 and 5 shall apply mutatis mutandis to cases falling under paragraph (1). |
| (4) | Where any custodian or any trustee in bankruptcy voluntarily sells the property on which the avoidance referred to in the provisions of paragraph (1) is registered and the cause of voluntarily selling such property is registered, the court shall, at the request of an interested person, commission the registry office to cancel the registration of the avoidance under paragraph (1), the register that is effected by the act of the avoidance, the avoided registration and other registrations that are effected subsequent to such registers, which cannot oppose any rehabilitation creditor or any bankruptcy creditor. |
| Article 27 (Application Mutatis Mutandis of Registered Rights) |
The provisions of Articles 24 through 26 shall apply mutatis mutandis only to registered right over the property of a debtor, a bankruptcy estate or an individual organization undergoing rehabilitation.
| Article 28 (Perusal of Case Records) |
| (1) | Interested persons may request inspection and copying of case records (including documents and other articles), as well as delivery of written judgments, original and certified copies or abstracts of investigation records or certificates concerning cases. |
| (2) | The provisions of paragraph (1) shall not apply to audiotapes or videotapes (including articles in which certain matters are recorded in a manner equivalent thereto; hereafter the same in this Article shall apply) among case records: Provided, That the court may allow reproduction of such materials, at the request of an interested person. |
| (3) | Notwithstanding the provisions of paragraphs (1) and (2), each of the following persons may not file an application referred to in paragraphs (1) and (2) until a judgment prescribed in any item of the relevant subparagraph is rendered: Provided, that the same shall not apply where the person is an applicant for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures: <Amended on Dec. 30, 2014> |
| 1. | An interested person other than the debtor: |
| (a) | A preservative measure provided for in the provisions of Article 43 (1); |
| (b) | A preservation and management order provided for in the provisions of Article 43 (3); |
| (c) | A stay order provided for in the provisions of Article 44 (1); |
| (d) | A general prohibition order provided for in the provisions of Article 45 (1); |
| (e) | A court judgement on an application for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures; |
| (a) | A judgment provided for in any item of subparagraph 1; |
| (b) | The designation of the date for hearing on an application for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures; |
| (c) | The designation of the hearing date on which the debtor is summoned to answer questions. |
| (4) | When it is likely to cause a clear impediment to the maintenance and rehabilitation of the debtor's business and to cause severe damage to the debtor's property, the court may elect not to permit the inspection, copying, delivery of the original, certified copies and abstracts or the reproduction of audiotapes and videotapes. |
| (5) | An immediate appeal may be filed against the decision made not to grant the permission provided for in the provisions of paragraph (4). |
| Article 29 (Inquiry about Property of Debtor) |
| (1) | The court may, if it is deemed necessary, inquire with any public institution, any financial institution and any organization, etc. that are each operating the computer network that holds information on the property and credit status of the debtor about the property that is held in the name of such debtor, either at the request of a custodian, trustee in bankruptcy, or interested person or ex officio. |
| (2) | When any interested person who is entitled to immunity files an application referred to in the provisions of paragraph (1), he or she shall specifically designate any public institution, any financial institution or any organization to which inquiries are made. In this case, the court shall order such person to prepay expenses involved in making such inquiries. |
| (4) | Matters concerning the scope of public institutions, financial institutions and organizations, etc. to which inquiries are made under paragraphs (1) through (3), procedures for making inquiries, expenses that have to be prepaid by interested persons, the management of the results of the inquiries etc. shall be prescribed by the Supreme Court Regulations. |
| Article 30 (Remunerations of Custodians) |
| (1) | The following persons are eligible for prepaid expenses, remuneration or special compensation. In this case, the court shall determine the amount of such remuneration and such special compensation: <Amended on Dec. 30, 2014> |
| 1. | Custodians, proxy custodians, protective custodians, trustees in bankruptcy and proxy trustees in bankruptcy; |
| 2. | Inspection commissioners, simplified inspection commissioners, rehabilitation commissioners and advisors; |
| 3. | Members of the Custodial Committee who perform the duties of the aforementioned persons. |
| (2) | The remuneration and the special compensation referred to in the provisions of paragraph (1) shall be the amount commensurate with their duties and responsibilities. |
| (3) | An immediate appeal may be filed against the determination referred to in the provisions of paragraph (1). |
| Article 31 (Compensation for Proxy Commissioners) |
| (1) | The court may permit the refunding of expenses or payment of compensation, to an appropriate extent, to the following persons. In this case, the court shall determine the amount of the expenses and the compensation: |
| 1. | Creditors, secured creditors, shareholders, equity right holders, proxy commissioners or agents who are credited with having achieved rehabilitation under bankruptcy procedures; |
| 2. | Persons who are credited with having managed a bankruptcy estate or realization. |
| (2) | An immediate appeal may be filed against a determination made pursuant to the provisions of paragraph (1). |
| Article 32 (Interruption of Prescription) |
The interruption of prescription shall be effective in each of the following cases:
| 1. | Submission of the list provided for in the provisions of Article 147 and the participation in rehabilitation procedures: Provided, That the same shall not apply where any rehabilitation creditor or any rehabilitation secured creditor who is not entered on the list withdraws his or her report or his or her report is dismissed without prejudice; |
| 2. | Participation in the bankruptcy procedures: Provided, That the same shall not apply where any bankruptcy creditor withdraws his or her report or his or her report is dismissed without prejudice; |
| 3. | Submission of the list of the individual rehabilitation creditors provided for in the provisions of Article 589 (2) and participation in the individual rehabilitation procedures: Provided, That the same shall not apply where any individual rehabilitation creditor who is not entered on the list withdraws his or her application for a judgment in claim allowance proceedings or his or her application is dismissed without prejudice. |
| Article 32-2 (Prohibition of Discriminatory Treatment) |
Every person shall not without good cause receive any unfavorable treatment, such as restriction on employment, or dismissal, on the grounds of a pending rehabilitation procedure, bankruptcy procedure, or individual rehabilitation procedure under this Act.
[This Article Newly Inserted on Mar. 24, 2006]
| Article 33 (Application Mutatis Mutandis of the Civil Procedure Act and the Civil Execution Act) |
In the absence of provisions in this Act with respect to rehabilitation procedures, bankruptcy procedures, individual rehabilitation procedures and international bankruptcy procedures, the Civil Procedure Act and the Civil Execution Act shall apply mutatis mutandis thereto.
PART II REHABILITATION PROCEDURES
CHAPTER I COMMENCEMENT OF REHABILITATION PROCEDURES
SECTION 1 Application for Commencement of Rehabilitation Procedures
| Article 34 (Application Filed for Commencing Rehabilitation Procedures) |
| (1) | In a case falling under any of the following subparagraphs, the debtor may file an application with the court for commencing the rehabilitation procedures: |
| 1. | Where the debtor finds it impossible to repay his or her obligations due and payable without any serious hindrance to the continuation of his or her business; |
| 2. | Where facts leading to bankruptcy are likely to arise with respect to the debtor. |
| (2) | In cases falling under paragraph (1) 2, the person prescribed in each item of the relevant subparagraph may also file an application for commencement of rehabilitation procedures according to the classification of each of the following subparagraphs: |
| 1. | When the debtor is a stock company or a limited-liability company: |
| (a) | A creditor who holds a claim equivalent to not less than 1/10 of the capital; |
| (b) | A shareholder or the equity right holder who holds the share or the equity share equivalent to not less than 1/10 of the capital; |
| 2. | When the debtor is not a stock company or a limited-liability company: |
| (a) | A creditor who holds a claim equivalent to not less than 50 million won; |
| (b) | An equity right-holder who holds an equity share of not less than 1/10 of the total amount of investment of any unlimited partnership, any limited partnership, any corporation or anyone equivalent thereto. |
| (3) | The court may, when any creditor, any shareholder or any equity right holder files an application for commencement of rehabilitation procedures pursuant to the provisions of paragraph (2), order the debtor to submit materials concerning the management of his or her business and the current state of his or her property. |
| Article 35 (Obligation to File Petition for Bankruptcy and Application for Commencement of Rehabilitation Procedures) |
| (1) | The liquidator of any debtor may file an application for commencement of rehabilitation procedures even when he or she files a petition for bankruptcy of such debtor pursuant to another statute. |
| Article 36 (Written Application) |
An application for commencement of rehabilitation procedures shall be filed in writing stating the following:
| 1. | The names and domiciles of the applicant and the legal representative; |
| 2. | Where the debtor is an individual, the name, the resident registration number (referring to the foreigner registration number or the domestic residence number in the case of anyone who has no resident registration number; hereinafter the same shall apply) and the domicile of such debtor; |
| 3. | Where the debtor is not an individual, the firm name, the location of the principal office or place of business (when the principal office or place of business is located overseas, refers to the principal office or place of business that is located in the Republic of Korea) and the name of the representative of the debtor (when the principal office or place of business is located overseas, this refers to the representative who resides in the Republic of Korea; hereinafter the same shall apply); |
| 4. | The purposes of the application; |
| 5. | The cause of commencing rehabilitation procedures; |
| 6. | The business objectives and the current business of the debtor; |
| 7. | The total number of shares or the total number of equity shares issued by the debtor, the amount of his or her capital, assets, obligations and current property; |
| 8. | Other procedures or any disposition involving the debtor's property, which is known to the applicant; |
| 9. | When the applicant holds an opinion on the rehabilitation plan, his or her opinion; |
| 10. | When any creditor files an application for commencement of rehabilitation procedures, the amount and the basis of the claim that he or she holds; |
| 11. | When any shareholder or any equity right holder files an application for commencement of rehabilitation procedures, the number or the amount of the shares or the equity shares held by him or her. |
| Article 37 (Keeping of Documents) |
Documents concerning the application for commencement of rehabilitation procedures shall be kept in the court for perusal by interested persons.
| Article 38 (Explanations) |
| (1) | Anyone who files an application for commencement of rehabilitation procedures shall vindicate the facts leading to the commencement of such rehabilitation procedures. In this case, when the foreign bankruptcy procedures provided for in the provisions of subparagraph 1 of Article 628 are in process on any debtor, facts leading to bankruptcy shall be deemed to exist with respect to the debtor. |
| (2) | When any creditor, any shareholder or any equity right holder files an application for commencement of rehabilitation procedures, he or she shall explain the amount of the claim or the number and the amount of shares or equity shares that he or she holds. |
| Article 39 (Prepayment of Expenses) |
| (1) | When anyone files an application for commencement of rehabilitation procedures, the applicant shall prepay expenses involved in taking the rehabilitation procedures. |
| (2) | The expenses referred to in the provisions of paragraph (1) shall be determined by the court taking into account the scale of the case, etc. In this case, when anyone other than the debtor files an application for commencement of rehabilitation procedures, the amount that can be paid out of the debtor's property shall be taken into consideration to cover expenses incurring after the rehabilitation procedures commence. |
| (3) | When it is decided to commence the rehabilitation procedures after anyone other than the debtor files an application for commencement of such rehabilitation procedures, the applicant may have his or her expenses paid out of the debtor's property pursuant to the provisions of paragraph (1). |
| (4) | The applicant's right to claim the payment of his or her expenses pursuant to the provisions of paragraph (3) shall be a priority claim. |
| Article 39-2 (Court Supervision over Progress of Rehabilitation Procedures) |
| (1) | A court shall conduct rehabilitation procedures in a rapid, fair and efficient manner, to the extent not impairing the interests of the creditors in general and the possibility of rehabilitation of debtors. |
| (2) | A court may, if deemed necessary, take each of the following measures at the request of an interested person or ex officio: <Amended on May 29, 2016> |
| 1. | Consultation with the interested person on the progress of rehabilitation procedures; |
| 2. | Preparation and operation of a timetable concerning the progress of rehabilitation procedures; |
| 3. | Request to a debtor, custodian or protective custodian for making a report on those matters falling under each of the following items or submitting materials relating thereto: |
| (a) | Current situation of the management of business affairs and property of a debtor; |
| (b) | The progress of rehabilitation procedures; |
| (c) | Where the purpose of use of the fund borrowed under Article 179 (1) 5 and 12 is determined, the execution of the fund; |
| (d) | Other matters necessary for the debtor’s rehabilitation; |
| 4. | Consolidation of assemblies of related persons; |
| 5. | Order to hold an explanatory meeting for interested persons under Article 98-2; |
| 6. | Other measures necessary for the debtor’s rehabilitation. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 40 (Notifications to Supervisory Administrative Agency) |
| (1) | Where an application for commencement of rehabilitation procedures has been filed for a debtor which is a stock company, the court shall notify each of the following persons of the purport of such application: <Amended on Feb. 29, 2008> |
| 1. | The administrative agency supervising the debtor's business; |
| 2. | The Financial Services Commission; |
| 3. | The head of a tax office having jurisdiction over the area where the debtor’s principal office or place of business (if the debtor’s principal office or place of business is located in a foreign state, it refers to its principal office or place of business located in the Republic of Korea) is located. |
| (2) | If deemed necessary, a court may require any of the following persons to state his or her opinion on the rehabilitation procedures: <Amended on Feb. 29, 2008; Mar. 31, 2010; Dec. 27, 2016> |
| 1. | The administrative agency supervising the debtor's business; |
| 2. | The Financial Services Commission; |
| 3. | The collecting authority with respect to any claim (including claims to collect taxes in the same manner as national taxes or claims to collect in the same manner as delinquent national or local taxes, which take priority over general rehabilitation claims) by which taxes are to be collected pursuant to the National Tax Collection Act or the Local Tax Collection Act. |
| (3) | A person who falls under each subparagraph of paragraph (2) may state his or her opinion on the rehabilitation procedures before the court. |
| (1) | When an application is filed for commencement of rehabilitation procedures, the court shall question the debtor or the representative of such debtor. |
| (2) | Notwithstanding the provisions of paragraph (1), the court may omit such questioning in each of the following cases: |
| 1. | Where such questioning of the debtor is likely to cause a substantial delay in the rehabilitation procedures, since the debtor or his or her representative resides overseas; |
| 2. | Where it is impossible to locate the whereabouts of the debtor or his or her representative. |
| Article 42 (Grounds for Dismissing Application Filed for Commencing Rehabilitation Procedures) |
In any of the following cases, the court shall dismiss any application for commencement of rehabilitation procedures. In this case, the court shall hear the opinion of the Custodial Committee:
| 1. | Where expenses necessary for rehabilitation procedures are not prepaid; |
| 2. | Where the application for rehabilitation procedures is not bona fide; |
| 3. | Where rehabilitation procedures are incompatible with the interests of the creditors in general. |
| Article 43 (Provisional Seizure, Preliminary Injunction and Other Preservative Measures) |
| (1) | When an application is filed for commencing rehabilitation procedures, the court may, at the request of an interested person or ex officio, grant an order of provisional seizure and preliminary injunction on the debtor‘s business and properties or other disposition necessary to preserve the debtor's business and properties until a decision is made on the application for commencement of rehabilitation procedures. In this case, the court shall hear the opinion of the Custodial Committee. |
| (2) | When any interested person files an application for a preservative measure referred to in the provisions of paragraph (1), the court shall determine whether to take the preservative measure within seven days from the date of the application. |
| (3) | When it is deemed necessary in addition to the preservative measure referred to in the provisions of paragraph (1), the court may order management by a protective custodian after hearing the opinion of the Custodial Committee. In this case, the court shall appoint one or multiple protective custodians. |
| (4) | The court may alter or rescind the preservative measure referred to in the provisions of paragraph (1) or the preservation and management order referred to in the provisions of paragraph (3) after hearing the opinion of the Custodial Committee. |
| (5) | The judgment as well as the judgment on the dismissal of the application therefor provided for in the provisions of paragraphs (1) (3) and (4) shall be made by decision. |
| (6) | An immediate appeal may be filed against the decision made pursuant to the provisions of paragraph (5). |
| (7) | The immediate appeal referred to in the provisions of paragraph (6) shall not have the effect of suspending any execution. |
| (8) | When the court issues the preservation and management orders referred to in the provisions of paragraph (3) or changes or rescinds such order, it shall publicly notify such measures. |
| Article 44 (Stay of Other Procedures) |
| (1) | Where an application is filed for the commencement of rehabilitation procedures, if deemed necessary, the court may, at the request of an interested person or ex officio, issue an order for the suspension of any of the following procedures until the decision on that application for commencement of the rehabilitation procedures is made: Provided, That in the case of the procedure referred to in subparagraph 2, the same shall not apply if such procedure is likely to do undue damage to any rehabilitation creditor or rehabilitation secured creditor who is the applicant for that procedure: <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| 1. | Any bankruptcy procedure for the debtor; |
| 2. | Any auction procedure for compulsory execution, provisional seizure, preliminary injunction, or the exercise of security right (hereinafter referred to as "compulsory execution, etc. based on any rehabilitation claim or rehabilitation security right") on the basis of a rehabilitation claim or rehabilitation security right, which has already been in progress with respect to any property of the debtor; |
| 3. | Any litigation procedure with respect to any property of the debtor; |
| 4. | Any procedure pending in an administrative agency with respect to any property of the debtor; |
| 5. | Any disposition on delinquency made under the National Tax Collection Act or the Local Tax Collection Act, disposition on delinquent national taxes according to the manners by which national taxes are collected (including disposition on delinquent national or local taxes; hereinafter the same shall apply), or the disposal of any goods which are offered as a guarantee for tax liability. In such cases, the opinion of the collecting authority to collect such taxes shall be heard. |
| (2) | Prescription shall not run during the period of suspending a disposition under paragraph (1) 5. |
| (3) | A court may alter or rescind a stay order prescribed in the provisions of paragraph (1). |
| (4) | If deemed particularly necessary for the rehabilitation of a debtor, a court may, at the request of the debtor (referring to a protective custodian, if appointed) or ex officio, issue an order for cancelling the suspension of compulsory execution, etc. based on a rehabilitation claim or rehabilitation security right. In such cases, the court may require the offering of a security. |
| Article 45 (General Order Given to Prohibit Compulsory Execution Based on Rehabilitation Claims and Rehabilitation Security Rights) |
| (1) | When it is recognized that special circumstances are likely to prevent satisfaction of the purposes of the rehabilitation procedures by the stay order provided for in the provisions of Article 44 (1) after receiving an application for commencement of rehabilitation procedures, the court may, at the request of an interested person or ex officio, make order prohibiting all rehabilitation creditors and rehabilitation secured creditors from conducting compulsory execution, etc. based on their rehabilitation claims or their rehabilitation security rights by the time a determination is made on the application filed for commencing rehabilitation procedures. |
| (2) | The prohibition order referred to in paragraph (1) (hereinafter referred to as "general prohibition order") shall be limited to cases where any measure or order falling under either of the following subparagraphs is already taken or given with respect to the debtor's major properties or any general prohibition order, measure or order falling under either of the following subparagraphs is given, taken or given: |
| 1. | The preservative measure provided for in the provisions of Article 43 (1); |
| 2. | The preservation and management order provided for in the provisions of Article 43 (3). |
| (3) | When any general prohibition order is given, the compulsory execution, etc. based on any rehabilitation claim or any rehabilitation security right that has already been enforced against the debtor's property shall be suspended. |
| (4) | The court may alter or rescind the general prohibition order. |
| (5) | When it is deemed particularly necessary to continue the debtor's business, the court may order the rescission of the compulsory execution based on any rehabilitation claim or any rehabilitation security right that has been suspended pursuant to the provisions of paragraph (3) at the request of the debtor (referring to the protective custodian when he or she is appointed). In this case, the court may require security to be furnished. |
| (6) | An appeal may be immediately filed against the general prohibition order, the decision referred to in the provisions of paragraph (4) and the cancellation order referred to in the provisions of paragraph (5). |
| (7) | The immediate appeal referred to in the provisions of paragraph (6) shall not have the effect of suspending any execution. |
| (8) | When the general prohibition order is given, the prescription of the rehabilitation claim and the rehabilitation security right shall not expire until the day on which two months have lapsed from the day following the day on which the effect of such order ceases. |
| Article 46 (Public Notice and Service of General Prohibition Order) |
| (1) | When a general prohibition order is granted or a decision to alter or rescind such order, the court shall publicly notify such decision and serve a written decision on the relevant debtor (referring to the protective custodian if such protective custodian is appointed) and the relevant applicant, respectively, and also serve a written statement setting out the operative part of the decision on such rehabilitation creditors, rehabilitation secured creditors and the debtor (referring to the protective custodian when he or she is appointed) as are known to the court. |
| (2) | The general prohibition order and a decision to change or revoke the general prohibition order shall take effect from the time when a written decision is delivered to the debtor (referring to the protective custodian when he or she is appointed). |
| (3) | When a judgment (excluding any decision to alter or rescind the general prohibition order) is granted against the cancellation order provided for in the provisions of Article 45 (5) and the immediate appeal provided for in the provisions of paragraph (6) of the same Article, the court shall serve a written judgment on each of the parties thereto. In this case, the provisions of Articles 10 and 11 shall not apply thereto. |
| Article 47 (Exclusion of Application of General Prohibition Order) |
| (1) | Where a general prohibition order is given and when it is recognized that the general prohibition order is likely to inflict undue damage on the rehabilitation creditor or the rehabilitation secured creditor who is the applicant for the compulsory execution, etc. based on the rehabilitation claim or the rehabilitation security right, the court may, at the request of the rehabilitation creditor or the rehabilitation secured creditor or ex officio, exclude the application of the general prohibition order on the rehabilitation creditor or the rehabilitation secured creditor. In such cases, the rehabilitation creditor or the rehabilitation secured creditor may enforce the compulsory execution, etc. against the debtor's properties based on the rehabilitation claim or the rehabilitation security right, and the procedures for compulsory execution based on the rehabilitation claim or the rehabilitation security right that is exercised by the rehabilitation creditor or the rehabilitation secured creditor before the general prohibition order is given may continue. |
| (2) | When the provisions of Article 45 (8) apply to anyone who is subject to the decision referred to in the provisions of paragraph (1), the "date on which the effect of the order ceases" in Article 45 (8) shall be deemed the "date on which the decision provided for in the provisions of Article 47 (1) is made." |
| (3) | An immediate appeal may be filed against the judgment that is issued on the application filed pursuant to the provisions of paragraph (1). |
| (4) | The immediate appeal referred to in the provisions of paragraph (3) shall not have the effect of suspending any execution. |
| (5) | When a judgment is issued on the application referred to in paragraph (1) and a judgment is issued on the immediate appeal referred to in paragraph (3), the court shall serve its written decision on each of the parties. In this case, the provisions of Article 10 shall not apply thereto. |
| Article 48 (Restrictions on Withdrawal of Application for Commencement of Rehabilitation Procedures) |
| (1) | Anyone who files an application for commencement of rehabilitation procedures may withdraw his or her application only up until a decision on commencement of the rehabilitation procedures is rendered. |
| (2) | No one shall withdraw his or her application for commencement of rehabilitation procedures and his or her application for the preservative measure without obtaining permission therefor from the court after the decision falling under each of the following subparagraphs is made: |
| 1. | A decision on the preservative measure provided for in the provisions of Article 43 (1); |
| 2. | A decision on the preservation and management order provided for in the provisions of Article 43 (3); |
| 3. | A decision on the stay order provided for in the provisions of Article 44 (1); |
| 4. | A decision on the general prohibition order provided for in the provisions of Article 45 (1). |
SECTION 2 Decision on Commencement of Rehabilitation Procedures
| Article 49 (Decision on Commencement of Rehabilitation Procedures) |
| (1) | When the debtor files an application for commencement of rehabilitation procedures, the court shall determine whether to commence such rehabilitation procedures within one month from the date such application is filed for commencement of rehabilitation procedures. |
| (2) | The date and the time of the decision shall be indicated on a written decision on the commencement of rehabilitation procedures. |
| (3) | The effect of the decision on the commencement of rehabilitation procedures shall arise from the time such decision is made. |
| Article 50 (Matters that Must Be Prescribed When Decision Made on Commencement of Rehabilitation Procedures) |
| (1) | When rendering a decision on commencement of rehabilitation procedures, the court shall appoint one or multiple custodians after hearing the opinions of the Custodial Committee and the Creditors' Consultative Council and prescribe the following matters: <Amended on Dec. 30, 2014; May 29, 2016> |
| 1. | A period during which custodians are required to prepare and submit the list provided for in Article 147 (1) (excluding cases where a list prescribed in Article 223 (4) is submitted). In such cases, the period shall be at least two weeks but not more than two months following the date of the decision on commencement of rehabilitation procedures; |
| 2. | A reporting period of rehabilitation claims, rehabilitation security rights, stocks or investment equities (hereafter in this Part referred to as the "reporting period"). In such cases, the reporting period shall be at least one week but not more than one month following the last date of the submission period determined in accordance with subparagraph 1 (where a list prescribed in Article 223 (4) is submitted, the date a decision on the commencement of rehabilitation procedures is rendered); |
| 3. | An inspection period of the rehabilitation claims and rehabilitation security rights entered in the list or reported (hereafter in this Part referred to as the "inspection period" in this Part). In such cases the inspection period shall be at least one week but not more than one month following the last date of the reporting period; |
| 4. | A submission period of a rehabilitation proposal. In such cases, the submission period shall be not more than four months following the last date (where a rehabilitation proposal prescribed in Article 223 (1) is submitted, the date a decision on the commencement of rehabilitation procedures is rendered) of the inspection period (not more than two months following the last day of the inspection period, where the debtor is an individual). |
| (2) | A court may in special circumstances delay the dates or extend the periods under paragraph (1) 1 through 3. <Amended on Dec. 30, 2014> |
| (3) | A court may, at the request of an interested person or ex officio, extend the period under paragraph (1) 4 by up to two months: Provided, That the extension shall in no case exceed one month if the debtor is an individual or a small and medium business entrepreneur. <Newly Inserted on Dec. 30, 2014> |
| Article 51 (Public Notice of Commencement of Rehabilitation Procedures and Service of Documents) |
| (1) | When the court decides to commence the rehabilitation procedures, it shall publicly notify without delay matters falling under each of the following subparagraphs: <Amended on Dec. 30, 2014> |
| 1. | The operative part of the decision on the commencement of rehabilitation procedures; |
| 2. | The name or trading name of the custodian; |
| 3. | The period and the date that are set pursuant to the provisions of Article 50; |
| 4. | For anyone who holds the debtor's properties for which the rehabilitation procedures commence or bears the debtor’s obligations, an order to the effect that he or she shall not transfer the properties to the debtor for whom the rehabilitation procedures commence; or that he or she shall not repay the debtor's obligations; and that, within a certain period of time, he or she must report to any custodian the fact that he or she holds the property of the debtor for whom the rehabilitation procedures commence or bears the debtor's obligations; |
| (2) | The court shall serve a written statement that contains the matters referred to in each subparagraph of paragraph (1) upon the following persons: |
| 3. | Rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders who are known to the court; |
| 4. | Persons who hold the debtor's properties for which rehabilitation procedures commence or bear the debtor's obligations. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to cases where any change occurs in the matters referred to in paragraph (1) 2 through 4: Provided, That a change in the inspection period may be exempted from public notice requirements. |
| (4) | Anyone who with intent or by negligence fails to make the report provided for in the provisions of paragraph (1) 4 shall compensate for any damage incurred to the debtor's property by such failure. |
| Article 52 (Notification of Commencement of Rehabilitation Procedures) |
A court shall, when deciding the commencement of rehabilitation procedures for a debtor which is a stock company, notify an administrative agency supervising the debtor's business affairs, the Minister of Justice, or the Financial Services Commission of the matters referred to in the subparagraphs of Article 51 (1). The same shall apply where any change is made on the matters referred to in Article 51 (1) 2 and 3. <Amended on Feb. 29, 2008>
| Article 53 (Immediate Appeal Filed against Determination on Application for Commencement of Rehabilitation Procedures) |
| (1) | An immediate appeal may be filed against a determination on an application for commencement of the rehabilitation procedures. |
| (2) | The provisions of Articles 43 through 47 shall apply mutatis mutandis to cases where an immediate appeal referred to in the provisions of paragraph (1) is filed against a decision to dismiss an application for commencement of rehabilitation procedures. |
| (3) | The immediate appeal referred to in the provisions of paragraph (1) shall not have the effect of suspending any execution. |
| (4) | When it is recognized that the procedures for the immediate appeal are in violation of Acts and the immediate appeal lacks grounds, the appellate court shall dismiss such immediate appeal with or without prejudice. |
| (5) | When any immediate appeal is deemed meritorious, the appellate court shall cancel the decision made by the lower court and remand the case to the lower court. |
| Article 54 (Cancellation of Decision on Commencement of Rehabilitation Procedures) |
| (1) | When a decision to cancel a decision on the commencement of rehabilitation procedures becomes final and conclusive, the court shall publicly notify without delay the operative part of such decision. |
| (2) | The provisions of Articles 51 (2) and 52 shall apply mutatis mutandis to cases falling under paragraph (1). |
| (3) | When a decision to cancel the decision on the commencement of rehabilitation procedures becomes final and conclusive, the custodian shall repay priority claims and, in the case of the priority disputed claims, make deposits for creditors with such claims. |
| Article 55 (Capital Reduction after Commencement of Rehabilitation Procedures) |
| (1) | The debtor shall be prohibited from performing each of the following acts without resorting to rehabilitation procedures during the period of time running from when the rehabilitation procedures commence to the time they end: |
| 1. | Reducing the amount of capital or investment; |
| 2. | Admitting equitable interest holders or issuing new shares or bonds; |
| 3. | Increasing the amount of capital or investment; |
| 4. | Performing an all-inclusive exchange of shares or all-inclusive transfer of shares; |
| 5. | Performing any merger, any split, any merger after divestiture or any change in organization; |
| 6. | Dissolving any company or keeping any company in existence; |
| 7. | Distributing profits or interest. |
| (2) | Permission therefor shall be obtained from the court, when it is intended to amend the articles of incorporation of a corporate debtor without resorting to rehabilitation procedures during the period of time running from when the rehabilitation procedures commence to the time they end. |
| Article 56 (Management of Business and Properties after Commencement of Rehabilitation Procedures) |
| (1) | When it is decided to commence rehabilitation procedures, the authority to conduct the debtor's business, and manage and dispose of his or her properties shall be exclusively vested in a custodian. |
| (2) | The directors of a debtor who is an individual or the debtor who is not an individual shall be prohibited from infringing on, or interfering with, the exercise of the authority of any custodian referred to in the provisions of paragraph (1). |
| Article 57 (Furnishing of Information) |
A custodian shall furnish information and materials pertaining to the debtor's business and enterprise to anyone who intends to perform any of the following acts under the conditions as prescribed by the Supreme Court Regulations: Provided, That when any justifiable grounds exist, the custodian may refuse to furnish such information and materials:
| 1. | Taking over all or part of the debtor's business, enterprise and major properties; |
| 2. | Taking over the debtor's shares or equity shares for purposes of assuming the debtor's management control; |
| 3. | Performing an all-inclusive exchange and an all-inclusive transfer of the debtor's shares, any merger or merger after divestiture of the debtor's business. |
| Article 58 (Stay of Other Procedures) |
| (1) | Where a decision to commence rehabilitation procedures is made, each of the following acts shall be prohibited: |
| 1. | A petition for bankruptcy or an application for the commencement of rehabilitation procedures; |
| 2. | Compulsory execution, etc. based on any rehabilitation claim or rehabilitation security right; |
| 3. | Disposition on delinquency, based on any claim to collect taxes in the same manner as national taxes and which does not take priority over general rehabilitation claims in collection. |
| (2) | Where the commencement of rehabilitation procedures has been decided, each of the following procedures shall be suspended: |
| 1. | The bankruptcy procedure; |
| 2. | Compulsory execution, etc. based on any rehabilitation claim or rehabilitation security right; |
| 3. | Disposition on delinquency, based on any claim to collect taxes in the same manner as national taxes and which does not take priority over general rehabilitation claims in collection. |
| (3) | Where the commencement of rehabilitation procedures has been decided, any disposition on delinquency against the debtor's property based on any rehabilitation claim or rehabilitation security right pursuant to the National Tax Collection Act or the Local Tax Collection Act, any disposition on delinquency based on any claim to collect taxes in the same manner as national taxes and which takes priority over general rehabilitation claims in collection, and any disposal of the goods which are offered as a guarantee for tax liability shall not be made, during one of the periods specified in the following subparagraphs whichever end date of such period occurs sooner, and dispositions which have already been made shall be suspended. In such cases, if deemed necessary, the court may, at the request of a custodian or ex officio, extend the period by up to one year: <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| 1. | A period from the date on which the commencement of rehabilitation procedures has been decided until the date on which the rehabilitation plan is authorized; |
| 2. | A period from the date on the commencement of rehabilitation procedures has been decided until the date on which the rehabilitation procedures are completed; |
| 3. | A period from the date on which the commencement of rehabilitation procedures has been decided until the date on which two years lapse thereafter. |
| (4) | Prescription shall not run during the period when the disposition may not be taken or is under suspension pursuant to the provisions of paragraph (3). |
| (5) | Where it is deemed that the rehabilitation is not likely to be obstructed, the court may, at the request of a custodian or the collecting authority with respect to any claim provided for in Article 140 (2), or ex officio, order the continuation of the procedure or disposition which is suspended pursuant to the provisions of paragraph (2), and where deemed necessary for rehabilitation, the court may, at the request of a custodian or ex officio, order the cancellation of the procedure or disposition which is suspended pursuant to the provisions of paragraph (2), with or without any security required to be offered: Provided, That the same shall not apply to bankruptcy procedures. |
| (6) | Claims for expenses against the debtor with respect to the procedures or dispositions which continue pursuant to the provisions of paragraph (5) shall constitute priority claims. |
| Article 59 (Suspension of Litigation Procedures) |
| (1) | When it is decided to commence rehabilitation procedures, litigation procedures on the debtor's properties shall be suspended. |
| (2) | Any custodian or any other party may subrogate any litigation procedures that are unrelated to the rehabilitation claim or the rehabilitation security right among those litigation procedures suspended pursuant to the provisions of paragraph (1). In this case, the claim for litigation expenses on the debtor shall constitute priority claims. |
| (3) | When the rehabilitation procedures are completed prior to the subrogation referred to in the provisions of paragraph (2), the debtor shall naturally subrogate the litigation procedures. |
| (4) | When the rehabilitation procedures are completed after the subrogation is made pursuant to the provisions of paragraph (2), the litigation procedures shall be suspended. In this case, the debtor shall subrogate the litigation procedures. |
| (5) | In cases falling under paragraph (4), any other party may also subrogate the litigation procedures. |
| (6) | The provisions of paragraphs (1) through (5) shall apply mutatis mutandis to cases involving the debtor's property that are pending in the administrative agencies at the time that rehabilitation procedures commence. |
| (1) | The court with pending rehabilitation cases (referring to the rehabilitation court in which a rehabilitation case is pending; hereinafter the same shall apply) may, when any lawsuit involving the debtor's properties is pending in another court at the time that the rehabilitation procedures commence, claim the transfer of such lawsuit to it by its decision. The same shall apply where such lawsuit is pending in another court after the rehabilitation procedures commence. <Amended on Dec. 27, 2016> |
| (2) | When the decision referred to in paragraph (1) is made, the court shall, upon receiving the claim for the transfer of the lawsuit, transfer it to the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| (3) | The transfer referred to in paragraph (2) may be performed even during the interruption or the suspension of the litigation procedures. |
| (4) | The provisions of paragraphs (1) through (3) shall not apply to any lawsuit that is pending in an appellate court. |
| Article 61 (Act Needed to Obtain Permission from Court) |
| (1) | When any custodian intends to perform any of the following acts, the court may require him or her to obtain its permission therefor, if it is deemed necessary: |
| 1. | Disposing of any property; |
| 2. | Acquiring any property by transfer; |
| 3. | Borrowing of money including funds; |
| 4. | Cancelling or terminating any contract pursuant to the provisions of Article 119; |
| 6. | Making a compromise or concluding any arbitration agreement; |
| 7. | Relinquishing any rights; |
| 8. | Approving priority claims or repossession rights; |
| 9. | Other acts designated by the court. |
| (2) | Every custodian shall be prohibited from performing each of the following acts without obtaining permission therefor: |
| 1. | Acquiring the debtor's business or properties by transfer; |
| 2. | Transferring his or her business or properties to the debtor; |
| 3. | Effecting any transaction with the debtor in the interest of himself and any third person. |
| (3) | The acts referred to in each subparagraph of paragraph (1) or (2) that is performed without obtaining the court's permission therefor shall be null and void: Provided, That such act shall not be asserted against any bona fide third person. |
| Article 62 (Transfer of Business) |
| (1) | If it is deemed necessary to rehabilitate a debtor, any custodian may transfer the whole or the main part of the business or the enterprise of such debtor after obtaining the court's permission therefor after the rehabilitation procedures commence even before the rehabilitation plan is authorized. |
| (2) | When the count grants the permission referred to in the provisions of paragraph (1), it shall hear the opinions of the following: |
| 1. | The Custodial Committee; |
| 2. | The Creditors' Consultative Council; |
| 3. | The union that is organized by a majority of the debtor's employees; |
| 4. | In the absence of any union prescribed in subparagraph 3, the person who represents a majority of the debtor's employees. |
| (3) | Where the permission referred to in the provisions of paragraph (1) is granted, the court shall determine ways to spend the transfer price. |
| (4) | Where the permission referred to in paragraph (1) is granted, when the total amount of all obligations of the debtor, which is a stock company, exceeds its total amount of assets, the court may, by decision, substitute such permission, at the request of the custodian, for a resolution passed at the general meeting of shareholders provided for in the provisions of Article 374 (1) of the Commercial Act. In this case, the provisions of Articles 374 (2) and 374-2 of the Commercial Act and the provisions of Article 165-5 of the Financial Investment Services and Capital Markets Act shall not apply thereto. <Amended on May 20, 2014 > |
| (5) | The provisions of Article 61 (3) shall apply mutatis mutandis to any act that is performed without obtaining the permission referred to in the provisions of paragraph (1). |
| Article 63 (Service of Decision on Permission to Transfer Business of Stock Company) |
| (1) | The court shall, when it makes the decision provided for in the provisions of Article 62 (4), serve a written decision on any custodian and also serve a written statement containing summary of such decision on each of shareholders. |
| (2) | The effect of a decision made pursuant to the provisions of Article 62 (4) shall accrue when it is served on the custodian. |
| (3) | Any shareholder may immediately file an appeal against a decision that is made pursuant to the provisions of Article 62 (4). |
| Article 64 (Act of Debtor after Commencement of Rehabilitation Procedures) |
| (1) | When the debtor performs any legal act in relation to his or her properties after the rehabilitation procedures commence, he or she shall be prohibited from claiming any effects that accrue from the rehabilitation procedures. |
| (2) | In applying the provisions of paragraph (1), the legal act that is performed by the debtor on the date on which the rehabilitation procedures commence shall be presumed as having been performed after the rehabilitation procedures have commenced. |
| Article 65 (Acquisition of Right after Commencement of Rehabilitation Procedures) |
| (1) | Notwithstanding anyone acquiring rights in the debtor's properties based on his or her rehabilitation claim or his or her rehabilitation security right without resorting to the debtor's act after the rehabilitation procedures commence, he or she shall not claim the effect of his or her acquisition thereof in relation to the rehabilitation procedures. |
| (2) | The provisions of Article 64 (2) shall apply mutatis mutandis to the acquisition referred to in the provisions of paragraph (1). |
| Article 66 (Register and Registration after Commencement of Rehabilitation Procedures) |
| (1) | Any register and provisional register of a real property or ship, which are effected after the commencement of rehabilitation procedures for a reason that arises before the commencement of rehabilitation procedures, shall not be asserted in regard of the rehabilitation procedures: Provided, That the same shall not apply where the register authority effects the principal register without knowledge of the fact that the rehabilitation procedures have commenced. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to the registration and the provisional registration of the establishment, transfer or change of rights. |
| Article 67 (Repayment Made to Debtor after Commencement of Rehabilitation Procedures) |
| (1) | Any repayment made to the debtor without knowledge of the fact that rehabilitation procedures have commenced may claim its effect in relation to the rehabilitation procedures. |
| (2) | Any repayment made to the debtor with knowledge of the fact that the rehabilitation procedures have commenced after such rehabilitation procedures commence may claim its effect only within the limit of the profits that accrue to the debtor's properties in relation to the rehabilitation procedures. |
| Article 68 (Presumption of Good Faith or Bad Faith) |
In applying the provisions of Articles 66 and 67, it shall be presumed that the fact of the commencement of rehabilitation procedures is not known before the rehabilitation procedures are publicly notified and it shall be presumed that the fact thereof is known after the rehabilitation procedures are publicly notified.
| Article 69 (Co-Ownership Relationship) |
| (1) | Where the debtor jointly holds any property rights with any other person, notwithstanding they have an agreement that prohibits them from dividing such property right, any custodian may claim the division of such property rights at the time that rehabilitation procedures commence. |
| (2) | In cases falling under paragraph (1), any co-owner may acquire the debtor's share after paying a reasonable price therefor. |
| Article 70 (Repossession Rights) |
The commencement of rehabilitation procedures shall not affect the right to repossess any properties that do not belong to the debtor from such debtor.
| Article 71 (Repossession of Sold Goods in Transit) |
| (1) | Where any seller ships out his or her goods, a subject of sale, to a purchaser who fails both to pay the price therefor in full and to take over such goods at the destination of the goods, if rehabilitation procedures commence for the purchaser, the seller may repossess such goods. In such cases, any custodian may request the delivery of such goods after paying the price therefor in full after obtaining permission therefor from the court. |
| (2) | The provisions of paragraph (1) shall not exclude the application of the provisions of Article 119. |
| Article 72 (Repossession Rights of Commission Agents) |
The provisions of Article 71 (1) shall apply mutatis mutandis where any commission agent, who is entrusted with the purchase of goods, ships out such goods to the entrusting person.
| Article 73 (Alternative Repossession Rights) |
| (1) | When the debtor transfers his or her property subject to repossession rights before the rehabilitation procedures commence, the repossession right holder may claim the transfer of the rights to claim the performance of the benefit in return. The same shall apply where any custodian transfers any property subject to repossession rights. |
| (2) | In cases falling under paragraph (1), any custodian receives the performance of the benefit in return, the repossession right holder may claim the return of the property that the custodian receives as the benefit in return. |
CHAPTER II INSTITUTIONS IN CHARGE OF REHABILITATION PROCEDURES
| Article 74 (Selection and Appointment of Custodians) |
| (1) | The court shall appoint persons who are fully qualified to perform duties as custodians after hearing the opinions of the Custodial Committee and the creditors' consultative council. |
| (2) | The court shall appoint individual debtors and debtors' non-individual representatives as custodians with the exception of the following instances: |
| 1. | When the debtor's financial distress is caused either by misappropriation or concealment of properties by any of the following persons or by poor management substantially attributable to such person: |
| (a) | An individual debtor; |
| (b) | The director of a non-individual debtor; |
| (c) | The manager of the debtor; |
| 2. | When the request from the Creditors' Consultative Council has any justifiable grounds; |
| 3. | When the debtor's rehabilitation is necessary. |
| (3) | Notwithstanding paragraph (1), where the debtor is an individual, a small and medium business entrepreneur and any person who is prescribed by the Supreme Court Regulations, the court may elect not to appoint any custodian: Provided, That where it is recognized that the grounds referred to in any subparagraph of paragraph (2) exist at the time the rehabilitation procedures are pending, a custodian may be appointed. |
| (4) | Where no custodian is appointed, the debtor (referring to the debtor's representative where the debtor is not an individual) shall be deemed the custodian provided for in the provisions of this Part. |
| (5) | Where any custodian is appointed, the court shall examine the debtor or the debtor's representative, except in urgent circumstances. |
| (6) | Any corporation may become a custodian. In this case, such corporation shall nominate a person from among its directors to perform the duties of the custodian, and make a report thereon to the court. |
| (7) | Where a creditors' consultative council falls under any subparagraph of paragraph (2), it may recommend a candidate for custodian to the court. <Newly Inserted on May 29, 2016> |
| Article 75 (Performance of Duties by Multiple Custodians) |
| (1) | If multiple custodians are involved, they shall perform their duties jointly. In such cases, they may divide their duties among themselves after obtaining permission therefor from the court. |
| (2) | If multiple custodians are involved, it shall be sufficient for a third party to declare his or her intent to only one of them. |
| Article 76 (Acting Custodians) |
| (1) | When it is deemed necessary, each custodian may, at his or her own responsibility, appoint one or multiple acting custodians to perform his or her duties. |
| (2) | The appointment of acting custodians as referred to in the provisions of paragraph (1) shall obtain permission therefor from the court. |
| (3) | When the court grants the permission pursuant to the provisions of paragraph (2), it shall publicly notify such permission. The same shall apply where the court alters or rescinds its permission to appoint acting custodians. |
| (4) | Where the debtor is a corporation, when the permission provided for in the provisions of paragraph (2) is granted, the court official of Grade V, etc. shall, ex officio and without delay, commission the registry office to register the selections and appointments of acting custodians by providing such registry office with a letter of commission accompanied by a certified copy of the written decision. The same shall apply where the permission to appoint acting custodians is altered or rescinded. |
| (5) | Acting custodians may perform any act on behalf of custodians, with the exception of any act involving any trial or related to any trial. |
Custodians may, when it is deemed necessary, appoint legal and corporate governance experts as their advisers after obtaining permission therefor from the court.
| Article 78 (Standing to Sue) |
Every custodian shall be a party to the lawsuit involving the debtor's properties.
| Article 79 (Inspection by Custodians) |
| (1) | Every custodian may ask any of the following persons to report on the current state of the debtor's business and properties, and may inspect the debtor's books, documents, money and goods: |
| 1. | An individual debtor or his or her legal representative; |
| 2. | The director, auditor, liquidator of a debtor who is not an individual, and any other person equivalent thereto; |
| 3. | The debtor's manager or employee. |
| (2) | If it is deemed necessary, any custodian may appoint any appraiser to perform the appraisal after obtaining permission therefor from the court. |
| (3) | Every custodian may, when he or she performs the inspection referred to in the provisions of paragraph (1), ask for the assistance of any executor after obtaining permission therefor from the court. |
| Article 80 (Management of Mails and Cessation of their Management) |
| (1) | The court may commission any postal service agency, transporter and any other person to deliver mails, telegraphs and cargoes addressed to the debtor to the custodian. |
| (2) | The custodian may open the mails, telegraphs and cargoes that are delivered to him or her pursuant to the provisions of paragraph (1). |
| (3) | The debtor may ask for the inspection on the mails, telegraphs, and cargoes provided for in the provisions of paragraph (2) and ask to deliver items unrelated to his or her property to him or her. |
| (4) | The court may, at the request of the debtor or ex officio, alter or rescind the commission referred to in the provisions of paragraph (1) after hearing the opinion of the relevant custodian. |
| (5) | When the rehabilitation procedures are completed, the court shall rescind the commission referred to in the provisions of paragraph (1). |
| Article 81 (Supervision of Custodians) |
| (1) | Custodians shall be placed under the supervision of the court. |
| (2) | The court shall deliver a written statement attesting the appointment to each custodians. |
| (3) | Every custodian shall, when he or she performs his or her duties, at the request of an interested person, produce his or her written statement referred to in the provisions of paragraph (2) to the latter. |
| Article 82 (Obligations of Custodians) |
| (1) | Every custodian shall perform his or her duties with the due care of a good manager. |
| (2) | When any custodian neglects to take the due care referred to in the provisions of paragraph (1), he or she shall be liable to indemnify any interested person for damage incurred by his or her negligence. In such cases, when more than one custodian neglects to take such due care, they shall be jointly and severally liable to indemnify him or her for such damage. |
| Article 83 (Resignation and Dismissal of Custodians) |
| (1) | Every custodian may, when he or she has any justifiable grounds, resign as a custodian after obtaining permission therefor from the court. |
| (2) | The court may, at the request of an interested person or ex officio, dismiss any custodian, on the grounds that fall under any of the following subparagraphs. In such cases, the court shall question such custodian: |
| 1. | When the grounds provided for in the provisions of Article 74 (2) 1 are found in relation to the custodian after he or she is appointed as a custodian; |
| 2. | When the custodian violates the duties provided for in the provisions of Article 82 (1); |
| 3. | When the custodian is found to lack management ability; |
| 4. | When other reasonable grounds exist. |
| (3) | An immediate appeal may be filed against a decision to dismiss any custodian under paragraph (2). |
| (4) | The immediate appeal referred to in the provisions of paragraph (3) shall not have the effect of suspending any execution. |
| (5) | When the court appoints a new custodian after dismissing a custodian pursuant to the provisions of paragraph (2), the provisions of Article 74 (2) shall not apply thereto. |
| Article 84 (Duty to Report Upon Completion of Duties) |
| (1) | When any custodian completes his or her duties, such custodian or his or her successor shall promptly make an accounting report to the court. |
| (2) | Even if any custodian has completed his or her duties, in pressing circumstances, such custodian or his or her successor shall take necessary measures until the time his or her successor or the debtor is able to manage such properties. |
SECTION 2 Protective Custodians
| Article 85 (Authority of Protective Custodians) |
When the preservation and the management orders provided for in the provisions of Article 43 (3) are given, the debtor's authority to run his or her business, manage his or her properties and take any disposition shall be exclusively vested in the protective custodian until the time it is decided to commence the rehabilitation procedures.
| Article 86 (Mutatis Mutandis Application of Provisions Governing Custodians) |
| (1) | The provisions of Articles 61, 74, 75, 78 through 84, and 89 shall apply mutatis mutandis to protective custodians. |
| (2) | The provisions of Article 59 (1) and (2) shall apply mutatis mutandis where the preservation and the management orders are given, and the provisions of Article 59 (3) through (5) shall apply mutatis mutandis where the preservation and the management orders cease to have effect. |
| (3) | The provisions of Articles 59 (1) through (5) shall apply mutatis mutandis to cases involving the debtor's properties that are pending in any administrative agencies at the time that the preservation and the management orders are given. In this case, the "time the rehabilitation procedures are completed" in the provisions of Article 59 (3) and (4) shall be deemed the "time the preservation and the management order ceases to have effect". |
| (1) | When it is deemed necessary, the court may appoint one or multiple inspectors after hearing the opinions of the creditors' consultative council and Custodial Committee. <Amended on May 29, 2016> |
| (2) | The inspectors shall be appointed from among persons who have knowledge and experience necessary to perform inspection but no interest in the rehabilitation procedures. |
| (3) | When the court appoints inspectors, it may require such inspectors to inspect the matters provided for in the provisions of Articles 90 through 92 for a fixed period and ask them to present their opinions as to whether it is appropriate to continue the rehabilitation procedures. |
| (4) | When it is deemed necessary, the court may require the inspectors to inspect other matters than those referred to in the provisions of paragraph (3) and to report the result of such inspection. |
| (5) | The court may, at the request of an interested person or ex officio, dismiss any inspector if good cause exists. In this case, the court shall examine the relevant inspector. |
| (6) | Where a person who intends to lend a fund to a debtor after the commencement of rehabilitation procedures requests materials on the business, property, debts, and other financial standing of the debtor, and if it is deemed that the borrowing of money is necessary for the continuation of the business of the debtor and the request for materials is well-grounded, the court may have inspectors inspect and report on matters related to the request and may provide the person requesting the materials with the results of the inspection in whole or in part within the scope necessary for the borrowing of fund. <Newly Inserted on May 29, 2016> |
| Article 88 (Mutatis Mutandis Application of Provisions Governing Inspectors) |
The provisions of Articles 79, and 81 through 83 (1) shall apply mutatis mutandis to the inspectors.
CHAPTER III INSPECTION AND SECURING OF DEBTOR'S PROPERTIES
SECTION 1 Inspection on Current Status of Debtor's Properties
| Article 89 (Management of Debtor's Business and Property) |
Every custodian shall attend to the tasks of managing the debtor's business and properties immediately after he or she assumes his or her post.
| Article 90 (Appraisal of Property Value) |
Every custodian shall appraise without delay the value of all of the properties that belong to the debtor at the time that rehabilitation procedures commence after he or she takes up his or her post. In such cases, the relevant custodian shall allow the debtor to participate in the appraisal thereof, save when his or her participation is likely to delay the appraisal of such value.
| Article 91 (Preparation of Properties List and Balance Sheet) |
Every custodian shall prepare a list of the debtor's properties and balance sheet at the time that the rehabilitation procedures commence and then submit them to the court without delays after assuming their posts.
| Article 92 (Inspection and Report by Custodians) |
| (1) | Custodians shall inspect without delay the matters falling under each of the following subparagraphs and then report the result of the inspection to the court and the custodial committee by the deadline determined by the court: Provided, That the same shall not apply where the following matters are submitted in writing under Article 223 (4): <Amended on Dec. 30, 2014; May 29, 2016> |
| 1. | Situations leading the debtor to the commencement of rehabilitation procedures; |
| 2. | Matters concerning the business affairs and property of the debtor; |
| 3. | Whether or not there is any circumstance giving rise to the need for a preservative measure under Article 114 (1) or a judgment in claim allowance proceedings under Article 115 (1); |
| 4. | Other matters necessary for the debtor's rehabilitation. |
| (2) | The deadline determined by the court in accordance with paragraph (1) shall not exceed four months from the date of the decision on commencement of rehabilitation procedures: Provided, That the court may delay the deadline in special circumstances. |
| Article 93 (Other Reports) |
Every custodian shall report the current state of the management of the debtor's business and properties in addition to the matters provided for in the provisions of Articles 90 through 92 and other matters that are ordered by the court under the conditions as prescribed by the court and prepare the debtor's properties list and balance sheet as of the date on which the rehabilitation plan is authorized and as of the time that is set by the court, and submit a certified copy of the debtor's properties list and balance sheet to the court.
| Article 94 (Appraisal of Fixed Properties Used for Business) |
| (1) | Every custodian shall, when he or she prepares the debtor's properties list and balance sheet, prepare them according to accounting practices generally regarded as fair and reasonable. |
| (2) | Deleted. <May 14, 2010> |
| Article 95 (Keeping of Documents) |
The documents that are submitted to the court pursuant to the provisions of Articles 87, and 91 through 93 shall be retained by the court for the purpose of offering them for inspection by interested persons.
| Article 96 (Suspension of Business) |
Where the continuation of the debtor's business is recognized as being inappropriate on the grounds of special circumstances, any custodian may suspend the debtor's business after obtaining permission therefor from the court.
| Article 97 (Means to Keep Properties) |
The court may prescribe means to keep money and other properties and matters necessary for receipt and payment of money.
| Article 98 (Assembly of Related Persons for Custodian’s Report) |
| (1) | The court may, if deemed necessary, convene an assembly of related persons to have the custodian make a report on the matters provided for in each subparagraph of Article 92 (1). In this case the custodian shall report the gist of the matters specified in each subparagraph of Article 92 (1) at the assembly of related persons. |
| (2) | The court shall order the custodian to take one or more measures falling under any of the following subparagraphs where it is not deemed necessary to convene the assembly of related persons under paragraph (1). In such cases, the custodian shall, after taking the relevant measures, report without delay the result thereof to the court: |
| 1. | A measure to notify the gist of the matters provided for in each subparagraph of Article 92 (1) to the persons falling under each subparagraph of Article 182 (1) in any such manners as are recognized by the court, before either holding an assembly of related persons for reviewing a rehabilitation plan or making a decision of proposing a rehabilitation plan as a written resolution under Article 240 (1); |
| 2. | A measure to hold an explanatory meeting for interested persons under Article 98-2 (2); |
| 3. | Other appropriate measures which the court deems to be necessary. |
| (3) | The custodian shall, in case of taking each measure specified in the subparagraphs of paragraph (2), notify the persons specified in the subparagraphs of Article 182 (1) to the effect that they are entitled to present their opinion, in writing, concerning the matters referred to in each subparagraph of Article 92 (1) to the court. |
[This Article Wholly Amended on Dec. 30, 2014]
| Article 98-2 (Explanatory Meeting for Interested Persons) |
| (1) | A debtor (including a protective custodian, if any, who is appointed; hereafter the same shall apply in this Article) may hold an explanatory meeting for interested persons to explain the matters falling under any of the following subparagraphs to rehabilitation creditors, rehabilitation secured creditors and shareholders before the commencement of rehabilitation procedures: |
| 1. | Current status of the business affairs and property of the debtor; |
| 2. | Current progress of rehabilitation procedures; |
| 3. | Other matters necessary for the debtor’s rehabilitation. |
| (2) | A custodian may, after the commencement of rehabilitation procedures, hold an explanatory meeting for interested persons to explain the matters provided for in each subparagraph of Article 92 (1) to the persons falling under each subparagraph of Article 182 (1). |
| (3) | A debtor or custodian shall, in case of having held an explanatory meeting for interested persons under paragraph (1) or (2), without delay report the gist of the result thereof to the court. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 99 (Court's Hearing of Opinions) |
At the assembly of related persons for the custodian’s report under Article 98 (1), the court shall hear the opinions of following persons with respect to the appointment of custodians, inspection commissioners and simplified inspection commissioners, the management of the debtor's business and properties, and whether the continuation of rehabilitation procedures is appropriate: <Amended on Dec. 30, 2014> | 1. | Custodians, inspection commissioners, and simplified inspection commissioners; |
| 3. | Rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders who are entered in the list provided for in the provisions of Article 147 (1) or reported. |
SECTION 2 Avoidance Power
| Article 100 (Avoidable Acts) |
| (1) | Any custodian may avoid the following acts for the debtor's properties after rehabilitation procedures commence: |
| 1. | An act performed by the debtor with knowledge that such act is detrimental to any rehabilitation creditor or any rehabilitation secured creditor: Provided, That the foregoing shall not apply where any beneficiary is not aware of the fact that the debtor’s act is detrimental to such rehabilitation creditor or such rehabilitation secured creditor at the time that such act is performed; |
| 2. | An act by the debtor that is detrimental to any rehabilitation creditor or any rehabilitation secured creditor and an act of furnishing any security or extinguishing any debt by the debtor after the suspension of payments is made, an application for commencement of rehabilitation procedures is filed, or a petition for bankruptcy is filed (hereafter in this Article through Article 103 referred to as “suspension of payment or other such procedure”); Provided, That the foregoing shall be limited to where any beneficiary is aware of the fact that the suspension of payments or other such procedure is made and the act causes damage to any rehabilitation creditor or any rehabilitation secured creditor at the time that such act is performed; |
| 3. | The act of furnishing any security or extinguishing any debt by the debtor, which does not pertain to the debtor's obligations and whose method and time do not pertain to the debtor's obligations, after or within 60 days before the suspension of payment or other such procedure is made: Provided, That the foregoing shall not apply where the creditor is not aware of the fact that the debtor’s act undermines the equality with other rehabilitation creditors or other rehabilitation secured creditors at the time such act is performed (it shall also not apply where the creditor is not aware of the fact that the suspension of payments or other such procedure is made if such act is performed after the suspension of payments or other such procedure is made); |
| 4. | A gratuitous act or act for consideration that can be deemed identical to the former, which is performed by the debtor after or within six months before the suspension of payments or other such procedure is made. |
| (2) | The provisions of paragraph (1) shall not apply to the act of furnishing any security or extinguishing any debtor which the debtor performs to the collecting authority which handles claims specified in the provisions of Article 140 (1) and (2). |
| Article 101 (Special Rules Governing Act Done to Specially Related Party as Other Party) |
| (1) | For purposes of applying the provisions of the proviso to Article 100 (1) 2, where beneficiary is in a special relationship with the debtor, the scope of which is prescribed by the Presidential Decree, (hereafter referred to as "specially related person" in this Article), the specially related person shall be presumed to be aware of the fact that the suspension of payments or other such procedure is made, and the act causes damage to any rehabilitation creditor or any rehabilitation secured creditor at the time such act is performed. |
| (2) | For purposes of applying the provisions of Article 100 (1) 3, with respect to the act done to the specially related person as the other party, "60 days" provided for in the main clause of the same subparagraph shall be construed as "one year" and for purposes of applying the proviso to the same subparagraph, it shall be presumed that the specially related person is aware of the fact that the debtor's act undermines the equality with other rehabilitation creditors or other rehabilitation secured creditors at the time such act is performed. |
| (3) | For purposes of applying the provisions of Article 100 (1) 4, with respect to the act done to the specially related person as the other party, "60 days" provided for in the same subparagraph shall be construed as "one year". |
| Article 102 (Exception of Payment of Promissory Notes) |
| (1) | The provisions of Article 100 (1) shall not apply if rights to one or multiple persons under a promissory note are extinguished unless the person entitled to payment on promissory note from the debtor receives such payment. |
| (2) | In cases falling under paragraph (1), when any person who is obligated to make final payment or any person who commissions the issuance of promissory notes becomes aware of the fact that the suspension of payments or other such procedure is made or does not become aware of the fact due to negligence at the time that such promissory notes are issued, the custodian may require such person to refund the amount paid by the debtor. |
| Article 103 (Avoidance of Requirements for Establishing Alteration of Right and Requirements for Setting Up Against) |
| (1) | Where any necessary act is performed to establish, transfer or alter rights with the aim of opposing any third person after the suspension of payments or other such procedure. is made, when such necessary act is performed with the knowledge that the suspension of payments or other such procedure is made after the lapse of 15 days from the date on which such necessary act is performed to establish, transfer or alter the rights, such necessary act may be avoided: Provided, That the same shall not apply where any principal register or any principal registration is effected based on any provisional register or any provisional registration after such provisional registration or such provisional registration is effected. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to any registration or any register that effects the acquisition of rights. |
| Article 104 (Avoidance of Execution Act) |
The avoidance power may be exercised when a person holds the title of execution with power to execute the act subject to avoidance, or when the act is based on an act of execution.
| Article 105 (Methods of Exercising Avoidance Power) |
| (1) | The avoidance power shall be exercised by a custodian by means of lawsuit, claim for avoidance or defense. |
| (2) | The court may, at the request of a rehabilitation creditor, rehabilitation secured creditor, shareholder or equity right holder or ex officio, order any custodian to exercise the avoidance power. |
| (3) | The lawsuit and the case of claim for avoidance referred to in paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| Article 106 (Claims Filed for Avoidance) |
| (1) | Every custodian shall, when he or she files a claim for avoidance, substantiate the factual basis for such avoidance. |
| (2) | Any judgment that cites or dismiss a claim for avoidance shall be made based on a decision that is accompanied by reasons therefor. |
| (3) | When the court makes the decision referred to in paragraph (2), it shall examine the other party. |
| (4) | When the court decides to cite a claim for avoidance, it shall deliver a written decision thereon to each of the parties. |
| Article 107 (Lawsuit Objecting to Decision to Cite Claim for Avoidance) |
| (1) | Anyone who is dissatisfied with any decision to cite a claim for avoidance may file a lawsuit objecting to such decision within one month from the date on which he or she takes the delivery of such decision. |
| (2) | The period referred to in the provisions of paragraph (1) shall be invariable. |
| (3) | The lawsuit referred to in the provisions of paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| (4) | The judgment on the lawsuit filed pursuant to the provisions of paragraph (1) shall authorize, alter or revoke the decision to cite the claim for avoidance: Provided, That the same shall not apply where the lawsuit is dismissed without prejudice on the grounds of being unlawful. |
| (5) | When a judgment that authorizes the whole or part of the decision (limited to the part of the decision that is authorized in the judgment) to cite the claim for avoidance becomes final and conclusive, the decision shall have the same effect as the final decision. The same shall apply to the decision to cite the claim for avoidance where the lawsuit referred to in the provisions of paragraph (1) is not filed, is withdrawn or is dismissed without prejudice within the period that is set pursuant to the provisions of the same paragraph. |
| Article 108 (Effect of Exercise of Avoidance Power) |
| (1) | The exercise of the avoidance power shall restore the debtor's properties to their original state. |
| (2) | Where the act provided for in the provisions of Article 100 (1) 4 is avoided, if the other party is not aware of the payment suspension, etc. at the time such act is performed, a refund may be made within the limit of the existing benefits. |
| (3) | Where the debtor's act is avoided, any other party may exercise his or her right according to the classification falling under any of the following subparagraphs: |
| 1. | When the benefit in return that is paid to the debtor does not exist among the debtor's properties, the right to claim the refund of such benefit in return; |
| 2. | When all of the profits that accrue from the benefit in return paid to the debtor exist among the debtor's properties, the right to claim the refund of the existing profits in the capacity of a priority creditor; |
| 3. | When the profits that accrue from the benefit in return paid to the debtor does not exist among the debtor's properties, the right to claim the refund of the value of the benefit in return in the capacity of a rehabilitation creditor; |
| 4. | When part of the profits that accrue from the benefit in return paid to the debtor exist among the debtor's properties, the right to claim the refund of the existing profits in the capacity of a priority creditor and the right to claim the refund of the difference between the benefit in return and the existing profits in the capacity of a rehabilitation creditor. |
| Article 109 (Restoration of Claims of Other Parties) |
| (1) | Where an act of the debtor is avoided, if the other party refunds any payment that is made to him or her or refunds the value of such payment, the claim of the other party shall be restored to its original state. |
| (2) | When an act of the debtor is avoided after the assembly of related persons that is called to review a rehabilitation proposal comes to a close or a decision is made to propose a rehabilitation proposal as a written resolution as provided for in Article 240, notwithstanding the provisions of 152 (3), the other party may subsequently supplement his or her report within one month from the date on which the act of the debtor is avoided. |
| Article 110 (Avoidance Power against Subsequent Purchasers) |
| (1) | In any of the following cases, the avoidance power may also be exercised against any subsequent purchaser: |
| 1. | Where the subsequent purchaser is aware of the fact that the grounds for avoidance exist for the former owner at the time that the subsequent purchase is effected; |
| 2. | Where the subsequent purchaser is a specially related person provided for in the provisions of Article 101: Provided, That the same shall not apply where the subsequent purchaser is not aware of the fact that the grounds for avoidance exist for the former owner at the time that the subsequent purchase is effected; |
| 3. | Where the subsequent purchaser effects the subsequent purchase on the grounds of a gratuitous act or an act for valuable consideration that may be deemed identical to a gratuitous act, when the grounds for avoidance exist for the former owner. |
| (2) | The provisions of Article 108 (2) shall apply mutatis mutandis to cases where the avoidance power is exercised pursuant to the provisions of paragraph (1) 3. |
| Article 111 (Restrictions on Avoidance Effected on Grounds of Knowledge of Payment Suspension) |
Any act that is performed one year prior to the date on which an application is filed for commencement of rehabilitation procedures shall not be avoided on the grounds of knowing that the payment is suspended.
| Article 112 (Period for Exercise of Avoidance Power) |
The avoidance power shall not be exercised when two years lapse from the date on which rehabilitation procedures commence. The same shall apply where ten years lapse from the date on which an act provided for in any subparagraph of Article 100 (1) is performed.
| Article 113 (Stay of Proceedings Filed by Creditors for Revocation) |
| (1) | Where a litigation filed by a rehabilitation creditor pursuant to Article 406 (1) of the Civil Act or Article 8 of the Trust Act, or a litigation of avoidance on the basis of the bankruptcy procedures is pending in the court at the time when the rehabilitation procedure commences, the proceedings thereof shall be interrupted. <Amended on May 28, 2013> |
| (2) | The provisions of Article 59 (2) through (5) shall apply mutatis mutandis to cases falling under paragraph (1). In such cases, "debtor" in Article 59 (3) and (4) shall be construed as "rehabilitation creditor or trustee in bankruptcy." <Amended on May 28, 2013> |
[Title Amended on May 28, 2013]
| Article 113-2 (Special Rules concerning Avoidance of Act of Trust) |
| (1) | Where a debtor avoids any act of trust done by himself/herself as a trustee pursuant to the Trust Act, such avoidance shall be made against the trustee, beneficiary, or subsequent purchaser. |
| (2) | Where a debtor avoids any act of trust toward the trustee as the other party for the reasons that such act of trust falls under Article 100 (1) 1, 2, or 3, the proviso to paragraph (1) 1, 2, or 3 of the same Article shall not apply. |
| (3) | Where a debtor avoids any act of trust against the beneficiary for reasons that such act of trust falls under Article 100 (1) 1 or 2, "any beneficiary from the act" shall be construed as the beneficiary as the other party against whom avoidance is sought, for purposes of applying the proviso to paragraph (1) 1 or 2. |
| (4) | Only where grounds exist for the relevant avoidance in all beneficiaries (if a subsequent purchaser of the right to benefit exists, referring to the subsequent purchaser), a custodian may claim restitution of the trust property against the trustee. In such cases, a custodian may, against any trustee who is unaware of the said ground for avoidance, claim the restitution to the extent of existing trust property. |
| (5) | A custodian may, against any beneficiary (including subsequent purchasers, if any) who is aware of the fact that the said ground for avoidance exists at the time he or she has acquired the right to benefit, claim the restitution of his or her acquired right to benefit as property of the debtor. |
| (6) | Where any trust property has been restituted by dint of the avoidance of any act of trust done by the debtor as a trustee, a bona fide third party who has transacted with the trustee may exercise a claim deriving from the transaction as a priority creditor to the extent of the restituted trust property. |
[This Article Newly Inserted on May 28, 2013]
SECTION 3 Responsibilities of Directors of Corporations
| Article 114 (Preservative Measures on Property of Corporate Directors) |
| (1) | When it is deemed necessary after a decision is made to commence the rehabilitation procedures for a corporate debtor, the court may, at the request of an custodian or ex officio, take a preservative measure on the properties of directors, etc. in order to preserve the right to make a capital call to the debtor's promoters, directors (including a deemed director under Article 401-2 (1) of the Commercial Act), auditors, inspectors or liquidators (hereafter, in this Article through Article 116 referred to as "directors, etc.") and to seek damages relating to directors' duties, etc. |
| (2) | When a custodian becomes aware of the fact that the claim referred to in the provisions of paragraph (1) exists, he shall file an application with the court for a preservative measure thereon pursuant to the provisions of paragraph (1). |
| (3) | If an urgent need is deemed to exist, the court may, at the request of the debtor (when any protective custodian is appointed, this refers to such protective custodian) or ex officio, take a preservative measure referred to in the provisions of paragraph (1) even before a decision is made to commence rehabilitation procedures. |
| (4) | The court may alter or rescind the preservative measure referred to in the provisions of paragraph (1) or (3) after hearing the opinion of the Custodial Committee. |
| (5) | An immediate appeal may be filed against the preservative measure referred to in the provisions of paragraph (1) or (3) and the decision referred to in the provisions of paragraph (4). |
| (6) | The immediate appeal referred to in the provisions of paragraph (5) shall not have the effect of staying any execution. |
| (7) | When a judgment is given on the preservative measure referred to in the provisions of paragraph (1) or (3) or on the decision referred to in the provisions of paragraph (4) and on the immediate appeal filed against such decision, a written decision shall be delivered to each of the parties. |
| Article 115 (Judgment in Claim Allowance Proceedings on Right to Seek Damages) |
| (1) | When it is deemed necessary after a decision is made to commence the rehabilitation procedures for a corporate debtor, the court may, at the request of any custodian or ex officio, render a judgment in claim allowance proceedings whereby it confirms the existence and details of the right to make a capital call to the directors, etc. or the right to seek damages based on the responsibility of directors exists and their contents. |
| (2) | When a custodian becomes aware of the fact that the right referred to in the provisions of paragraph (1) exists, he or she shall file an application with the court for the judgment referred to in the provisions of paragraph (1). |
| (3) | When a custodian files the application referred to in the provisions of paragraph (1), he or she shall substantiate the factual grounds for such application. |
| (4) | When intending to initiate a claim allowance proceeding ex officio, the court shall render judgment to that effect. |
| (5) | If an application referred to in the provisions of paragraph (1) is filed or if a decision is made to initiate a claim allowance proceeding referred to in the provisions of paragraph (4), it shall be deemed a judicial claim in regard to the interruption of prescription. |
| (6) | Any judgment that dismisses an application for a judgment in claim allowance proceedings and that for claim allowance referred to in the provisions of paragraph (1) shall be in the form of a decision accompanying the reasons therefor. |
| (7) | When the court makes the decision referred to in the provisions of paragraph (6), it shall examine interested persons in advance. |
| (8) | Claim allowance proceedings (excluding any claim allowance proceeding after a claims allowance decision is rendered) shall be completed when the rehabilitation procedures concluded. |
| (9) | When a claim allowance decision is rendered, a written decision shall be delivered to each of the parties. |
| Article 116 (Lawsuit Filed in Objection) |
| (1) | Anyone who is dissatisfied with a judgment on the inspection confirmation provided for in Article 115 (1) may file a lawsuit objecting to such judgment within one month from the date on which the judgment is delivered to him or her. |
| (2) | The period referred to in the provisions of paragraph (1) shall be invariable. |
| (3) | When persons who file the lawsuit referred to in paragraph (1) are directors, etc., the custodians shall be named as defendants and when custodians file the lawsuit, the directors shall be named as defendants, respectively. |
| (4) | The lawsuit referred to in paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending rehabilitation cases. Arguments may be put forward only after one month lapses from the date on which a decision is delivered on such lawsuit. <Amended on Dec. 27, 2016> |
| (5) | When multiple lawsuits are pending simultaneously, the court shall merge pleadings. |
| (6) | A judgment on the lawsuit referred to in the provisions of paragraph (1) shall authorize, alter or rescind the decision of paragraph (1): Provided, That the same shall not apply where the lawsuit is dismissed without prejudice for being unlawful. |
| (7) | The judgment that authorizes or alters a claim allowance decision shall have the same effect as the effect of a final and conclusive judgment ordering execution with respect to compulsory execution. |
| Article 117 (Effect of Judgment in Claim Allowance Proceedings) |
When the lawsuit provided for in the provisions of Article 116 (1) is not filed within the period provided for in the provisions of the same paragraph, is withdrawn or is dismissed without prejudice, the judgment on the inspection confirmation shall have the same effect as the effect of a final and conclusive judgment ordering execution.
CHAPTER IV REHABILITATION CREDITORS, REHABILITATION SECURED CREDITORS, SHAREHOLDERS AND EQUITY RIGHT HOLDERS
SECTION 1 Rights of Rehabilitation Creditors, Rehabilitation Secured Creditors, Shareholders and Equity Right Holders
| Article 118 (Rehabilitation Claims) |
The following claims shall constitute rehabilitation claims:
| 1. | Property claims based on grounds that arise before the rehabilitation procedures commence for the debtor; |
| 2. | Interest that accrues after rehabilitation procedures commence; |
| 3. | Compensatory damages and penalties incurred by non-performance after rehabilitation procedures commence; |
| 4. | Costs incurred from participating in rehabilitation procedures. |
| Article 119 (Options When Both Parties Fail to Fulfill Bilateral Contract) |
| (1) | When the debtor and the other party to a bilateral contract have yet to complete performance of the contract at the time rehabilitation procedures commence, any custodian may cancel or terminate such bilateral contract and request the debtor to meet his or her obligations and require the other party to fulfill his or her obligations: Provided, That the custodian shall not cancel or terminate the bilateral contract after the assembly of related persons held to review a rehabilitation proposal comes to a close or a decision is made to pass a written resolution as provided for in Article 240. |
| (2) | In cases falling under paragraph (1), the other party may send to the custodian a peremptory notice demanding a definitive answer as to whether the bilateral contract is to be cancelled, terminated or upheld. In such cases, when the custodian fails to provide a definitive answer within 30 days from the date on which he or she is so notified, the custodian shall be deemed to have relinquished his or her right to cancel or to terminate a right referred to in the provisions of paragraph (1). |
| (3) | The court may, at the request of the custodian or the other party or ex officio, extend or shorten the period referred to in the provisions of paragraph (2). |
| (4) | The provisions of paragraphs (1) through (3) shall not apply to any collective agreement. |
| (5) | Where the custodian cancels or terminates a contract to which the State is a party, concerning a project for improvement of defense capability under Article 3 of the Defense Acquisition Program Act, pursuant to paragraph (1), he or she shall consult with the Minister of the Defense Acquisition Program Administration. <Newly Inserted on May 20, 2014> |
| Article 120 (Special Rules concerning Payment and Settlement System) |
| (1) | Where rehabilitation procedures commence with respect to any participant in the payment and settlement system designated by the Governor of the Bank of Korea (hereafter in this paragraph referred to as "payment and settlement system") after consulting with the Financial Services Commission in order to ensure the completion of payment and settlement, the transfer order or payment, the performance, adjustment and deduction related thereto, the offer, disposal and appropriation of any security such as deposit money, and other settlements concerning the participant, shall become effective, notwithstanding the provisions of this Act, as determined by the person who operates the payment and settlement system, and shall not be subject to cancelation, termination, revocation, and avoidance. Detailed matters necessary for the designation of the payment and settlement system shall be prescribed by Presidential Decree. <Amended on Feb. 29, 2008> |
| (2) | Where rehabilitation procedures commence with respect to any participant in the clearing and settlement system which is operated by any person engaged in clearing and settlement affairs of the transactions of securities and financial derivatives pursuant to the Financial Investment Services and Capital Markets Act or other statutes and regulations, or by other persons prescribed by Presidential Decree, the takeover, adjustment and deduction of any debt, the offer, disposal and appropriation of any security such as deposit money, and other clearing and settlement concerning the participant, shall become effective, notwithstanding the provisions of this Act, as determined by the person who operates the clearing and settlement system, and shall not be subject to cancelation, termination, revocation, and avoidance. <Amended on Aug. 3, 2007> |
| (3) | Where rehabilitation procedures commence with respect to either of the parties who perform each of the following transactions (hereafter in this paragraph referred to as "eligible financial transaction") on the basis of a single contract (hereafter in this paragraph referred to as "master agreement") which provides fundamental matters concerning certain financial transactions, the completion and settlement of the eligible financial transaction shall become effective, notwithstanding the provisions of this Act, as determined by the parties in the master agreement, and shall not be subject to cancelation, termination, revocation, and avoidance, and transactions falling under subparagraph 4 shall not be subject to a stay order or general prohibition order: Provided, That the same shall not apply where the debtor performs any eligible financial transaction in conspiracy with the counterpart, with the aim of causing harm to any rehabilitation creditor or rehabilitation secured creditor: |
| 1. | Transactions prescribed by Presidential Decree, which are financial derivatives transactions, such as forward deliveries, options, and swaps, the objects of which are the prices or interest rates of currencies, securities, contributed shares, general goods, credit risk, energy, weather conditions, freights, frequencies, environment, etc., or any indexes or indicators based on such prices or interest rates; |
| 2. | Spot exchange transaction, repurchase transaction of securities, security lending transactions and secured call transaction; |
| 3. | Any transaction which are mixed between transactions falling under subparagraphs 1 and 2; |
| 4. | The offer, disposal and appropriation of any security accompanied with the transactions falling under subparagraphs 1 through 3. |
| Article 121 (Cancellation and Termination of Bilateral Contracts Unfulfilled by Both Parties) |
| (1) | When any contract is canceled or terminated pursuant to the provisions of Article 119, the other party may exercise his or her right as a rehabilitation creditor on the compensation for damage. |
| (2) | Where any contract is cancelled or terminated pursuant to the provisions of paragraph (1), when any benefit in return that is paid to the debtor exists among the debtor's properties, the other party may claim the refund of such benefit in return and where such benefit in return does not exist among debtor's properties, the other party may exercise his or her right as a priority creditor to claim the refund of the value thereof. |
| Article 122 (Bilateral Contract Aimed at Continued Payments) |
| (1) | The other party of a bilateral contract that requires the debtor to perform continued provision may not refuse to perform his or her obligations on the grounds that the debtor fails to repay any rehabilitation claim or any rehabilitation security right arising out of the provision before an application is filed for commencing the rehabilitation procedures after such application is filed for commencing the rehabilitation procedures. |
| (2) | The provisions of paragraph (1) shall not apply to any collective agreement. |
| Article 123 (Takeover of Bills of Exchange after Commencement) |
| (1) | Where rehabilitation procedures commence for a debtor who is an issuer of bills of exchange or an endorser, when any payer or any preliminary payer performs the takeover or the payment thereof without knowledge of such fact, the payer or the preliminary payer may exercise his or her right on a claim that accrues therefrom as a rehabilitation creditor. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to securities that are primarily used to pay for checks, money, goods or securities. |
| (3) | The provisions of Article 68 shall apply mutatis mutandis to the application of paragraphs (1) and (2). |
| Article 124 (Lease Agreements) |
| (1) | When rehabilitation procedures commence for a debtor who is a lessor, any prepayment of rent or disposal of rent claims may not be asserted in relation to the rehabilitation procedures, with the exception of rent for the current and following terms at the time that such rehabilitation procedures commence. |
| (2) | Anyone who suffers damage due to the inability to assert effects in relation to such rehabilitation procedures under paragraph (1) may exercise his or her right to seek damages in the capacity of a rehabilitation creditor. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to surface rights. |
| (4) | Where rehabilitation procedures commence for a debtor who is a lessor, if the lessee falls under any of the following subparagraphs, the provisions of Article 119 shall not apply: |
| Article 125 (Mutual Accounts) |
| (1) | A mutual account shall be closed, when the rehabilitation procedures commence for either of the parties thereto. In this case, either party may close the account and claim the payment of any balance. |
| (2) | A claim that is held by the other party of the debtor under paragraph (1) shall constitute a rehabilitation claim. |
| Article 126 (Where Debtor Is Jointly and Severally Liable for an Obligation with Other Persons) |
| (1) | Where multiple persons jointly and severally liable for an obligation, if the rehabilitation procedures commence for all or part of such persons, the creditors may exercise their rights on the total amount of the claims they hold at the time that such rehabilitation procedures commence in the capacity of rehabilitation creditors in each rehabilitation procedure. |
| (2) | In cases falling under paragraph (1), even if another person jointly and severally liable for an obligation repay the obligation or take other action to extinguish the obligation as to the creditor (hereafter in this Article referred to as "repayment, etc.") after the rehabilitation procedures commence, such creditors may exercise their rights on the total amount of the claims they hold at the time that the rehabilitation procedures commence, save when the total amount of the claims are extinguished. |
| (3) | In cases falling under paragraph (1), anyone who holds the right to claim reimbursement from the debtor, which is possibly expected to be exercised in the future, may participate in the rehabilitation procedures for the total amount of his or her claim for reimbursements: Provided, That the same shall not apply where any creditor participates in the rehabilitation procedures for the total amount of the claim that he or she holds at the time that the rehabilitation procedures commence. |
| (4) | Where any creditor participates in rehabilitation procedures pursuant to the provisions of paragraph (1) and anyone who holds the claim for reimbursement, who is possibly expected to exercise his or her right to claim such reimbursement from the debtor in future and the total amount of his or her claim is extinguished by repayment, etc. to the creditor after the rehabilitation procedures commence, the creditor may exercise the right that he or she holds within the scope of his or her right to claim reimbursements. |
| (5) | The provisions of paragraphs (2) through (4) shall apply mutatis mutandis where any third person who provides security for the debtor's obligations makes repayment, etc. of such obligations to the creditors or holds the right to claim reimbursements, which he or she is expected to exercise on the obligations in the future. |
| Article 127 (Obligations for Guarantee Borne By Debtor) |
When rehabilitation procedures commence for a debtor who is a guarantor, any creditor may exercise his or her right over the total amount of the claim that he or she holds at the time that such rehabilitation procedures commence in the capacity of a rehabilitation creditor.
| Article 128 (Participation in Rehabilitation Procedures for Persons Who Hold Unlimited Liabilities for Corporation's Obligations Where Rehabilitation Procedures Commence) |
Where it is decided to commence rehabilitation procedures for persons who hold unlimited liabilities for a corporation's obligations, the creditors of the relevant corporation may participate in the rehabilitation procedures for the total amount of claims that they hold at the time that the rehabilitation procedures commence.
| Article 129 (Participation in Rehabilitation Procedures by Persons Who Hold Limited Liabilities for Corporation's Obligations Where Rehabilitation Procedures Commence) |
| (1) | Where it is decided to commence rehabilitation procedures for members who hold limited liabilities for a corporation's obligations, the creditors of the corporation shall be prohibited from participating in such rehabilitation procedures. |
| (2) | Where it is decided to commence the rehabilitation procedures for any corporation, the creditors of such corporation shall be prohibited from exercising their rights on members who hold limited liabilities for the corporation's obligations. |
| Article 130 (In Cases of Partial Guarantee) |
Where multiple guarantors each bear part of the obligations, the provisions of Articles 126 and 127 shall apply mutatis mutandis to the part of the obligations they bear.
| Article 131 (Prohibition on Repayment of Rehabilitation Claims) |
The act (excluding any exemption) of extinguishing rehabilitation claims by repaying them, receiving the repayment thereof, etc. without following the provisions of the rehabilitation plan shall not be performed after the rehabilitation procedures have commenced, save when the provisions of this Act especially prescribe otherwise: Provided, That the same shall not apply where any custodian makes repayment after obtaining permission therefor from the court, and to a case that falls under the claim provided for in the provisions of Article 140 (2) and falls under any of the following subparagraphs: | 1. | Where a disposition on delinquency, disposal of any real right granted by way of security or continuation thereof is permitted; |
| 2. | Where a third party debtor arbitrarily transfers the debtor's claims (including claims that are affected by the effect of seizure) that are seized according to a disposition on delinquency to the collecting authority in the period during which the disposition on delinquency is suspended. |
| Article 132 (Permission to Repay Rehabilitation Claims) |
| (1) | When a small and medium business entrepreneur who is a transaction partner of the debtor is likely to face hardship in the continuation of his or her business unless he or she receives the repayment of a small-sum claim that he or she holds, the court may grant permission to pay back the whole or part of such small-sum claim to him or her at the request of any custodian, any protective custodian or the debtor even before it decides to authorize a confirmation of the rehabilitation plan. <Amended on May 29, 2016> |
| (2) | When it is recognized that the repayment of rehabilitation claims is necessary for the rehabilitation of the debtor, the court may permit the payment of the whole or part of such rehabilitation claims at the request of any custodian, any protective custodian or the debtor even before it is decided to authorize a confirmation of the rehabilitation plan. <Amended on May 29, 2016> |
| (3) | When the court intends to grant the permission referred to in paragraphs (1) and (2), it shall hear the opinions of the Custodial Committee and the creditors' consultative council and take into account all circumstances including current transactions between the debtor and the creditors, the debtor's current properties and the interests, etc. of interested persons. |
| Article 133 (Rights of Rehabilitation Creditors) |
| (1) | Every rehabilitation creditor may participate in rehabilitation procedures based on the claim that he or she holds. |
| (2) | Every rehabilitation creditor shall hold a voting right on the claim provided for in the provisions of Articles 134 through 138 according to the amount that is calculated on the basis of those provisions and on other claims according to the amount of such other claims. |
| Article 134 (Interest-Free Claim with Time Limit) |
An interest-free claim, the deadline of which arrives after rehabilitation procedures commence shall be the amount obtained by deducting the interest from the amount of the claim after the total amount of the interest, based on the statutory interest and the principal are calculated to be the amount of the claim at the time that the deadline arrives during the period ranging from the time the rehabilitation procedures commence to the deadline.
| Article 135 (Claim For Money Payable by Periodic Installments) |
The provisions of Article 134 shall apply mutatis mutandis to any claim for money payable by periodic installments, the amount and the period of which are not confirmed.
| Article 136 (Interest-Free Claims of Indefinite Time Limit) |
Interest-free claims, the time limits of which are indefinite shall be the amount that is appraised at the time that rehabilitation procedures commence. The same shall apply where the amount of the claim for money payable by periodic installment or the period, for which are indefinite.
| Article 137 (Non-Monetary Claims) |
When the purpose of any claim is not monetary, the amount of any claim is indeterminate and any claim is set in foreign currency, such claim shall be the amount appraised as at the time that rehabilitation procedures commence.
| Article 138 (Conditional Claims and Future Claims) |
| (1) | Conditional claims shall be the amount appraised as at the time rehabilitation procedures commence. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to future claims that can be exercised to the debtor. |
| Article 139 (Calculation of Period for Preferential Rights) |
When any preferential rights are held on the amount of claim within a certain period, such certain period shall be calculated retroactively from the time rehabilitation procedures commence.
| Article 140 (Reduction of and Exemption from Fines and Taxes) |
| (1) | With respect to the claims on any fine, minor fine, criminal proceedings costs, additional collection charge, and administrative fine, the rehabilitation plan shall not provide for any reduction and exemption, and matters affecting other rights. |
| (2) | With respect to the claims to collect taxes are to be collected pursuant to the National Tax Collection Act or the Local Tax Collection Act (including claims to collect taxes in the same manner as national taxes, which take priority over general rehabilitation claims in collection), where the rehabilitation plan provides that the collection of taxes or the realization of any property under a disposition on delinquency is deferred for not more than three years, it shall be required to hear the opinion of the collecting authority to collect such taxes. <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| (3) | With respect to the claims under paragraph (2), where the rehabilitation plan provides for the deferral of collection of debts or the realization of any property under a disposition on delinquency for more than three years, or provides for the devolution of debts, the tax reduction and exemption, or other matters that affect the said claims, the consent of the collecting authority to collect public charges shall be required. |
| (4) | With respect to the claims under paragraph (2), the collecting authority to collect debts may give consent under paragraph (3). |
| (5) | Prescription shall not run during the period in which the collection is deferred or the realization of the property under a disposition on delinquency is deferred, pursuant to the provisions of paragraphs (2) and (3). |
| Article 141 (Rights of Rehabilitation Secured Creditors) |
| (1) | A rehabilitation claim or a claim for any property against a person other than the debtors resulting from any cause arising before the rehabilitation procedure commences, which is secured by any such lien, pledge, mortgage, right to property transferred for security, right of provisional registered security, security right under the Act on Security over Movable Property, Claims, Etc., right to lease on a deposit basis, or preferential right, as exists on the debtor’s property at the time the rehabilitation procedure is commenced, shall be deemed a rehabilitation security right: Provided, That with respect to claims for any interest, or any damages or penalties caused by the failure to comply with any obligation, this shall only apply to the claims arising until one day before the commencement of the rehabilitation procedure is determined. <Amended on Jun. 10, 2010> |
| (2) | The provisions of Articles 126 through 131, and 139 shall apply mutatis mutandis to rehabilitation security rights. |
| (3) | A rehabilitation secured creditor may participate in the rehabilitation procedure, based on his or her rehabilitation security rights. |
| (4) | A rehabilitation secured creditor may participate in the rehabilitation procedure as a rehabilitation creditor with respect to the portion in excess of the value (where any other senior security right exists, it refers to the amount calculated by deducting the amount of the claim secured by that senior security right from the value of the subject matter of his or her security right; hereafter the same shall apply in this Article) of the subject matter of his or her security right, among the amount of his or her claim. |
| (5) | A rehabilitation secured creditor shall have voting rights in proportion to the value of the subject matter of his or her security right: Provided, That where the amount of any secured claim of any rehabilitation secured creditor is less than the value of the subject matter of his or her security right, he or she shall have voting rights in proportion to the value of that secured claim. |
| (6) | The provisions of Articles 133 (2), and 134 through 138 shall apply mutatis mutandis to the voting rights of rehabilitation secured creditors. |
| Article 142 (Proxy Commissioners) |
| (1) | Rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders may individually or jointly appoint one or multiple proxy commissioners. |
| (2) | The authority of every proxy commissioner shall be attested to in writing. |
| (3) | Proxy commissioners may perform every act in rehabilitation procedures for rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders who appoint them. |
| (4) | Where there are several proxy commissioners, they shall exercise their authority jointly. However, it shall be sufficient for a third party to declare his or her intent to only one of them. |
| (5) | When any proxy commissioners exercises his or her authority in a manner that is deemed clearly unfair, the court may revoke the permission referred to in the provisions of paragraph (1). |
| (6) | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder shall, when they dismiss any proxy commissioner, report without delay such fact to the court. |
| Article 143 (Trustee Companies) |
| (1) | Every trustee company provided for in the provisions of the Secured Bond Trust Act may perform any and all acts involving the report of rehabilitation claims or rehabilitation security rights, the exercise of its voting right and other rehabilitation procedures for all of the debenture holders according to a resolution passed at a meeting of the debenture holders. |
| (2) | When any trustee company performs the acts referred to in the provisions of paragraph (1) for all of the debenture holders, it may elect not to indicate each of such debenture holders. |
| Article 144 (Offset Right) |
| (1) | Where any rehabilitation creditor or any rehabilitation secured creditor bears obligations for the debtor at the time that rehabilitation procedures commence, when both of the claims and the obligations can be offset against each other prior to the expiration of the reporting period, the relevant rehabilitation creditor or the relevant rehabilitation secured creditor may perform such offset without resorting to the rehabilitation procedures only within such reporting period. The same shall apply where the obligations are time-fixed. |
| (2) | The rent obligations of the current term and the following term after the rehabilitation procedures of any rehabilitation creditor and any rehabilitation secured creditor commence may be offset against each other pursuant to the provisions of paragraph (1): Provided, That when there is any security deposit, any rent obligation may be offset against each other thereafter. |
| (3) | The provisions of paragraph (2) shall apply mutatis mutandis to land rents. |
| Article 145 (Prohibition on Offset) |
In any of the following cases, the offset shall be prohibited from being performed:
| 1. | Where any rehabilitation creditor or any rehabilitation secured creditor bears obligations for the debtor after the rehabilitation procedures commence; |
| 2. | Where any rehabilitation creditor or any rehabilitation secured creditor bears obligations for the debtor with knowledge of the fact that the suspension of payments is made, an application is filed for commencing rehabilitation procedures or a petition for bankruptcy is filed: Provided, That the same shall not apply in any of the following cases: |
| (a) | When such obligations are borne on grounds prescribed by Acts; |
| (b) | When such obligations that are borne on grounds that arise before any rehabilitation creditor or any rehabilitation secured creditor becomes aware of the fact that the payment is suspended, an application is filed for commencement of rehabilitation procedures or a petition for bankruptcy is filed; |
| (c) | When such obligations are borne on grounds that arise not more than one year prior to the earliest of the time when rehabilitation procedures commence, and the time when bankruptcy is declared; |
| 3. | When debtors of the debtor, for whom rehabilitation procedures commence, acquires any rehabilitation claim or any rehabilitation security right that is held by any other person after such rehabilitation procedures commence; |
| 4. | When debtors of the debtor, for whom rehabilitation procedures commence, acquires any rehabilitation claim or any rehabilitation security right with knowledge of the fact that the suspension of payments is made, an application is filed for commencing rehabilitation procedures or a petition for bankruptcy is filed: Provided, That the same shall not apply in any of the cases falling under subparagraph 2. |
| Article 146 (Rights of Shareholders and Equity Right Holders) |
| (1) | Every shareholder and every equity right holder may participate in rehabilitation procedures with the shares and the equity shares that he or she holds. |
| (2) | Every shareholder and every equity right holder shall hold voting rights in proportion to the number or amount of shares or equity shares he or she holds. |
| (3) | When the debtor's total obligations exceed his or her total assets at the time that rehabilitation procedures commence, shareholders and equity right holders shall not have any voting rights: Provided, That the same shall not apply where the total amount of the debtor's assets is in excess of the total amount of his or her obligations at the time that a proposal for changing the rehabilitation plan provided for in the provisions of Article 282 is submitted. |
| (4) | When the debtor's total obligations exceed his or her total assets at the time that a proposal for amending the rehabilitation plan is submitted pursuant to the provisions of Article 282, shareholders and equity right holders shall not have any voting rights on such proposal for amending the rehabilitation plan. |
SECTION 2 Preparation of List of Rehabilitation Creditors, Rehabilitation Secured Creditors, Shareholders, and Equity Right Holders and Reporting thereof
| Article 147 (List of Rehabilitation Creditors, Rehabilitation Secured Creditors, and Shareholders and Equity Right Holders) |
| (1) | Every custodian shall prepare a list of rehabilitation creditors, the list of rehabilitation secured creditors, and the list of shareholders and equity right holders (hereafter referred to as "lists" in this Part) and submit them within such period as prescribed in Article 50 (1) 1. <Amended on Dec. 30, 2014> |
| (2) | Each of the following matters shall be noted in the lists: |
| 1. | List of rehabilitation creditors: |
| (a) | The names and domiciles of rehabilitation creditors; |
| (b) | The details of and grounds for such rehabilitation claims; |
| (c) | The amount of voting rights; |
| (d) | When there are claims with general preferential right, the gist thereof; |
| 2. | List of rehabilitation secured creditors: |
| (a) | The names and domiciles of rehabilitation secured creditors; |
| (b) | The details of, and grounds for such rehabilitation security rights, the purposes for the security rights, their values and when anyone other than the debtor for whom the rehabilitation procedures commence is a debtor, his or her name and domicile; |
| (c) | The amount of voting rights; |
| 3. | List of shareholders and equity right holders: |
| (a) | The names and domiciles of shareholders and equity right holders; |
| (b) | The kinds and the number of shares or equity shares. |
| (3) | The court shall make the lists available for inspection by interested persons during the reporting period. |
| (4) | Any custodian may alter or correct the matters noted on the lists after obtaining permission therefor from the court under the conditions prescribed by the Supreme Court Regulations by the last day of the reporting period. |
| Article 148 (Report on Rehabilitation Claims) |
| (1) | Any rehabilitation creditor who intends to participate in the rehabilitation procedures shall report the matters falling under each of the following subparagraphs to the court and submit evidential documents thereof, or certified copies or abridged copies of such evidential documents to the court within the reporting period: |
| 1. | His or her name and domicile; |
| 2. | The details and grounds for his or her rehabilitation claim; |
| 3. | The amount of his or her voting rights; |
| 4. | When his or her claim holds a general preferential right, the gist thereof. |
| (2) | Any rehabilitation creditor shall report separately the portion of the general preferential right among his or her rehabilitation claims. |
| (3) | When any lawsuit is pending at the time that the rehabilitation procedures commence for rehabilitation claims, the relevant rehabilitation creditor shall report the court, parties, the case name and the case number, other than the matters that are prescribed in the provisions of paragraphs (1) and (2). |
| Article 149 (Report on Rehabilitation Security Rights) |
| (1) | Any rehabilitation secured creditor who intends to participate in rehabilitation procedures shall report the matters falling under each of the following subparagraphs to the court and submit evidential documents thereof, or certified copies or abridged copies of such documents to the court within the report period: |
| 1. | His or her name and domicile; |
| 2. | The details of, and grounds for his or her rehabilitation security right; |
| 3. | The purpose for and value of his or her rehabilitation security right; |
| 4. | The amount of his or her voting rights; |
| 5. | When anyone is a debtor, other than the debtor for whom the rehabilitation procedures commence, the former's name and domicile. |
| (2) | The provisions of Article 148 (3) shall apply mutatis mutandis to cases falling under paragraph (1). |
| Article 150 (Report on Shares and Equity Shares) |
| (1) | Any shareholder or any equity right holder who intends to participate in rehabilitation procedures shall report the matters falling under each of the following subparagraphs to the court and submit his or her share certificate or his or her equity share certificate and evidential documents or certified copies or abridged copies thereof to the court: |
| 1. | His or her name and domicile; |
| 2. | The kinds, the number or the amount of his or her shares or his or her equity shares. |
| (2) | The court may order to suspend entry of any alteration into the register of shareholders for a fixed period. In this case, the fixed period shall not exceed two months. |
| (3) | The provisions of Article 148 (3) shall apply mutatis mutandis to cases falling under paragraph (1). |
| Article 151 (Legal Fiction of Reporting) |
Rehabilitation claims, rehabilitation security rights, shares or equity shares that are noted on the list shall be deemed to have been reported pursuant to the provisions of Articles 148 through 150.
| Article 152 (Supplementation after Report) |
| (1) | When any rehabilitation creditor or any rehabilitation secured creditor fails to make the report within the reporting period for a cause not imputable to him or her, he or she may supplement such report within one month after such grounds cease to be relevant. |
| (2) | The period referred to in the provisions of paragraph (1) shall be invariable. |
| (3) | The report referred to in the provisions of paragraph (1) shall not be made in either of the following cases: |
| 1. | After an assembly of related persons that is held to review a rehabilitation proposal comes to a close; |
| 2. | After a decision is made to propose a rehabilitation proposal as a written resolution as provided for in Article 240. |
| (4) | The provisions of paragraphs (1) through (3) shall apply mutatis mutandis to cases where any rehabilitation creditor or any rehabilitation secured creditor alters reported matters to the effect of prejudicing the interests of any other rehabilitation creditor or any other rehabilitation secured creditor for a cause not imputable to the rehabilitation creditor or the rehabilitation secured creditor. |
| Article 153 (Report on Rehabilitation Claims after Lapse of Reporting Period) |
| (1) | With respect to any rehabilitation claim and any rehabilitation security right that accrue after the lapse of the reporting period, a report thereon shall be made within one month from the date on which such claim and such right accrue. |
| (2) | The provisions of Article 152 (2) through (4) shall apply mutatis mutandis to the report referred to in the provisions of paragraph (1). |
| Article 154 (Change of Names) |
| (1) | Anyone who has acquired any rehabilitation claim or any rehabilitation security right that is entered in the list or is reported may change his or her reported name even after the lapse of the reporting period. |
| (2) | Anyone who intends to change his or her name pursuant to the provisions of paragraph (1) shall report both of the following matters to the court or submit an evidential document or a certified copy or an abridged copy thereof to the court: |
| 1. | The name and domicile; |
| 2. | The right that he or she acquires, the date on which he or she acquires it, and the cause for acquiring it. |
| Article 155 (Additional Report on Shares and Equity Shares) |
| (1) | When it is deemed appropriate, the court may reset a reporting period after the lapse of a reporting period in order to allow for additional reports on shares or equity shares. In this case, the court shall publicly notify the gist thereof and then deliver a written statement in which such gist is entered to the person falling under each of the following subparagraphs: |
| 3. | Any person who fails to make a report as a shareholder or an equity right holder with the knowledge of such report. |
| (2) | The provisions of Articles 162 through 165 shall apply mutatis mutandis to cases falling under paragraph (1). |
| Article 156 (Report on Fines and Taxes) |
| (1) | Anyone who holds claims provided for in the provisions of Article 140 (1) and (2) shall, without delay, report to the court the amount of such claims, the cause for his or her holding such claim and the details of his or her security rights. |
| (2) | The provisions of Article 167 (1) shall apply mutatis mutandis to claims reported pursuant to the provisions of paragraph (1). |
| Article 157 (Dissatisfaction with Fine Prior to Commencement of Rehabilitation Procedures) |
| (1) | When the cause of any claim that is reported pursuant to the provisions of paragraph 156 (1) is a disposition for which an administrative trial, a lawsuit or an appeal is permitted, any custodian may file an application for appeal in a manner that the debtor is entitled to with regard to his or her claim. |
| (2) | The provisions of Articles 172, 175 and 176 (1) shall apply mutatis mutandis to the application for appeal under paragraph (1). |
SECTION 3 Inspection and Confirmation of Rehabilitation Claims and Rehabilitation Security Rights
| Article 158 (Table of Rehabilitation Creditors, Rehabilitation Secured Creditors and Shareholders and Equity Right Holders) |
The clerk, etc. of the court shall prepare a table of rehabilitation creditors, a table of rehabilitation secured creditors and a table of shareholders and equity right holders based on rehabilitation claims, rehabilitation security rights, shares or equity shares that are recorded on the list or reported, categorize them according to the nature of their rights and then record matters falling under each of the following subparagraphs in such tables:
| 1. | Table of rehabilitation creditors: |
| (a) | The names and domiciles of rehabilitation creditors; |
| (b) | The contents of and grounds for rehabilitation claims; |
| (c) | The amount of voting rights; |
| (d) | When claims have general preferential rights, the gist thereof; |
| 2. | Table of rehabilitation secured creditor: |
| (a) | The names and domiciles of rehabilitation secured creditors; |
| (b) | The details of, and grounds for rehabilitation security rights, the reasons for and values of the security rights, and when any person who is a debtor other, than the debtor, his or her name and domicile; |
| (c) | The amount of voting rights; |
| 3. | Table of shareholders and equity right holders: |
| (a) | The names and domiciles of shareholders and equity right holders; |
| (b) | The kinds, the number or amount of shares or equity shares. |
| Article 159 (Delivery of Certified Copies) |
The court official of Grade V, etc. shall deliver to custodians the certified copies of the table of rehabilitation creditors, the table of rehabilitation secured creditors and the table of shareholders and equity right holders.
| Article 160 (Perusal of Documents during Inspection Period) |
The documents falling under each of the following subparagraphs shall be held in the court for inspection by interested persons during the inspection period:
| 2. | Documents concerning reports and objections; |
| 3. | The table of rehabilitation creditors, the table of rehabilitation secured creditors, and the table of shareholders and equity right holders. |
| Article 161 (Objections Raised to Rehabilitation Claims and Rehabilitation Security Rights) |
| (1) | Each of the following persons may raise a written objection to the court with respect to any rehabilitation claim and any rehabilitation security right entered in the list or reported within the inspection period: |
| 3. | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder who are all entered in the list or are reported. |
| (2) | When it has been decided to alter the inspection period, the court shall serve a written decision on each of the persons referred to in the provisions of paragraph (1). |
| (3) | Service under paragraph (2) may be made by mailing the relevant document. |
| Article 162 (Inspection of Rehabilitation Claims and Rehabilitation Security Rights Reported after Reporting Period) |
The court shall set a special date (hereinafter referred to as "special inspection date") for inspecting any rehabilitation claim and any rehabilitation security right that are all reported pursuant to the provisions of Articles 152 (1) and 153 (1). In this case, expenses incurred to conduct such inspection shall be borne by the relevant rehabilitation creditor or the relevant rehabilitation secured creditor.
| Article 163 (Delivering Notification of Special Inspection Date) |
When the court decides to set a special inspection date, it shall serve a written decision on each of the following persons:
| 3. | The rehabilitation creditor, the rehabilitation secured creditor, the shareholder and the equity right holder who are all recorded on the list or are reported. |
| Article 164 (Presence of Persons Concerned) |
| (1) | The representative of an individual debtor or the representative of the non-individual debtor shall be present on the special inspection date to state his or her opinion: Provided, That he or she may cause his or her agent to be present on the special inspection date when justifiable grounds therefor exist. |
| (2) | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder, any equity right holder or his or her agent may be present on the special inspection date to raise objections to any other rehabilitation claim or any other rehabilitation security right. |
| (3) | The agent referred to in the provisions of paragraphs (1) and (2) shall submit written evidence of proxy. |
| Article 165 (Presence of Custodians) |
The inspection of any rehabilitation claim and any rehabilitation security right shall not be conducted without the presence of the relevant custodian on the special inspection date.
| Article 166 (Allowance of Rehabilitation Claims and Rehabilitation Security Rights) |
When no objection is raised by any custodian, any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder during the inspection period or on the special inspection date, the features of the rights and the amount of the voting rights falling under both of the following subparagraphs shall be confirmed, and with respect to any claim with the preferential rights, its preferential right shall be confirmed:
| 1. | Rehabilitation claims and rehabilitation security rights that are reported; |
| 2. | When any rehabilitation claim or any rehabilitation security right that is reported is nonexistent, the rehabilitation claim or the rehabilitation security right that is recorded on the list submitted by any custodian. |
| Article 167 (Register on Table of Rehabilitation Creditors and Table of Rehabilitation Secured Creditors) |
| (1) | The court official of Grade V, etc. shall record the results of the inspection of rehabilitation claims and rehabilitation security rights on the table of rehabilitation creditors and the table of rehabilitation secured creditors. The same shall apply to any objections raised by debtors. |
| (2) | The court official of Grade V, etc. shall record the gist of confirmation in the evidential documents of the rehabilitation claims and the rehabilitation security rights that are confirmed and affix the court seal to each of them. |
| (3) | The court official of Grade V, etc. shall, upon receiving a claim filed by any rehabilitation creditor or any rehabilitation secured creditor, deliver to him or her an abridged copy of the table of rehabilitation creditors or the table of rehabilitation secured creditors on their rights. |
| Article 168 (Effect of Entries) |
When any rehabilitation claim and any rehabilitation security right that are confirmed are recorded in the table of rehabilitation creditors and the table of rehabilitation secured creditors, such entries shall have the same effect as the effect of a final and conclusive judgment on all of them recorded on the tables.
| Article 169 (Notification of Objection) |
When an objection to any rehabilitation claim or any rehabilitation security right is raised, the court shall notify the holder of the relevant claim or right of such objection.
| Article 170 (Judgment in Claim Allowance Proceedings for Rehabilitation Claims and Rehabilitation Security Rights) |
| (1) | When any custodian, any rehabilitation creditor, any rehabilitation secured creditor, any shareholder or any equity right holder raises an objection to any rehabilitation claim and any rehabilitation security right that are recorded on the list or reported, the rightful claimant who holds the rehabilitation claim or the rehabilitation security right (hereafter referred to as "disputed claim" in this Part) may file an application with the court for a judgment in claim allowance proceedings (hereafter referred to in this Part as a "judgment in claim allowance proceedings") for the confirmation of his or her claim and rights with all of the objectors as the other parties: Provided, That the same shall not apply to cases falling under Articles 172 and 174. |
| (2) | The application referred to in the main clause of paragraph (1) shall be filed within one month from the last day of the inspection period or from the special inspection date. |
| (3) | The judgment in claim allowance proceedings shall determine whether disputed claims exist and the contents of such claims. |
| (4) | When the court gives the judgment in claim allowance proceedings, it shall examine objectors. |
| (5) | The court shall deliver a written decision on the judgment in claim allowance proceedings to each of the parties. |
| Article 171 (Lawsuit Objecting to Judgment in Claim Allowance Proceedings) |
| (1) | Anyone who is dissatisfied with a judgment in claim allowance proceedings may file a lawsuit objecting to such judgment in claim allowance proceedings within one month from the date on which he or she receives service of the written judgment thereon. |
| (2) | The appeal referred to in the provisions of paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| (3) | When anyone who files the appeal referred to in paragraph (1) is a rightful claimant who holds any disputed claim, all of the objectors shall be named as defendants and when he or she is an objector, the rehabilitation creditors or the rehabilitation secured creditors shall be named as defendants. |
| (4) | No arguments can be presented for the appeal referred to in paragraph (1) until after the lapse of one month from the date the written decision is served. |
| (5) | When multiple lawsuits are pending on the same disputed claim, the court shall merge pleadings therefor. |
| (6) | With respect to the appeal referred to in paragraph (1), unless the suit of objection is dismissed without prejudice for being unlawful, the court shall grant the judgment in claim allowance proceedings or make a ruling to amend such judgment. |
| Article 172 (Taking Over Lawsuit Involving Disputed Claims) |
| (1) | Where any lawsuit involving disputed claims is pending at the time that rehabilitation procedures commence, when any rehabilitation creditor or any rehabilitation secured creditor intends to have such claims confirmed, all of the objectors shall take over the litigation procedures as other parties of the lawsuit. |
| (2) | The provisions of Articles 167 (3) and 170 (2) shall apply mutatis mutandis to any application to take over such a suit referred to in paragraph (1). |
| Article 173 (Restrictions on Assertions) |
Rehabilitation creditors or rehabilitation secured creditors may only assert matters that are recorded in the table of rehabilitation creditors and the table of rehabilitation secured creditors, which are pertain to the grounds and details of disputed claims in the judgment in claim allowance proceedings, in the lawsuit objecting to the judgment in claim allowance proceedings provided for in the provisions of Article 171 (1) and the litigation procedures assignment of which is taken pursuant to the provisions of Article 172 (1).
| Article 174 (Objections Raised to Claims with Title of Execution) |
| (1) | With respect to disputed claims with title of execution or a final and conclusive judgment, an objector may raise an objection only through litigation procedures that the debtor is permitted to take. |
| (2) | Where a lawsuit on the rehabilitation claim or the rehabilitation security right referred to in the provisions of paragraph (1) is pending in the court at the time that rehabilitation procedures commence, when any objector intends to assert the objection provided for in the provisions of paragraph (1), the objector shall take over the litigation procedures against the rehabilitation creditor or the rehabilitation secured creditor who holds the rehabilitation claim or the rehabilitation security right. |
| (3) | The provisions of Article 170 (2) shall apply mutatis mutandis to the assertion of the objections referred to in the provisions of paragraph (1) or the taking-over provided for in the provisions of paragraph (2), and the provisions of Articles 171 (4) and (5) and 173 shall apply mutatis mutandis to paragraphs (1) and (2). In this case, "one month after the date on which the written decision is served" in Article 171 (4) shall be deemed "the last day of the inspection period involving the disputed claim or the invariable period of one month from the special inspection date". |
| (4) | Where the assertion of the objection provided for in the provisions of paragraph (1) is not made or the taking-over provided for in the provisions of paragraph (2) is not effected within the period provided for in the provisions of Article 170 (2) that are applied mutatis mutandis under paragraph (3), when the objector is the rehabilitation creditor or the rehabilitation secured creditor, the objection provided for in the provisions of Article 161 (1) or 164 (2) shall be deemed nonexistent and when the objector is the custodian, it shall be deemed that the custodian recognizes the rehabilitation claim or the rehabilitation security right. |
| Article 175 (Record of Result of Judgment in Claim Allowance Proceedings on Allowing Rehabilitation Claims and Rehabilitation Security Rights) |
The court official of Grade V, etc. shall, at the request of any custodian, any rehabilitation creditor, or any rehabilitation secured creditor, record the results of the lawsuit (when a lawsuit objecting to the judgment in claim allowance proceedings is not filed or is dismissed without prejudice within the period provided for in the provisions of Article 171 (1), this refers to the contents of the judgment) of the confirmation of the rehabilitation claim or the rehabilitation security right in the table of rehabilitation creditors and the table of rehabilitation secured creditors.
| Article 176 (Effect of Judgment in Lawsuit Filed for Confirmation of Rehabilitation Claims and Rehabilitation Security Rights) |
| (1) | The judgment in the lawsuit filed for the confirmation of the rehabilitation claims and the rehabilitation security rights shall have effect on all of rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders. |
| (2) | When a suit objecting to the judgment in claim allowance proceedings is not filed within the period provided for in the provisions of Article 171 (1) or is dismissed without prejudice, the judgment shall have the same effect as that of the final and conclusive judgment on all of the rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders. |
| Article 177 (Reimbursement of Legal Costs) |
When any gain is accrued to the debtor's property from the lawsuit (including the judgment in claim allowance proceedings) on allowance of rehabilitation claims or rehabilitation security rights, any rehabilitation creditor, any rehabilitation secured creditors, any shareholder, any equity right holder may claim for reimbursement of the legal costs as priority creditors within the scope of such gain.
| Article 178 (Value of Subject Matter of Lawsuit Filed for Confirmation of Rehabilitation Claims or Rehabilitation Security Rights) |
The value of the subject matter of a lawsuit filed for the confirmation of any rehabilitation claim or any rehabilitation security right shall be determined by the court with pending rehabilitation cases taking into account the estimated amount of gains to be made from the rehabilitation plan. <Amended on Dec. 27, 2016>
SECTION 4 Priority Claims and Other Claims after Rehabilitation Procedures Commence
| Article 179 (Claims Constituting Priority Claims) |
| (1) | Any of the following claims shall constitute priority claims: <Amended on Dec. 30, 2006; Dec. 31, 2007; Oct. 21, 2009; May 20, 2014; May 29, 1016> |
| 1. | Claims for expenses incurred in a judgment for common interest of any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder; |
| 2. | Claims for expenses incurred in performing the management of the debtor's business and properties and the disposal of his or her properties after the rehabilitation procedures commence; |
| 3. | Claims for expenses incurred in implementing the rehabilitation plan: Provided, That any expenses that incurred after the completion of the rehabilitation procedures shall be excluded; |
| 4. | Claims for any expenses, remuneration, compensation and special compensation provided for in the provisions of Articles 30 and 31; |
| 5. | Claims for funds borrowed by any custodian in order to manage the debtor's business and properties after the rehabilitation procedures commence and any claim arising out of any other act; |
| 6. | Claims that accrue to the debtor from clerical work or unlawful gains after the rehabilitation procedures commence; |
| 7. | Claims held by other parties when any custodian fulfills obligations pursuant to the provisions of Article 119 (1); |
| 8. | Claims that accrue from the supply made by the other party to a bilateral contract that obliges the continued supply before the rehabilitation procedures commence after an application is filed for commencing them; |
| 8-2. | Claims for the prices of the goods supplied to the debtor in continuous and normal business activities within 20 days before the commencement of rehabilitation procedures is requested; |
| 9. | Tax that falls under each of the following items and the deadline for payment thereof has yet to arrive at the time rehabilitation procedures commence: |
| (a) | Taxes withheld: Provided, That the tax imposed on any bonus that is deemed reverted to the representative pursuant to the provisions of Article 67 of the Corporate Tax Act shall be limited to tax collected at source; |
| (b) | Value-added tax, individual consumption tax, liquor tax, and traffic, energy and environment tax; |
| (c) | Education tax and special tax for agricultural and fishing villages, levied and collected in the same manner as a main tax is levied and collected; |
| (d) | Local tax collected and paid by the person liable for the special collection; |
| 10. | The wages, severance pay and disaster compensation of the debtor's employees; |
| 11. | The debtor’s employees’ right to claim for a refund of bailment monies and fidelity guarantee monies, which accrue from causes arising before the rehabilitation procedures commence; |
| 12. | Claims that accrue from the borrowing of funds and procurement of materials that are performed by the debtor or any protective custodian with permission therefor from the court, and other claims that accrue from acts that are inevitable in continuing the debtor’s business after an application is filed for commencement of rehabilitation procedures and prior to the commencement of rehabilitation procedures; |
| 13. | Expenses determined by the court as necessary for the creditors' consultative council to carry out its activities pursuant to the provisions of Article 21 (3); |
| 14. | Supporting allowances to the debtor and his or her dependents; |
| 15. | Other inevitable expenses to be incurred for the debtor, which are not referred to in subparagraphs 1 through 8, 8-2, and 9 through 14. |
| (2) | In granting permission for borrowing of funds under paragraph (1) 5 and 12, the court shall hear the opinions of the creditors' consultative council, and take into account all conditions, such as the status of business between debtor and creditor, debtors’ financial standing, and interested parties. <Newly Inserted on Oct. 21, 2009; May 29, 2016> |
| Article 179 (Claims Constituting Priority Claims) |
| (1) | Any of the following claims shall constitute priority claims: <Amended on Dec. 30, 2006; Dec. 31, 2007; Jan. 30, 2009; Oct. 21, 2009; May 20, 2014; May 29, 2016> |
| 1. | Claims for expenses incurred in a judgment for common interest of any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder; |
| 2. | Claims for expenses incurred in performing the management of the debtor's business and properties and the disposal of his or her properties after the rehabilitation procedures commence; |
| 3. | Claims for expenses incurred in implementing the rehabilitation plan: Provided, That any expenses that incurred after the completion of the rehabilitation procedures shall be excluded; |
| 4. | Claims for any expenses, remuneration, compensation and special compensation provided for in the provisions of Articles 30 and 31; |
| 5. | Claims for funds borrowed by any custodian in order to manage the debtor's business and properties after the rehabilitation procedures commence and any claim arising out of any other act; |
| 6. | Claims that accrue to the debtor from clerical work or unlawful gains after the rehabilitation procedures commence; |
| 7. | Claims held by other parties when any custodian fulfills obligations pursuant to the provisions of Article 119 (1); |
| 8. | Claims that accrue from the supply made by the other party to a bilateral contract that obliges the continued supply before the rehabilitation procedures commence after an application is filed for commencing them; |
| 8-2. | Claims for the prices of the goods supplied to the debtor in continuous and normal business activities within 20 days before the commencement of rehabilitation procedures is requested; |
| 9. | Tax that falls under each of the following items and the deadline for payment thereof has yet to arrive at the time rehabilitation procedures commence: |
| (a) | Taxes withheld: Provided, That the tax imposed on any bonus that is deemed reverted to the representative pursuant to the provisions of Article 67 of the Corporate Tax Act shall be limited to tax collected at source; |
| (b) | Value-added tax, individual consumption tax, and liquor tax. |
| (c) | Education tax and special tax for agricultural and fishing villages, levied and collected in the same manner as a main tax is levied and collected; |
| (d) | Local tax collected and paid by the person liable for the special collection; |
| 10. | The wages, severance pay and disaster compensation of the debtor's employees; |
| 11. | The debtor’s employees’ right to claim for a refund of bailment monies and fidelity guarantee monies, which accrue from causes arising before the rehabilitation procedures commence; |
| 12. | Claims that accrue from the borrowing of funds and procurement of materials that are performed by the debtor or any protective custodian after obtaining permission therefor from the court, and other claims that accrue from acts that are inevitable in continuing the debtor’s business after an application is filed for commencement of rehabilitation procedures and prior to the commencement of rehabilitation procedures; |
| 13. | Expenses determined by the court as necessary for the creditors' consultative council to carry out its activities pursuant to the provisions of Article 21 (3); |
| 14. | Supporting allowances to the debtor and his or her dependents; |
| 15. | Other inevitable expenses to be incurred for the debtor, which are not referred to in subparagraphs 1 through 8, 8-2, and 9 through14. |
| (2) | In granting permission for borrowing of funds under paragraph (1) 5 and 12, the court shall hear opinions of the creditors' consultative council, and take into account all conditions, such as the status of business between debtor and creditor, debtor's financial standing, and interests of interested parties. <Newly Inserted on Oct. 21, 2009; May 29, 2016> |
[Enforcement Date: Jan. 1, 2022] Article 179
| Article 180 (Repayment of Priority Claims) |
| (1) | Priority claims shall be reimbursed at any time without undergoing the rehabilitation procedures. |
| (2) | Priority claims shall be reimbursed in preference to any rehabilitation claims and rehabilitation security rights. |
| (3) | In any of the following cases, the court may order the suspension or cancellation of compulsory execution or provisional seizure of any property of the debtor on the basis of a priority claim, with or without any security being provided at the request of an custodian or ex officio: |
| 1. | Where any compulsory execution or provisional seizure significantly obstructs rehabilitation and the debtor has other property that may be readily realized; |
| 2. | Where it becomes clear that the debtor’s property is insufficient to cover the total amount of the priority claims. |
| (4) | A court may alter or rescind a stay order prescribed in the provisions of paragraph (3). |
| (5) | An immediate appeal may be filed against a stay order or revocation under paragraph (3), and against a decision under paragraph (4). |
| (6) | No immediate appeal referred to in paragraph (5) shall have the effect of suspending any execution. |
| (7) | Where it becomes clear that the debtor's property is insufficient to cover the total amount of the priority claims, claims for the funds borrowed with permission from the court in order to continue the debtor's business, among the claims falling under Article 179 (1) 5 and 12, shall preferentially be reimbursed, and other priority claims shall, regardless of the order of priority prescribed by statutes, be reimbursed in proportion to their amounts that are not yet reimbursed: Provided, That this shall not affect the effects of any such lien, pledge, mortgage, security right referred to in the Act on Security over Movable Property, Claims, Etc., and preferential rights, as are for priority claims. <Amended on Oct. 21, 2009; Jun. 10, 2010> |
| Article 181 (Other Claims after Commencement) |
| (1) | With respect to any property claim resulting from causes arising after rehabilitation procedures commence, which is not a priority claim, a rehabilitation claim or a rehabilitation security right (hereinafter referred to as "other claims after the commencement"), the act of repaying such claim, taking the repayment of such claim or extinguishing such claim (excluding the act of excluding) shall be prohibited from being performed from the time when the rehabilitation procedures commence to the time when the repayment period has ended (referring to the time when the rehabilitation procedures are completed where the rehabilitation procedures are completed before it is decided to grant an authorization for the rehabilitation plan and the time when the repayment is completed where repayment based on the rehabilitation plan is completed before the period has expired). |
| (2) | No application may be filed for any auction with the aim of compulsorily executing, provisionally seizing, provisionally disposing of the debtor's properties or exercising security rights against the debtor's properties based on other claims after the rehabilitation procedures commence during the period referred to in the provisions of paragraph (1). |
CHAPTER V Assembly of Related Persons
| Article 182 (Notification of Date) |
| (1) | The court shall notify following persons of the date on which the assembly of related persons is to be held: <Amended on Dec. 30, 2014> |
| 2. | Inspection commissioners and simplified inspection commissioners; |
| 4. | Rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders who are recorded on the list or are reported; |
| 5. | When any person bears any obligation or furnishes any security for the rehabilitation, such person. |
| (2) | Notwithstanding the provisions of paragraph (1), the court may elect not to notify any rehabilitation creditor, rehabilitation secured creditor, shareholder and equity right holder who is not entitled to exercise his or her voting rights of the date of the assembly of related persons. <Amended on Dec. 30, 2014> |
| Article 183 (Notification of Date) |
A court shall notify an administrative agency supervising the business affairs of the debtor which is a stock company, the Minister of Justice, and the Financial Services Commission, of the date on which the assembly of related persons is to be held. <Amended on Feb. 29, 2008>
| Article 184 (Presiding over by Court) |
The court shall preside over assemblies of related persons.
| Article 185 (Announcement of Date and Purposes) |
| (1) | The court shall announce the date on which the assembly of related persons is to be held and the agenda of such meeting. |
| (2) | When a declaration is made on the postponement or the continuation of the assembly of related persons, the delivery and the announcement thereof may be omitted. |
| Article 186 (Combination of Date for Assembly of Related Persons and Special Inspection Date) |
When it is deemed appropriate, the court may combine the date of the assembly of related persons and the special inspection date, at the request of the custodian therefor or ex officio.
| Article 187 (Objection to Voting Rights) |
The following persons may raise an objection to voting right of any rehabilitation creditor, rehabilitation secured creditor, shareholder and any equity right holder at the assembly of related persons: Provided, That the same shall not apply to the voting right of any rehabilitation creditor or any rehabilitation secured creditor who holds the rehabilitation claim or the rehabilitation security right confirmed in the inspection procedures provided for in the provisions of Section 3 of Chapter IV of this Part:
| 2. | Any rehabilitation creditor, rehabilitation secured creditor, shareholder and any equity right holder who are all recorded on the list or are reported. |
| Article 188 (Exercise of Voting Rights) |
| (1) | Every rehabilitation creditor or every rehabilitation secured creditor who holds the rehabilitation claim or the rehabilitation security right that becomes final and conclusive may exercise his or her voting rights according to the amount thereof or the number thereof that becomes final and conclusive and every shareholder or equity right holder who holds the voting rights to which no objection is raised may exercise those voting rights according to the amount or the number recorded on the list or are reported. |
| (2) | With respect to any voting rights to which an objection is raised, the court shall determine whether to permit the exercise of the voting rights and the amount or the number on which the voting rights is permitted to be exercised. |
| (3) | The court may, at the request of an interested person or ex officio, amend the determination referred to in the provisions of paragraph (2) at any time. |
| (4) | The determination referred to in the provisions of paragraphs (2) and (3) need not be delivered. |
| Article 189 (Split Voting) |
| (1) | Any voting right holder may split his or her votes. |
| (2) | In cases under paragraph (1), every holder of voting rights shall report in writing the gist thereof to the court at least seven days prior to the assembly of related persons is held. |
| Article 190 (Exclusion of Unjust Voting Right Holders) |
| (1) | When it is deemed that any rehabilitation creditor, rehabilitation secured creditor, shareholder, or equity right holder has acquired his or her rights for the purpose of making unfair gains, including the giving and taking of property benefits in exchange for any resolution, in light of the time at which the right is acquired, the price therefor is paid and of other circumstances, the court may prohibit him or her from exercising his or her voting rights. |
| (2) | The court shall examine the relevant holder of voting rights before it renders the disposition pursuant to the provisions of paragraph (1). |
| Article 191 (Persons Prohibited from Exercising his or her Voting Rights) |
Anyone falling under any of the following subparagraphs shall be prohibited from exercising his or her voting rights:
| 1. | Anyone whose rights are not affected by the rehabilitation plan; |
| 2. | Anyone who holds a claim provided for in the provisions of Article 140 (1) and (2); |
| 3. | Anyone who holds the claim provided for in the provisions of subparagraphs 2 through 4 of Article 118; |
| 4. | Anyone who is prohibited from exercising his or her voting rights pursuant to the provisions of Articles 188 and 190; |
| 5. | Anyone who is protected pursuant to the provisions of Article 244 (2). |
| Article 192 (Exercise of Voting Rights by Proxy) |
| (1) | Any rehabilitation creditor, rehabilitation secured creditor, shareholder and any equity right holder may cause his or her agent to exercise those voting rights. In this case, the agent shall submit written evidence of proxy. |
| (2) | The provisions of Article 189 (2) shall apply mutatis mutandis to cases where the agent splits the delegated votes. |
CHAPTER VI REHABILITATION PLAN
SECTION 1 Contents of Rehabilitation Plan
| Article 193 (Contents of Rehabilitation Plan) |
| (1) | Each of the following matters shall be prescribed in the rehabilitation plan: |
| 1. | Any change to all or part of the rights of any rehabilitation creditor, rehabilitation secured creditor, shareholder or any equity right holder; |
| 2. | The repayment of priority claims; |
| 3. | Means of raising fund to repay the debtor's obligations; |
| 4. | The purpose for using profits, that exceed the amount anticipated in the rehabilitation plan; |
| 5. | When any other claims are known after the rehabilitation procedures commence, the details thereof. |
| (2) | Each of the following matters may be prescribed in the rehabilitation plan: |
| 1. | The transfer of any business or any properties, any investment or any rent and the commission of any corporate governance; |
| 2. | Any amendment to the articles of incorporation; |
| 3. | Any change in directors and the chief executive officer. (When the debtor is not a stock company, anyone who holds the authority to represent the debtor shall be included); |
| 4. | A decrease in the capital; |
| 5. | The issuance of new shares or bonds; |
| 6. | The all-inclusive exchange, transfer, merger, merger after divestiture after division of shares; |
| 8. | The incorporation of a new company; |
| 9. | Other matters necessary for the rehabilitation. |
| (3) | When an agreement is reached among all or some creditors on the repayment order of claims that they hold by the deadline determined by the court in accordance with Article 92 (1), the rehabilitation proposal shall have no provision against claims for which repayment order is agreed insofar as such agreement does not prejudice other creditors under the rehabilitation proposal. In such cases, the creditors shall submit data attesting to their agreement to the court by the deadline determined by the court in accordance with Article 92 (1). <Amended on Dec. 30, 2014> |
| Article 194 (Rights of Rehabilitation Creditors) |
| (1) | When any change is made in the rights of any rehabilitation creditor, rehabilitation secured creditor, shareholder or any equity right holder, such change in rights shall be expressly stated in the rehabilitation plan and the details of the altered rights shall be prescribed after the change thereof. |
| (2) | When the rights of a rehabilitation creditor, a rehabilitation secured creditor, a shareholder or an equity right holder are not affected by the rehabilitation plan, the rights of such person shall be explicitly stated in the rehabilitation plan. |
| Article 195 (Deadline for Obligations) |
Where any obligations are borne and the deadline for any obligations are postponed according to the rehabilitation plan, the time limit of such obligations, when such obligations are secured, shall not exceed the period of the existence of the collateral. When no collateral exists or it is not possible to determine on the period of the existence of such collateral, the period of existence thereof shall not exceed 10 years: Provided, That the same shall not apply to cases where bonds are issued under the conditions prescribed by the rehabilitation plan.
| Article 196 (Furnishing of Security and Bearing of Obligations) |
| (1) | When the debtor or anyone other than the debtor furnishes any security for the rehabilitation, the person who furnishes such security shall be expressly indicated in the rehabilitation plan and the details of such security shall be prescribed in the rehabilitation plan. |
| (2) | When anyone other than the debtor assumes obligations, becomes a guarantor thereof and bears obligations, etc, for the rehabilitation, he or she shall be expressly indicated in the rehabilitation plan and the details of the obligations shall be prescribed in the rehabilitation plan. |
| Article 197 (Unconfirmed Rehabilitation Claims) |
| (1) | When any rehabilitation claim or any rehabilitation security right to which an objection is raised and the claim allowance proceedings therefor are not completed, appropriate measures therefor shall be prescribed in the rehabilitation plan, taking into account the possibility of confirming such claim and such rights. |
| (2) | Appropriate measures shall be prescribed in the rehabilitation plan for claims that are reportable pursuant to the provisions of Article 109 (2). |
| Article 198 (Repaid Rehabilitation Claims) |
Any rehabilitation claim and any rehabilitation security right that are repaid pursuant to the provisions of the proviso to Articles 131 and 132 (1) and (2) among the rehabilitation claims and the rehabilitation security rights shall be expressly stated in the rehabilitation plan.
| Article 199 (Priority Claims) |
Any priority claims that are already repaid shall be expressly indicated in the rehabilitation plan, and priority claims that are scheduled to be repaid in the future shall also be prescribed in the rehabilitation plan.
| Article 200 (Transfer of Business or Properties) |
| (1) | In any of the following cases, the subject matter, the price thereof, the other party and other matters shall be prescribed in the rehabilitation plan: |
| 1. | Where the whole or part of the debtor's business or properties are transferred, invested or rented; |
| 2. | Where the whole or part of the management of the debtor's business is commissioned; |
| 3. | Where any contract under which the profits and losses are shared with any other person and any other contract equivalent thereto are concluded, changed or canceled; |
| 4. | Where the whole or part of another person's business and properties are acquired by transfer. |
| (2) | In cases under paragraph (1), where the proceeds are distributed to any rehabilitation creditor, rehabilitation secured creditor, shareholder and equity right holder, the methods of such distribution shall also be prescribed. |
| Article 201 (Rights on Which Dispute Is Not Settled) |
When any dispute on the rights that belong to the debtor are not settled, matters concerning the acceptance of the compromise or the mediation or custodians’ performance of lawsuit and methods of exercising other rights shall be prescribed in the rehabilitation plan.
| Article 202 (Amendment to Articles of Incorporation) |
When the articles of incorporation of the debtor are amended, the details of the change in the articles of incorporation shall be prescribed in the rehabilitation plan.
| Article 203 (Change in Directors) |
| (1) | When directors of a corporate debtor are appointed or the chief executive officer thereof (when the debtor is not a stock company, anyone who holds the authority to represent the debtor shall be included; hereafter in this Article referred to as "chief executive officer") is selected, the persons who are appointed or to be selected, their terms of office or methods of their appointment shall be prescribed in the rehabilitation plan. |
| (2) | When anyone who is to remain in his or her position among the directors or the chief executive officer of a corporate debtor, he or she shall be designated, along with his or her term of office, in the rehabilitation plan: Provided, That when rehabilitation procedures commence on the grounds of the flight or concealment of the properties or intentional poor management, etc. that are perpetrated and performed by any director or chief executive officer, such persons shall not be entitled to retain their positions. |
| (3) | In cases under paragraphs (1) and (2), when multiple chief executive officers jointly represent the debtor, the gist thereof shall be prescribed in the rehabilitation plan. |
| (4) | The court shall appoint the auditor of a corporate debtor after hearing the opinion thereof of the creditors' consultative council. In this case, the court shall determine his or her term of office. |
| (5) | The terms of office for the directors referred to in the provisions of paragraph (1) or (2) shall not exceed one year. |
| Article 204 (Matters concerning Appointment of Directors) |
The rehabilitation plan concerning methods of selection, appointment or the manner of retention of office of directors, the chief executive officer or auditors of any corporate debtor or any new company (excluding any new company incorporated by merger or resulting from merger after divestiture shall be excluded) shall conform to the principle of equity and also conform to the overall interests of rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders.
| Article 205 (Capital Reductions of Stock Companies or Limited-Liability Companies) |
| (1) | When the capital of a debtor which is a stock company is reduced, both of the following matters shall be prescribed in the rehabilitation plan: |
| 1. | The amount of capital to be reduced; |
| 2. | Ways to reduce the capital; |
| (2) | The reduction of capital under paragraph (1) shall be determined in consideration of the following matters: <Amended on May 20, 2014> |
| 1. | Assets and liabilities, and profit-making capability of the debtor; |
| 2. | Matters concerning the issuance of new stocks provided for in Article 206. |
| (3) | Deleted. <May 20, 2014> |
| (4) | When rehabilitation procedures commence due to an act substantially attributable to any director or any manager of the debtor which is a stock company, the rehabilitation plan shall include that the capital is to be reduced by retiring not less than 2/3 of shares held by shareholders, their relatives and shareholders with a special relationship, the scope of which is prescribed by Presidential Decree, any of whom exercise influence over the conduct that causes the rehabilitation procedures; or by consolidating not less than 3 shares into one share. |
| (5) | When new shares are issued pursuant to the provisions of Article 206 after the capital reduction referred to in the provisions of paragraph (4), the shareholders provided for in the provisions of paragraph (4) shall not be permitted to underwrite the newly issued shares: Provided, That stock options provided for in the provisions of Article 340-2 of the Commercial Act may be granted to the shareholders referred to in the provisions of paragraph (4). |
| (6) | The provisions of paragraphs (1) through (4) and the main clause of paragraph (5) shall apply mutatis mutandis to limited-liability companies. |
| Article 206 (Issuance of New Shares by Stock Companies and Limited-Liability Companies) |
| (1) | Where the debtor, who is a stock company, issues new shares without requiring rehabilitation creditors, rehabilitation secured creditors or share-holders to make new payments or investment in kind, each of the following matters shall be provided for in the rehabilitation plan: |
| 1. | The type and number of new shares; |
| 2. | Matters concerning the allotment of new shares; |
| 3. | The amount of capital and reserve to be increased due to the issuance of new shares; |
| 4. | The amount of liabilities to be decreased due to the issuance of new shares. |
| (2) | Where the debtor, which is a stock company, issues new share after requiring rehabilitation creditors, rehabilitation secured creditors, or share-holders to make new payments or investment in kind, each of the following matters shall be provided in the rehabilitation plan: |
| 1. | The matters under paragraph (1) 1 and 3; |
| 2. | The paid-in amount, matters concerning the allotment of new shares, and the date set for payment of new shares; |
| 3. | Where there exists any person who makes new investment in kind, the person, property which is the object of such investment, the price of the property, and the types and number of shares to be granted thereto. |
| (3) | Where the debtor, which is a stock company, issues new shares, except in cases falling under paragraphs (1) and (2), each of the following matters shall be provided in the rehabilitation plan: |
| 1. | The matters under paragraph (1) 1; |
| 2. | The matters under paragraph (2) 3; |
| 3. | The issue price of new sharer and the date set for payment of new shares; |
| 4. | The amount not added to the capital, among the issue price of new shares. |
| (4) | Where new shares are issued pursuant to the provisions of paragraph (1), none of the following provisions shall apply: <Amended on Aug. 3, 2007; May 19, 2011; Nov 26, 2019> |
| (5) | The provisions of paragraphs (1) through (3) shall apply mutatis mutandis to limited-liability companies. |
| Article 207 (All-Inclusive Share Swap of Stock Companies) |
When the debtor which is a stock company performs an all-inclusive share swap with another company, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan:
| 1. | The trading name of the other company; |
| 2. | Where other company becomes a wholly owning parent company, as detailed under Article 360-2 (1) of the Commercial Act (hereinafter referred to as "wholly owning parent company"), when the other company amends its articles of incorporation by way of an all-inclusive share swap, the regulations therefor; |
| 3. | Matters concerning the total number and types of shares and the number of shares by type that are newly issued by the company that becomes a wholly owning parent company for the all-inclusive share swap and the distribution of newly issued shares to shareholders by the company that becomes a wholly owned subsidiary (hereinafter referred to as "wholly owned subsidiary") as defined under Article 360-2 (1) of the Commercial Act; |
| 4. | Matters concerning the amount of capital and reserve to be raised by the company that becomes a wholly owning parent company; |
| 5. | When it is prescribed to pay money or distribute bonds to shareholders of the other company, the regulations therefor; |
| 6. | The date and time on, and at which the general meeting of shareholders is held to approve a resolution for a written contract under which the all-inclusive share swap is performed with any other company (where the company performs the all-inclusive share swap without obtaining approval therefor at the general meeting of shareholders, the gist thereof); |
| 7. | The date on which the all-inclusive share swap is performed; |
| 8. | When the other company distributes its profits by the date on which the all-inclusive share swap is performed or distributes the profits in cash pursuant to the provisions of Article 462-3 (1) of the Commercial Act, the limited amount thereof; |
| 9. | When the company that becomes a wholly owning parent company pursuant to the provisions of Article 360-6 of the Commercial Act transfers its shares, the total number and the types of shares, and the number of shares by type that are to be transferred; |
| 10. | When the company that becomes a wholly owning parent company appoints directors and an auditor, their names and their resident registration numbers. |
| Article 208 (Comprehensive Transfer of Shares of Stock Companies) |
When the debtor which is a stock company incorporates a new company that is a wholly owning parent company through a comprehensive transfer of shares, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan:
| 1. | The trading name of the newly incorporated company; |
| 2. | The articles of incorporation of the newly incorporated company; |
| 3. | Matters concerning the types and the number of shares that are issued by the newly incorporated company for the comprehensive transfer of shares, the distribution of shares by the debtor who becomes a wholly owning parent company to rehabilitation creditors, rehabilitation secured creditors or shareholders; |
| 4. | Matters concerning the amount of capital and reserve of the newly incorporated company; |
| 5. | When it is decided to pay cash or distribute bonds to the shareholders of the debtor who becomes a wholly owned subsidiary, the regulations therefor; |
| 6. | The time frame during which comprehensive transfer of shares is performed; |
| 7. | When the debtor who becomes a wholly owned subsidiary distributes his or her profits by the date on which the comprehensive transfer of shares is performed and the profits are distributed in cash pursuant to the provisions Article 462-3 (1) of the Commercial Act, the limited amount thereof; |
| 8. | The names and resident registration numbers of the directors and auditors of the newly incorporated company. |
| Article 209 (Issuance of Bonds by Stock Companies) |
When a debtor which is a stock company issues bonds, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan:
| 1. | The total amount of bonds; |
| 2. | The value of each of the bonds, the interest rate of the bonds, methods of redeeming the bonds and the deadline for redeeming the bonds, methods of paying the interest thereon and the details of the bonds; |
| 3. | Methods to issue the bonds and when the bonds are issued by causing rehabilitation creditors, rehabilitation secured creditors or shareholders to make new payments or without causing them to do so, the matters concerning the distribution of such new payments; |
| 4. | When the bonds are collateralized, the details of the security rights. |
| Article 210 (Mergers of Stock Companies) |
When a debtor which is a stock company, merges with any other company and a party to the merger survives the merger, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan:
| 1. | The trading name of the other company; |
| 2. | The types and the number of shares and equity shares that are issued by the surviving company when it merges with any other company, and matters concerning restrictions on the rights of shareholders and equity right holders to underwrite newly issued shares, or equity shares and when it is decided to grant such rights to any third person, matters concerning such rights; |
| 3. | The types, the number and the distribution of shares or equity shares that are issued to the rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders of any company that is extinguished by merger and matters concerning the distribution of such shares or equity shares; |
| 4. | The amount of capital and reserve that are expected to be raised in the surviving company; |
| 5. | When it is decided to pay cash or distribute bonds to the shareholders and equity right holders of any company that is extinguished by merger, the regulations therefor; |
| 6. | The date and the time on, or at which the general meeting of shareholders or the general meeting of members is held to resolve on the approval of a written merger contract; |
| 7. | The date on which a merger is effected; |
| 8. | Where surviving company decides to amend the articles of incorporation due to merger, the regulations therefor; |
| 9. | When the other company distributes its profits or distributes the profits in cash due to merger pursuant to the provisions of Article 462-3 (1) of the Commercial Act, the limited amount thereof; |
| 10. | When any director or any auditor (including the members of the audit committee; hereafter in this Article through Article 213 the same shall apply) who is to take office in the surviving company due to merger is selected, his or her name and resident registration number. |
| Article 211 (Consolidation of Companies) |
When the debtor, who is a company, incorporates a new company as a result of consolidation with another company, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan:
| 1. | The trading name of the other company; |
| 2. | The trading name, purposes, the locations of the principal office and the branch offices, the amount of capital and reserve and methods of notification of the newly incorporated company; |
| 3. | The types and the number of shares and equity shares that are issued by the newly incorporated company and their distribution; |
| 4. | When matters concerning restrictions on the rights of shareholders and equity secured creditors to underwrite shares or equity shares that are newly issued by the newly incorporated company at the time that the company is newly incorporated and matters concerning the underwriting of such shares or equity shares by any specific third person are prescribed, the matters thereof; |
| 5. | The types and the number of shares or equity shares that are issued for rehabilitation creditors and rehabilitation secured creditors, the shareholders and equity right holders of the debtor or the shareholders and equity right holders of the other company and matters concerning their distribution; |
| 6. | When it is decided to pay cash or distribute bonds to shareholders and equity right holders of each company, the regulations therefor; |
| 7. | The date and the time on, and at which the general meeting of shareholders or the general meeting of members of any other company is held to resolve on the approval for a merger contract; |
| 8. | The date on which the consolidation is effected; |
| 9. | When the other company distributes its profits or its profits in cash on the grounds of merger pursuant to the provisions of Article 462-3 (1) of the Commercial Act, the limited amount thereof; |
| 10. | When any director and any auditor who are to take office in any company that survives the merger are selected, their names and resident registration numbers. |
| Article 212 (Splits of Stock Companies) |
| (1) | When a debtor which is a stock company, incorporates a new company after a split of its stock company, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan: |
| 1. | The firm name, purposes, the locations of the principal office and the branch offices, the number of shares to be issued, the value per share, the amount of capital and reserve and the methods of notification of the newly incorporated company; |
| 2. | The total number and the types of shares and the number of shares by type that are issued by the newly incorporated company; |
| 3. | The matters concerning restrictions on the rights of shareholders to underwrite new shares issued by any new company, which are prescribed at the time that such new company is incorporated and when the right to underwrite new shares is granted to any specific third person, the matters with regard thereto; |
| 4. | When the shares of any newly incorporated company are distributed to the rehabilitation creditors, rehabilitation secured creditors or shareholders of the debtor without causing them to make new payments, the matters concerning the total number and the types of shares and the number of shares by type that are issued, and the distribution of such shares and when the shares are combined or divided by their distribution, the matters with regard thereto; |
| 5. | When it is decided to pay cash and distribute bonds to the shareholders of the debtor, the regulations therefor; |
| 6. | The properties and the value thereof, which are transferred to the newly incorporated company; |
| 8. | Persons who are expected to become directors, the chief executive officer and auditors of the newly incorporated company, ways to appoint them and their terms of office. In this case, their terms of office shall not exceed one year; |
| 9. | When the newly incorporated company issues bonds, the matters referred to in each subparagraph of Article 209; |
| 10. | When shares are issued by causing rehabilitation creditors, rehabilitation secured creditors, shareholders or any third person to pay for them the matters concerning the amount of their payments, the distribution of such shares and the dates of their payments; |
| 11. | When anyone makes investment in kind, his or her name and resident registration number, the property that is the object of such investment, the price thereof and the types and the number of shares that are distributed in return; |
| 12. | Other matters to be entered in the articles of incorporation of the newly incorporated company; |
| 13. | The amount of capital and reserve; |
| 14. | The date on which the split is effected. |
| (2) | When the debtor remains existence after a split, the matters falling under each of the following subparagraphs with respect to the debtor shall be prescribed in the rehabilitation plan: |
| 1. | The amount of capital and reserve to be reduced; |
| 2. | Ways to reduce the capital; |
| 3. | The properties that are transferred on the due to the spit and their value; |
| 4. | The total number of shares issued after the split; |
| 5. | When the total number of shares issued by the debtor is reduced, the total number and the kinds of shares and the number of shares by kind, which are reduced; |
| 6. | Other matters that result in an amendment of in the articles of incorporation. |
| Article 213 (Merger after Divestiture of Stock Companies) |
| (1) | Where a debtor which is a stock company, is split and part of such stock company is merged with another company and the latter survives, or where the other company is split and part of such other company merges with the debtor which is a stock company and such debtor survives, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan: |
| 1. | The trading name of the other company; |
| 2. | When the total number of shares that the surviving company has to issue on the grounds of the merger after divestiture increases, the matters concerning the total number of shares that increases, the types of shares and the number of shares by type that increase and restrictions on the rights of shareholders to underwrite such shares and the right of any third person to underwrite newly issued shares is given, the regulations therefor; |
| 3. | The matters concerning the total number, types of new shares and the number of shares by type issued for the rehabilitation creditors, rehabilitation secured creditors and shareholders of the debtor who is split or the distribution of such shares, and when the combination or the division of shares is performed on the grounds of their distribution, the matters thereabout; |
| 4. | When it is decided to prescribe the payment of cash and the distribution of bonds to shareholders of any company that is to split, the matters thereabout; |
| 5. | Matters concerning the total amount of capital and reserve of the surviving company, which is raised; |
| 6. | The properties and their value that the debtor who is split transfers to the surviving company; |
| 8. | The date and time on, and at which the general meeting of shareholders of the other company is held to resolve on the approval of a written agreement on merger after divestiture; |
| 9. | The date on which the merger after divestiture is effected; |
| 10. | Where the other company survives, when the directors and auditors of such company are selected, their names and resident registration numbers; |
| 11. | Other matters that result in an amendment of the articles of incorporation of the surviving debtor. |
| (2) | Where the debtor is split and part of the debtor is consolidated with the whole or part of another company to form a new company, or where the other company is split and part of such other company is consolidated with the whole or part of the debtor to form a new company, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan: |
| 1. | The trading name of the other company; |
| 2. | The trading name, purposes, the locations of the principal office and branch offices, the number of shares to be issued, the value per share, the amount of capital and reserve, and methods of notification of the newly incorporated company; |
| 3. | Matters concerning restrictions on the rights of shareholders to underwrite shares that are issued by the newly incorporated company at the time the new company is incorporated and when it is prescribed that the right to underwrite new shares is granted to any specific third person, the matters with regard thereto; |
| 4. | The properties and their value, which are transferred by the debtor or the other company to the newly incorporated company; |
| 6. | Other matters to be entered in the articles of incorporation of the newly incorporated company; |
| 7. | Matters concerning the total number and the types of shares, and the number of shares by type issued for the rehabilitation creditors, rehabilitation secured creditors and shareholders of the debtor or the shareholders of the other company, and when the shares are combined or split upon distribution, the matters with regard thereto; |
| 8. | When it is prescribed to pay cash or distribute bonds to the debtor or the shareholders of the other company, the matters with regard thereto; |
| 9. | The date and the time on, and at which the general meeting of shareholders of the other company is held to resolve on the approval for a written agreement on merger after divestiture; |
| 10. | The date on which the merger after divestiture is effected; |
| 11. | Persons who are expected to become directors, the chief executive officer and auditors of the newly incorporated company, their appointment, methods of selecting them and their terms of office. In this case, their terms of office shall not exceed one year; |
| (3) | The provisions of Article 212 shall apply mutatis mutandis to cases where the part that is not subject to the merger after divestiture of the debtor provided for in the provisions of paragraphs (1) and (2) is prescribed. |
| Article 214 (Physical Division of Stock Companies) |
The provisions of Articles 212 and 213 shall apply mutatis mutandis to cases where the debtor, who is a stock company to be split, acquires all of the shares of any company that is incorporated by split or merger after divestiture.
| Article 215 (Incorporation of New Company by Stock Companies or Limited- Liability Companies) |
| (1) | When a new company (limited to any stock company or any limited-liability company. hereafter in this Article the same shall apply) is incorporated by causing rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders to underwrite its shares or its equity shares instead of causing them to make new payments or make investment in kind therein, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan: |
| 1. | The trading name, purposes, the locations of the principal office and branch offices and methods of notification of the newly incorporated company; |
| 2. | The kinds and the number of shares and equity shares issued by the newly incorporated company; |
| 3. | The value per share or per investment; |
| 4. | Matters concerning restrictions on the rights of shareholders to underwrite shares or equity shares or the rights of equity right holders to underwrite equity shares, each of which are issued by the newly incorporated company at the time that the new company is incorporated, and when the right of any third person to do so is prescribed, the matters with regard thereto; |
| 5. | Matters concerning the types, the number and the distribution of shares or equity shares issued for rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders; |
| 6. | Other matters that are entered in the articles of incorporation of the newly incorporated company; |
| 7. | The amount of capital and amount of reserve of the newly incorporated company; |
| 8. | The properties, and their value, that are transferred from the debtor to the newly incorporated company; |
| 9. | Persons who are expected to become directors, the chief executive officer and auditors in the newly incorporated company, their appointment, methods of selecting them and their terms of office. In this case, their terms of office shall not exceed one year; |
| 10. | When the newly incorporated company issues bonds, the matters referred to in each subparagraph of Article 209; |
| (2) | With the exception of cases under paragraph (1), when a new company is incorporated without resorting to the all-inclusive share swap, any merger, any split or any merger after divestiture, the matters falling under each of the following subparagraphs shall be prescribed in the rehabilitation plan: |
| 1. | The matters referred to in paragraph (1) 1 through 3, 6, and 8 through 10; |
| 2. | The types and the number of shares or equity shares issued at the time the new company is incorporated and when rehabilitation creditors, rehabilitation secured creditors or equity right holders are permitted to underwrite shares or equity shares without causing them to make new payments or make investments in kind, the matters referred to in paragraph (1) 5; |
| 3. | When anyone makes a new investment in kind, his or her name and resident registration number, the properties that are the object of his or her investment and the value thereof, and the types and number of shares and equity shares each provided in return for his or her investment. |
| Article 216 (Dissolution) |
When the debtor dissolves his or her company without resorting to any merger, any split or any merger after divestiture. the gist thereof and the time of the dissolution of his or her company shall be prescribed in the rehabilitation plan.
| Article 217 (Fair and Equitable Differentiation) |
| (1) | The rehabilitation plan shall accord fair and equitable treatment taking into account the ranking order of the rights referred to in the provisions of each of the following subparagraphs: |
| 1. | Rehabilitation security rights; |
| 2. | Rehabilitation claims with general preferential right; |
| 3. | Rehabilitation claims, other than the rehabilitation claims referred to in subparagraph 2; |
| 4. | The rights of shareholders and equity right holders, the details of which call for the preferential distribution of the residual property; |
| 5. | The rights of shareholders and equity right holders, other than the rights referred to in the provisions of subparagraph 4. |
| (2) | The provisions of paragraph (1) shall not apply to claims provided for in the provisions of Article 140 (1) and (2). |
| Article 218 (Principle of Equity) |
| (1) | The conditions of the rehabilitation plan shall allow for equity between persons who hold rights of the same nature: Provided, That the same shall not apply to the following cases: <Amended on May 29, 2016> |
| 1. | When consent is obtained from a person who suffers disadvantage; |
| 2. | When the principles of equity are not undermined even if any rehabilitation creditor, any rehabilitation secured creditor whose claims are minor in terms of amount, or any person who holds a claim provided for in subparagraphs 2 through 4 of Article 118 are differently prescribed or differentiated; |
| 3. | When the rehabilitation claims of a small and medium business entrepreneur who is a transaction partner of the debtor is repaid preferentially to other rehabilitation claims in fear that the rehabilitation claims are likely to cause a clear impediment to the continuation of the business; |
| 4. | When the principles of equity are not undermined even if persons who hold rights of the same kind are differentiated. |
| (2) | Where each of the following claims is prescribed differently from other rehabilitation claims or is differentiated in the rehabilitation plan, it is recognized that such does not undermine the principles of equity, and such claim may be handled more disadvantageously than other rehabilitation claim: |
| 1. | A claim arising out of a cash loan extended to a person with a special relationship, whose scope is prescribed by the Presidential Decree, with the debtor before the rehabilitation procedures commence; |
| 2. | A claim regarding guarantee obligations where the debtor becomes a guarantor without compensation for the person in a special relationship, the scope of which is prescribed by the Presidential Decree, with the former before the rehabilitation procedures commence; |
| 3. | A claim for indemnification arising out of a guarantee liability for the debtor where the person in a special relationship, whose scope is prescribed by the Presidential Decree, with the debtor becomes a guarantor for the debtor before the rehabilitation procedures commence. |
| Article 219 (Voidance of Act of Giving Special Profits) |
The act of giving special benefits to any rehabilitation creditor, rehabilitation secured creditor, shareholder and equity right holder in his or her name or in the name of any third person, without resorting to the rehabilitation plan, shall be null and void.
SECTION 2 Submission of Rehabilitation Proposal
| Article 220 (Submission of Rehabilitation Proposal) |
| (1) | A custodian shall prepare and present a rehabilitation proposal to the court within the period determined by the court, in accordance with Article 50 (1) 4 or paragraph (3) of the same Article. |
| (2) | A custodian shall, in case of being unable to prepare a rehabilitation proposal within the period under paragraph (1), report the fact to the court within that period. |
[This Article Wholly Amended on Dec. 30, 2014]
| Article 221 (Submission of Rehabilitation Proposal by Rehabilitation Creditors) |
A person falling under any of the following subparagraphs may prepare and present a rehabilitation proposal to the court within the period under Article 220 (1): | 2. | A rehabilitation creditor, rehabilitation secured creditor, shareholder or equity right holder who is entered into the list or has made a report; |
[This Article Wholly Amended on Dec. 30, 2014]
| Article 222 (Rehabilitation Proposal Whose Details Aim for Liquidation or Business Transfer) |
| (1) | When the value of the debtor's business is deemed higher where the business is liquidated than its value when the debtor's business continues, the court may, at the request of a person falling under any of the following subparagraphs, permit the development of a rehabilitation proposal, the details of which are geared toward liquidation (including the transfer of the whole or part of the business and the asset spinoff of the business): Provided, That the same shall not apply where it prejudices the interests of the creditors in general: |
| 3. | Any rehabilitation creditor, rehabilitation secured creditor, shareholder, or any equity right holder each of whom are recorded on the list and are reported; |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to cases where it becomes manifestly difficult to develop a rehabilitation proposal, the details of which are geared toward the continuation of the business through debtors being in existence, merger, split, merger after divestiture and the incorporation of a new company, etc. after rehabilitation procedures commence. |
| (3) | The court may revoke the permission referred to in the provisions of paragraph (1) or (2) at any time until the rehabilitation proposal is presented for resolution. |
| (4) | The provisions of Article 236 (4) shall apply mutatis mutandis to the permission referred to in the provisions of paragraphs (1) and (2). |
| Article 223 (Prior Submission of Rehabilitation Proposal) |
| (1) | Any creditor who holds a claim corresponding to at least 1/2 of the debtor's obligations or any debtor who has obtained the consent of such creditor may develop a rehabilitation proposal and submit it to the court from the time when rehabilitation procedures commence before the commencement of rehabilitation procedures. <Amended on Dec. 30, 2014; May 29, 2016> |
| (2) | The court shall keep the rehabilitation proposal (when the rehabilitation proposal is revised pursuant to Article 228 or 229 (2), this refers to the revised rehabilitation proposal; hereafter in this Article referred to as "prior rehabilitation proposal") in the court for inspection by interested parties. |
| (3) | Creditors other than creditors who have submitted the prior rehabilitation proposal, may express their intentions to agree to the prior rehabilitation proposal in writing to the court by the date preceding the date the assembly of related persons is held or the date preceding the first day of the period determined by the court under Article 240 (2) to resolve on the rehabilitation proposal. <Amended on May 29, 2016> |
| (4) | Any person who submits a prior rehabilitation proposal shall submit lists of rehabilitation creditors, rehabilitation secured creditors, shareholders, and equity holders (it must include the matters specified in the subparagraphs of Article 147 (2)), documents including the matters provided for in the subparagraphs of Article 92 (1), and other documents prescribed by the Supreme Court Regulations to the court before rehabilitation procedures commence. <Newly Inserted on May 29, 2016> |
| (5) | When the lists of rehabilitation creditors, rehabilitation secured creditors, shareholders, and equity holders referred to in paragraph (4) are submitted, such lists shall be considered as lists in Article 147 (1). <Newly Inserted on May 29, 2016> |
| (6) | When the prior rehabilitation proposal is submitted, the relevant custodian need not submit the rehabilitation proposal after obtaining exemption thereof from the court or may withdraw the rehabilitation proposal that he or she has submitted to the court. <Amended on May 29, 2016> |
| (7) | Any creditor who has submitted the prior rehabilitation proposal or who has expressed an intention to agree to the prior rehabilitation proposal shall be deemed to have agreed to it when the prior rehabilitation proposal is approved by a resolution at the assembly of related persons that is called for the adoption thereof: Provided, That when the contents of the prior rehabilitation proposal are amended to the detriment of creditors, circumstances are greatly changed and material grounds exist, such creditors may withdraw their agreements after obtaining the court's permission therefor by the day preceding the date on which the assembly of related persons is held. <Amended on Dec. 30, 2014; May 29, 2016> |
| (8) | When a prior rehabilitation proposal is proposed as a written resolution under Article 240 (1), any creditor who has submitted a prior rehabilitation proposal, or who has expressed his or her agreement to such prior rehabilitation proposal before the response period prescribed in paragraph (2) of the same Article shall be considered to have agreed within the response period mentioned in the above: Provided, That when the details of the prior rehabilitation proposal is revised unfavorably to the creditor or there exists a substantial circumstantial change or there exists other grave grounds, the creditor may withdraw his or her agreement by obtaining permission from the court by the date the response period terminates. <Newly Inserted on May 29, 2016> |
| Article 224 (Assembly of Related Persons Held to Review Rehabilitation Proposal) |
When the rehabilitation proposal is submitted, the court shall call an assembly of related persons to review such rehabilitation proposal on a fixed date: Provided, That the same shall not apply to cases where it is proposed as a written resolution provided for in the provisions of Article 240.
| Article 225 (Hearing of Opinions with Respect to Rehabilitation Proposal) |
The court shall hear the opinions of any of the following persons concerning the rehabilitation proposal after hearing an explanation of the rehabilitation proposal from the submitters of such rehabilitation proposal at the assembly of related persons provided for in the provisions of Article 224: | 3. | Rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders who are entered in the list or are reported; |
| Article 226 (Opinions of Supervisory Administrative Agencies) |
| (1) | The court may, if deemed necessary, request an administrative agency supervising the debtor's business, the Minister of Justice, the Financial Services Commission, or any other administrative agency to state its opinions with respect to the rehabilitation proposal. <Amended on Feb. 29, 2008> |
| (2) | With respect to the rehabilitation proposal that provides for the matters requiring permission, authorization, license, and other dispositions of administrative agencies, the court shall hear the opinions on such matters from the relevant administrative agencies. |
| (3) | An administrative agency supervising the debtor's business, the Minister of Justice, or the Financial Services Commission may, at any time, state its opinions on the rehabilitation proposal to the court. <Amended on Feb. 29, 2008> |
| Article 227 (Opinions of Debtor's Union) |
The court shall hear the opinion of the person falling under each of the following subparagraphs with respect to a rehabilitation proposal:
| 1. | A union comprised of a majority of the debtor's employees; |
| 2. | When the union referred to in subparagraph 1 is nonexistent, the person who represents a majority of the debtor's employees. |
| Article 228 (Revision of Rehabilitation Proposals) |
Any submitter of a rehabilitation proposal may revise the rehabilitation proposal after obtaining permission from the court therefor by the date on which an assembly of related persons is held to review a rehabilitation proposal or by the date on which it is decided to propose a rehabilitation proposal as a written resolution pursuant to the provisions of Article 240.
| Article 229 (Order Given to Revise Rehabilitation Proposals) |
| (1) | The court may order any submitter of a rehabilitation proposal to revise it, at the request of an interested person or ex officio. |
| (2) | When an order is issued by the court pursuant to the provisions of paragraph (1), the submitter of the rehabilitation proposal shall revise it within the deadline set by the court. |
| Article 230 (Resumption of Assembly of Related Persons) |
| (1) | When a revision as provided for in the provisions of Article 229 is made after the date on which the assembly of related persons is held to review the rehabilitation proposal, the court may call an assembly of related persons to review the proposed revision on a refixed date. |
| (2) | The provisions of Article 225 shall apply mutatis mutandis to the assembly of related persons referred to in the provisions of paragraph (1). |
| Article 231 (Exclusion of Rehabilitation Proposal) |
Where a rehabilitation proposal falls under any of the following subparagraphs, the court may elect not to refer the rehabilitation proposal to the assembly of related persons for review or resolution:
| 1. | If the rehabilitation proposal is in violation of statutes; |
| 2. | If the rehabilitation proposal is not fair or equitable; |
| 3. | If it is impossible to implement the rehabilitation proposal. |
| Article 231-2 (Exceptional Provisions concerning Preclusion of Rehabilitation Proposal) |
| (1) | The court may elect not to refer a rehabilitation proposal to the assembly of related persons for review or resolution, where the content of the rehabilitation proposal is concerning any act falling under the subparagraphs of Article 57 and all the following requirements are satisfied: |
| 1. | A requirement that it is deemed that the cause for the commencement of rehabilitation procedures has occurred due to any act substantially attributable to any of the following persons: |
| (b) | An auditor of the debtor that is a company; |
| (c) | A manager of the debtor that is a company. |
| 2. | A requirement that a person who intends to conduct any act falling under the subparagraphs of Article 57 falls under any of the following: |
| (a) | A case where the person raises funds necessary for conducting any act falling under the subparagraphs of Article 57 through the fund provision, security furnishing or debt guarantee by any person falling under subparagraph 1; |
| (b) | A case where, in considering the current and past transaction relations, equity ownership relations and fund provision relations, it is deemed that the person has common economic interests with any person falling under subparagraph 1, with respect to business operation such as taking over of the management right of the debtor; |
| (c) | A case where the person is in any such special relationship with any person falling under subparagraph 1 as prescribed by Presidential Decree, such as his or her spouse or lineal blood relative. |
| (2) | The court shall not refer a rehabilitation proposal to the assembly of related persons for review or resolution, where the content of the rehabilitation proposal is concerning any act falling under the subparagraphs of Article 57 and a person who intends to conduct such act or a person who is in a special relationship with that person falls under any of the following subparagraphs: |
| 1. | A case where either person is a person in whose case ten years have not elapsed since the complete execution (including a case of being deemed to have been completely executed) or exemption from execution of his or her imprisonment without labor or greater punishment which was declared by a court, for having committed any of the crimes (including crimes and attempted crimes subject to aggravated punishment in accordance with the Criminal Act or other statutes) specified in Articles 347, 347-2, 349, 355, 356, and 357 of the Criminal Act against the debtor; |
| 2. | A case where either person is under suspension of the execution or sentence of his or her imprisonment without labor or greater punishment declared by as court for having committed a crime falling under subparagraph 1 against the debtor; |
| 3. | A case where either person is a person in whose case five years have not elapsed since the complete execution (including a case of being deemed to have been completely executed) or exemption from execution of his or her imprisonment without labor or greater punishment which was declared by a court for having violated this Act; |
| 4. | A case where the person is under suspension of the execution or sentence of his or her imprisonment without labor or greater punishment declared by a court for having violating this Act. |
| (3) | The court may, if necessary for verifying the matters specified in paragraph (1) or (2), order the debtor, the custodian, the protective custodian, other interested person, etc, to provide the relevant information or submit the relevant materials. |
[This Article Newly Inserted on Oct. 15, 2014]
| Article 232 (Assembly of Related Persons Called to Resolve on Rehabilitation Proposal) |
| (1) | When the court does not order to revise the rehabilitation proposal that goes through the review of the assembly of related persons pursuant to the provisions of Article 224 or 230, the court shall call an assembly of related persons to resolve on the rehabilitation proposal setting a date therefor. |
| (2) | In cases under paragraph (1), the court shall deliver in advance a copy or summary of the rehabilitation proposal to following persons: |
| 3. | Rehabilitation creditors, rehabilitation secured creditors, and shareholders and equity right holders (excluding anyone not entitled to exercise his or her voting rights) who are entered in the list or are reported; |
| 4. | Any person who bears any obligations or provides security for the rehabilitation. |
| (3) | The delivery referred to in the provisions of paragraph (2) may be made by mail. |
| (4) | The provisions of Article 8 (4) and (5) shall apply mutatis mutandis to the delivery referred to in the provisions of paragraph (3). |
| Article 233 (Presence of Persons who Bear Obligations for Rehabilitation) |
| (1) | Anyone who bears any obligation or provides any security for rehabilitation shall be present to state the gist thereof on the date provided for in the provisions of Article 232 (1): Provided, That he or she may cause his or her agent to be present when justifiable grounds thereof exist. |
| (2) | The agent referred to in the proviso to the provisions of paragraph (1) shall submit written evidence of proxy. |
| (3) | When it is placed in a written resolution pursuant to the provisions of Article 240, the terms of an agreement of any person who bears any obligations or provides a security shall be prescribed in the rehabilitation proposal after obtaining such agreement from such person instead of the statement referred to in the provisions of paragraph (1). |
| Article 234 (Amendment to Rehabilitation Proposal) |
Any submitter of the rehabilitation proposal may amend such rehabilitation proposal at the assembly of related persons provided for in the provisions of Article 232 (1) after obtaining permission therefor from the court only when such change is not prejudicial to rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders.
SECTION 3 Resolution on Rehabilitation Proposal
| Article 235 (Timing of Resolution) |
The rehabilitation proposal shall not be presented for resolution before the inspection period expires.
| Article 236 (Methods of Resolution and Categorization of Rehabilitation Creditors) |
| (1) | When a resolution is placed on the agenda of an assembly of related persons pursuant to the provisions of Article 232 (1), or a written resolution is placed on the agenda pursuant to the provisions of Article 240, rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders shall participate in such resolution as a group as categorized pursuant to the provisions of paragraphs 2, 3 and 5. |
| (2) | Rehabilitation creditors, rehabilitation secured creditors, shareholders, equity right holders shall be categorized into the groups falling under each of the following subparagraphs for their participation in the development and the passing of resolutions on the rehabilitation proposal: Provided, That the same shall not apply to anyone who holds a claim provided for in the provisions of Article 140 (1) and (2): |
| 1. | Rehabilitation secured creditors; |
| 2. | Rehabilitation creditors who have claims with general preferential right; |
| 3. | Rehabilitation creditors other than rehabilitation creditors referred to in the provisions of subparagraph 2; |
| 4. | Shareholders and equity right holders who hold shares or equity shares that take priority in regards to the distribution of the residual property; |
| 5. | Shareholders and equity right holders other than the shareholders and the equity right holders provided for in the provisions of subparagraph 4. |
| (3) | The court may categorize persons who fall under at least two subparagraphs into one group or persons who fall under one subparagraph into at least two groups taking into account the nature of the rights held by the persons referred to in each subparagraph of paragraph (2) and the relation of interest: Provided, That rehabilitation secured creditors, rehabilitation creditors, shareholders and equity right holders shall each be categorized into another group. |
| (4) | Anyone falling under any of the following subparagraphs may state his or her opinion with respect to the categorization referred to in the provisions of paragraph (3): |
| 3. | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder who are all recorded on the list or are reported. |
| (5) | The court may alter the categories referred to in the provisions of paragraphs (2) and (3) at any time before the rehabilitation proposal is presented for resolution. |
| (6) | The provisions of Article 163 shall apply mutatis mutandis to the delivery of the decision referred to in the provisions of paragraphs (3) and (5): Provided, That when a declaration is made on the date on which the assembly of related persons is held, no service need be made. |
| Article 237 (Requirements for Adoption) |
A rehabilitation proposal shall be adopted at an assembly of related persons, according to each of the following groups:
| 1. | Group of rehabilitation creditors: |
Consent shall be obtained from the persons holding the voting rights equivalent to at least 2/3 of the total amount of the voting rights of the rehabilitation creditors who are entitled to exercise their voting rights;
| 2. | Group of rehabilitation secured creditors: |
| (a) | With respect to the rehabilitation proposal under Article 220, consent shall be obtained from the persons holding the voting rights equivalent to at least 3/4 of the total amount of the rehabilitation secured creditors who are entitled to exercise their voting rights; |
| (b) | With respect to the rehabilitation proposal under Article 222, consent shall be obtained from the persons holding the voting rights equivalent to at least 4/5 of the total amount of the rehabilitation secured creditors who are entitled to exercise their voting rights; |
| 3. | Group of shareholders or equity right holders: |
Consent shall be obtained from the persons holding the voting rights equivalent to at least 1/2 of the total number of the voting rights of shareholders or equity right holders who are entitled to exercise their voting rights at an assembly of related persons to approve the rehabilitation proposal.
| Article 238 (Designation of Hearing Continuation Date) |
Where an assembly of related persons fails to resolve on the rehabilitation proposal, when persons falling under the following subparagraphs agree on continuation, the court may set a hearing continuation date, ex officio or at the request of the custodian or the debtor and any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder who are entitled to exercise their voting rights: <Amended on Dec. 30, 2014>
| 1. | Persons who hold voting rights equivalent to not less than 1/3 of the total voting rights of the rehabilitation creditors who are entitled to exercise their voting rights from among group of rehabilitation creditors; |
| 2. | Persons who hold voting rights equivalent to not less than 1/2 of the total voting rights of the rehabilitation secured creditors who are entitled to exercise their voting rights from among the group of rehabilitation secured creditors; |
| 3. | Persons who hold voting rights equivalent to not less than 1/3 of the total voting rights of the shareholders and equity right holders who are entitled to exercise their voting rights from among the group of shareholders and equity right holders. |
| Article 239 (Timing of Resolution) |
| (1) | The rehabilitation proposal shall be resolved upon within two months from the first day of the assembly of related persons provided for in the provisions of Article 232 (1). |
| (2) | When it is deemed necessary, the court may extend the period referred to in the provisions of paragraph (1), at the request of any submitter of the rehabilitation proposal or ex officio. In this case, the period shall not exceed one month. |
| (3) | The rehabilitation proposal shall be resolved upon within one year from the date on which rehabilitation procedures commence: Provided, That the court may extend the period by up to 6 months for unavoidable reasons. |
| Article 240 (Resolutions in Writing) |
| (1) | If it is deemed appropriate when the rehabilitation proposal is submitted, the court may render judgment to the effect that the rehabilitation proposal be presented for written resolution (hereafter in this Part referred to as "written resolution"). In such cases, the court shall publicly notify the gist thereof. |
| (2) | When the written resolution referred to in paragraph (1) is decided, the court deliver a copy or a summary of the rehabilitation proposal to each of the persons provided for in Article 182 (1) and also deliver a written statement to each of the voting right holders, requesting them to confirm in writing as to whether they agree with the rehabilitation proposal, their opinions with respect to whether authorization is granted and whether they agree the designation of a hearing continuation date if the rehabilitation proposal is not resolved within the period set by the court (hereafter in this Chapter referred to as "response period") (when a prior rehabilitation proposal prescribed in Article 223 (2) is submitted, no confirmation as to whether they agree to the designation of a hearing continuation date is needed). In such cases, the response period shall not exceed two months from the date the decision referred to in paragraph (1) is made. <Amended on May 29, 2016> |
| (3) | The delivery referred to in the provisions of paragraph (2) may be made by mail. |
| (4) | When the rehabilitation proposal is delivered pursuant to paragraph (2), it shall be deemed that the assembly of related persons held to review the rehabilitation proposal provided for in Article 224 comes to an end. |
| (5) | When the written agreement of voting right holders to the rehabilitation proposal delivered to the court within the response period meet the requirements for a resolution provided for in Article 237, the rehabilitation proposal shall be deemed resolved upon. |
| (6) | Articles 188 (1) through (3) and 189 shall apply mutatis mutandis to every written resolution. |
| (7) | When a hearing continuation date provided for in Article 238 is designated for the rehabilitation proposal that is not resolved upon by means of a written resolution, the rehabilitation proposal shall be presented for resolution on the hearing continuation date and it shall not be presented for written resolution again. |
| Article 241 (Survival of Corporation If Rehabilitation Proposal Adopted) |
When rehabilitation procedures commence and the rehabilitation proposal is resolved upon for a debtor who is an incorporated association or an incorporated foundation that is under liquidation or is declared bankrupt, such incorporated association may continue to exist according to the regulations governing the amendment of its articles of association and such incorporated foundation may continue to exist after obtaining an authorization therefor from the administrative agency in charge of incorporated foundations.
SECTION 4 Authorization of Rehabilitation Plans
| Article 242 (Whether or Not to Grant Authorization of Rehabilitation Plans) |
| (1) | Where a rehabilitation proposal is adopted at an assembly of related persons, the court shall make a decision on whether to grant authorization of the rehabilitation plan, on the date of such adoption or on the date of decision declared by the court immediately after the adoption. |
| (2) | Any of the following persons may, on the date referred to in paragraph (1), state their opinions on whether to grant authorization of the rehabilitation plan: <Amended on Feb. 29, 2008> |
| 1. | Persons falling under any subparagraph of Article 182 (1); |
| 2. | The administrative agency supervising the debtor's business, the Minister of Justice, or the Financial Services Commission. |
| (3) | Where a decision on setting the date whether to grant authorization of the rehabilitation plan is made by the court declaration, such decision may be exempted from public notice and service requirements. |
| (4) | Deleted. <May 29, 2016> |
| (5) | Deleted. <May 29, 2016> |
| Article 242-2 (Authorization or Non-Authorization of Rehabilitation Plans When They Have Undergone a Written Resolution) |
| (1) | When a rehabilitation proposal is approved by a written resolution, the court shall render a decision on the authorization or non-authorization of the rehabilitation plan, without delay. |
| (2) | Before rendering a decision on the authorization or non-authorization of a rehabilitation plan under paragraph (1), the court may listen to the opinions of the persons interested as to the authorization or non-authorization of the rehabilitation plan by fixing a date which follows the response period prescribed in Article 240 (2). |
| (3) | Any person falling under any subparagraph of Article 242 (2) may make a statement of opinions on the authorization or non-authorization of the rehabilitation plan on the date mentioned in paragraph (2). |
| (4) | Where a court renders a decision on the determination of a date prescribed in paragraph (2), it shall publicly announce the decision and serve a written decision on persons who have returned their opinions on the authorization or non-authorization of the rehabilitation plan in writing under Article 240 (2). |
| (5) | If deemed reasonable, every court may combine the date mentioned in paragraph (2) with the special inspection date ex officio at the request of the custodian. |
| (6) | When a court renders a decision of authorization or non-authorization of a rehabilitation plan under paragraph (1), it shall serve a document including the operative part of the decision and the gist of the grounds thereof on the persons in the subparagraphs of Article 182 (1). |
[This Article Newly Inserted on May 29, 2016]
| Article 243 (Requirements for Authorizing Rehabilitation Plans) |
| (1) | The court may determine to grant authorization of the rehabilitation plan only in cases where the requirements falling under each of the following subparagraphs are met: |
| 1. | The rehabilitation procedures or the rehabilitation plan shall conform to the provisions of Acts; |
| 2. | The rehabilitation plan shall be fair, equitable and executable; |
| 3. | The rehabilitation plan shall be resolved on the basis of good faith and fairness; |
| 4. | Repayment methods according to the rehabilitation plan shall be in terms geared towards making repayments more advantageously than repayments would be made to each creditors when the debtor's business is liquidated: Provided, That the same shall not apply to cases where the creditors agree to payment methods; |
| 5. | The rehabilitation plan, the terms of which are geared for a merger or merger after divestiture, requires a resolution passed by a general meeting of shareholders and a general meeting of members of the other company, which approves any merger contract or an agreement on merger after divestiture: Provided, That the same shall not apply to cases where the relevant company does not require such approval resolution of the general meeting of shareholders or the general meeting of members; |
| 6. | Matters requiring permission, authorization, license or other disposition granted by administrative agencies in the rehabilitation plan shall be consistent with opinions of administrative agencies provided for in the provisions of Article 226 (2) with respect to major points; |
| 7. | With respect to the rehabilitation plan, the terms of which are geared towards an exchange of shares, a general meeting of shareholders of the other company is required to pass a resolution that approves such all-inclusive share swap: Provided, That the same shall not apply to cases where the company performs the all-inclusive share swap pursuant to the provisions of Articles 360-9 and 360-10 of the Commercial Act. |
| (2) | Even in cases where the procedures for determining whether to grant authorization for the rehabilitation plan are in violation of the provisions of Acts, when it is deemed inappropriate not to grant authorization for the rehabilitation plan taking into account the extent of the violation, the current state of the debtor and all other circumstances, the court may determine to grant such authorization. |
| Article 243-2 (Non-Authorization of Rehabilitation Plan) |
| (1) | The court may make a decision of non-authorization of a rehabilitation plan in cases where the contents of the rehabilitation proposal is concerning any act falling under any or the subparagraphs of Article 57 and meets all the requirements referred to in the subparagraph of Article 231-2 (1). |
| (2) | The court shall make a decision of non-authorization of a rehabilitation plan in cases where the contents of the rehabilitation proposal is concerning any act falling under any of the subparagraphs of Article 57 and a person who intends to conduct such act or other person who is in a special relationship prescribed by Presidential Decree with the former person falls under any of the subparagraphs of Article 231-2 (2). |
| (3) | The court may, if necessary for confirming the contents referred to in paragraph (1) or (2), order the debtor, the custodian, the protective custodian, other interested person, etc, to provide the relevant information or submit the relevant materials. |
[This Article Newly Inserted on Oct. 15, 2014]
| Article 244 (Authorization in Cases of Group in Disagreement) |
| (1) | Where a resolution on a rehabilitation proposal is passed at an assembly of related persons or the rehabilitation proposal is placed in a written resolution under Article 240, even when any group fails to reach agreement thereon among persons who hold voting rights that exceed the statutory amount and number, the court may amend the rehabilitation proposal, prescribe provisions aimed at protecting the rights of the rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders of such group in a manner falling under any of the following subparagraphs and determine to grant authorization for the rehabilitation plan: |
| 1. | The means by which properties subject to security rights are transferred to a newly incorporated company or any other person or is withheld for the debtor while keeping the security rights intact for the rehabilitation secured creditors; |
| 2. | The means by which properties subject to security rights for rehabilitation secured creditors, the debtor's properties to be appropriated for the repayment of claims for rehabilitation creditors and the debtor's properties that is to be appropriated for the distribution of residual property for shareholders and equity right holders are all sold at a price that exceeds fair value (with respect to properties that are subject to security rights, any burden incurred by such rights shall be deemed nonexistent) that is set by the court and the balance obtained by subtracting costs of sale from the sale proceeds is used for repayment, distribution and deposit; |
| 3. | The means by which proceeds of the fair trade price of the rights that is set by the court are distributed to the rightful claimants; |
| 4. | The means by which the rightful claimants are fairly and equally protected according to the means referred to in the provisions of subparagraphs 1 through 3. |
| (2) | Where a resolution is passed at an assembly of related persons on the rehabilitation proposal or the rehabilitation proposal is presented for written resolution pursuant to the provisions of Article 240, when it is clear that it is impossible to obtain from any group the agreement necessary to meet the requirements for resolving upon the rehabilitation proposal, the court, at the request of the person developing the rehabilitation proposal, shall prescribe provisions that aim for protecting the rights of such group of rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders by means referred to in the provisions of each subparagraph of paragraph (1) and permit developing the rehabilitation proposal. |
| (3) | When the application referred to in the provisions of paragraph (2) is filed, the court shall hear the opinions of the applicant and not less than one rightful claimant of the group from which it is evidently impossible to obtain an agreement. |
| Article 245 (Declaration of Determination on Whether to Grant Authorization of Rehabilitation Plan) |
| (1) | The court shall render its decision on whether to grant authorization of the rehabilitation plan and shall publicly notify the text of such decision and the summary of its reasoning, and the rehabilitation plan or the summary thereof. In such cases, no service need be made. |
| (2) | The provisions of Article 41 (1) shall apply mutatis mutandis to cases on which a decision under paragraph (1) is made. |
| (3) | Notwithstanding the provisions of paragraph (1), where any decision on whether to grant authorization of the rehabilitation plan has been made with respect to the written resolution under Article 240, the court shall deliver the text of such decision and the summary of its reasoning, and the rehabilitation plan and the summary thereof to the following persons: <Amended on Feb. 29, 2008> |
| 1. | The persons falling under any of the subparagraphs of Article 182 (1); |
| 2. | The administrative agency supervising the debtor’s business, the Minister of Justice, or the Financial Services Commission, where the debtor is a stock company. |
| Article 246 (Timing when Rehabilitation Plans Take Effect) |
The rehabilitation plan shall take effect from the time a decision is made to grant authorization thereof.
| (1) | An immediate appeal may be filed against a decision on whether to grant authorization of the rehabilitation plan: Provided, That the same shall not apply to any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder who are not recorded in the list or are not reported. |
| (2) | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder and any equity right holder who do not hold voting rights shall, when they file for an immediate appeal pursuant to the provisions of paragraph (1), substantiate that they are a rehabilitation creditor, a rehabilitation secured creditor, a shareholder and an equity right holder, respectively. |
| (3) | Any appeal against a decision to grant authorization of the rehabilitation plan shall not affect the implementation of such rehabilitation plan: Provided, That when the appellate court or the court with pending rehabilitation cases deems that the appeal has grounds and the need is substantiated to urgently prevent any irrecoverable loss caused by the implementation of the rehabilitation plan, such court may, if a request therefor is made, require any security to be furnished, suspend the whole or part of the rehabilitation plan without requiring such security to be furnished and take other necessary dispositions by the time until it rules on the appeal. <Amended on Dec. 27, 2016> |
| (4) | When an appeal is filed against a decision to grant authorization for the rehabilitation plan, the court with pending rehabilitation cases may order the appellant to deposit, by way of bonds, fund, or securities recognized by the court within the scope that is prescribed by the Supreme Court Regulations for a fixed period. <Amended on Dec. 27, 2016> |
| (5) | In cases under paragraph (4), when the appellant fails to furnish the security within the period set by the court, the court shall, by decision, dismiss the appeal without prejudice. |
| (6) | When the appeal referred to in paragraph (4) is dismissed, the debtor is declared bankrupt or the rehabilitation procedures continue, the funds or securities furnished as a security shall revert to the bankruptcy estate. |
| (7) | Any protest against the judgment on the immediate appeal referred to in paragraph (1) shall be governed by the provisions of Article 442 of the Civil Procedure Act. In such cases, paragraphs (1) through (6) shall apply mutatis mutandis to such protest. |
| Article 248 (Where Decision Not to Grant Authorization for Rehabilitation Plan Becomes Final and Conclusive) |
The provisions of Articles 291 and 292 shall apply mutatis mutandis to cases where a decision not to grant authorization for the rehabilitation plan becomes final and conclusive.
| Article 249 (Entries in Table of Rehabilitation Creditors) |
When a decision to grant authorization for the rehabilitation plan becomes final and conclusive, the court official of Grade V, etc. shall enter the rights recognized in the rehabilitation plan in the table of rehabilitation creditors and in the table of rehabilitation secured creditors and in the table of shareholders and equity right holders.
| Article 250 (Scope of Effect of Rehabilitation Plan) |
| (1) | The rehabilitation plan shall affect following persons: |
| 2. | Any rehabilitation creditor, any rehabilitation secured creditor, any shareholder, and any equity right holder; |
| 3. | Anyone who bears obligations or furnishes security for rehabilitation; |
| 4. | Any newly incorporated company (excluding any company that is incorporated by merger or resulting from merger after divestiture). |
| (2) | The rehabilitation plan shall not affect the rights or security falling under either of the following subparagraphs: |
| 1. | Rights held by any rehabilitation creditor or any rehabilitation secured creditor against a guarantor of the debtor for whom rehabilitation procedures commence and on any person who bears any obligation jointly with the debtor for whom rehabilitation procedures commence; |
| 2. | The security furnished by any person other than the debtor for any rehabilitation creditor or any rehabilitation secured creditor. |
| Article 251 (Immunity of Rehabilitation Claims) |
When it is decided to grant authorization for the rehabilitation plan, the debtor shall be exempted from his or her responsibilities under all of the rehabilitation claims and rehabilitation security rights, with the exception of rights recognized pursuant to the rehabilitation plan or the provisions of this Act and the rights of shareholders and equity right holders, and all security rights over the debtor's properties shall cease to exist: Provided, That the same shall not apply to claims provided for in the provisions of Article 140 (1).
| Article 252 (Alteration of Rights) |
| (1) | Where a decision on the authorization of the rehabilitation plan has been made, the rights of rehabilitation creditors, rehabilitation secured creditors, shareholders, and equity right holders shall be altered according to the rehabilitation plan. |
| (2) | Articles 339 and 340 (3) of the Commercial Act shall apply mutatis mutandis to the money, other articles, shares or equity shares, claims, other rights, and share certificates which shareholders or equity right holders will receive by the alteration of rights under paragraph (1). <Amended on May 20, 2014> |
| Article 253 (Rights of Rehabilitation Creditors and Rehabilitation Secured Creditors) |
The rights of rehabilitation creditors and rehabilitation secured creditors that are prescribed according to the rehabilitation plan shall be recognized only for persons who hold rehabilitation claims or rehabilitation security rights that are all confirmed.
| Article 254 (Rights of Shareholders and Equity Right Holders who are Not Reported) |
The rights of shareholders and equity right holders that are recognized according to the rehabilitation plan shall also apply to the rights of shareholders and equity right holders who fail to report their shares and equity shares.
| Article 255 (Effect of Entries in Table of Rehabilitation Creditors) |
| (1) | The entries of the table of rehabilitation creditors or the table of rehabilitation secured creditors that govern the rights recognized according to the rehabilitation plan on the basis of rehabilitation claims or rehabilitation security rights shall have the same effect as a final and conclusive judgment on the following persons when a decision to grant authorization for the rehabilitation plan becomes final and conclusive: |
| 2. | Rehabilitation creditors, rehabilitation secured creditors, and shareholders and equity right holders; |
| 3. | Anyone who bears obligations or furnishes security for the rehabilitation; |
| 4. | The newly incorporated company (excluding any company that is incorporated by merger or resulting from merger after divestiture). |
| (2) | Anyone who holds the rights referred to in the provisions of paragraph (1), the terms of which are geared at claiming the payment of funds and any other performance, may perform compulsory execution on the debtor and any person who bears any obligation for the rehabilitation according to the table of rehabilitation creditors or the table of rehabilitation secured creditors after the rehabilitation procedures are completed. In such cases, the guarantor may lodge an objection to such compulsory execution pursuant to Article 437 of the Civil Act. |
| Article 256 (Invalidation of Suspended Procedures) |
| (1) | When it is decided to grant authorization for the rehabilitation plan, the auction procedures for the bankruptcy procedures, the compulsory execution, the provisional seizure, the preliminary injunction and the exercise of security right, etc. that are suspended respectively pursuant to the provisions of Article 58 (2) shall lose their effect: Provided, That the same shall not apply to procedures or dispositions that continue pursuant to the provisions of paragraph (5) of the same Article. |
| (2) | Estate claims (excluding any estate claims falling under subparagraphs 2 and 9 of Article 473) that lose their effect pursuant to the provisions of paragraph (1) in the bankruptcy procedures shall constitute priority claims. |
CHAPTER VII PROCEDURES AFTER REHABILITATION PLAN AUTHORIZED
| Article 257 (Implementation of Rehabilitation Plan) |
| (1) | When it is decided to grant authorization for the rehabilitation plan, the custodian shall implement the rehabilitation plan without delay. |
| (2) | When a new company is incorporated according to the rehabilitation plan, the custodian shall perform the duties of the promoters and incorporators members. |
| (3) | The Custodial Committee shall assess whether the rehabilitation plan is appropriately implemented each year and submit the results of such assessment to the court. |
| (4) | The Custodial Committee may present to the court its opinion with respect to the completion or the discontinuation of the rehabilitation procedures. |
| Article 258 (Court's Order Given to Implement Rehabilitation Plan) |
| (1) | The court may issue the following persons orders necessary to implement the rehabilitation plan: |
| 2. | Rehabilitation creditors, rehabilitation secured creditors, and shareholders and equity right holders; |
| 3. | A person who bears obligations or furnishes security for the rehabilitation; |
| 4. | A newly incorporated company (excluding a new company that is incorporated by merger or resulting from merger after divestiture); |
| (2) | When it is deemed necessary to ensure the implementation of the rehabilitation plan, the court may require a considerable amount of security to be furnished for persons who hold claims pursuant to the provisions of this Act or according to the rehabilitation plan and any other persons who hold rehabilitation claims, or rehabilitation security rights, to which disputed claims are made and for which the claim allowance proceedings are yet to be completed. |
| Article 259 (Inspection of Debtor) |
In any of the following cases, the court may order any inspection commissioner or simplified inspection commissioner to inspect properties and the current business of the debtor, at the request of the creditors' consultative council or ex officio: <Amended on Dec. 30, 2014>
| 1. | Where the rehabilitation plan is not implemented properly; |
| 2. | Where it is necessary to determine whether to cease or discontinue the rehabilitation procedures; |
| 3. | Where it is necessary for amending the rehabilitation plan. |
| Article 260 (Exclusion from Provisions of Statutes Governing Resolutions of General Meetings) |
In the implementation of the rehabilitation plan, notwithstanding the provisions of statutes and regulations or the articles of incorporation, a general meeting of an incorporation, a general meeting of shareholders, a general meeting of members (including a general meeting of specific class of shareholders and a general meeting of members equivalent thereto) or a meeting of the board of directors of the corporate debtor need not resolve on anything.
| Article 261 (Special Cases concerning Business Transfer) |
| (1) | When the following acts are prescribed in the rehabilitation plan pursuant to the provisions of Article 200, such acts may be performed according to the rehabilitation plan: |
| 1. | The conclusion, amendment or revocation of any of the following contracts or any other contracts equivalent thereto: |
| (a) | Contracts by which the whole or part of the business or properties of the debtor are transferred, invested or leased; |
| (b) | Contracts by which the whole or part of the management of the debtor's business is delegated; |
| (c) | Contracts by which the profits and losses of the business are shared with other persons or any other contracts equivalent thereto; |
| 2. | Agreements by which the whole or part of the business or the properties of other persons are acquired by transfer. |
| Article 262 (Special Cases concerning Amendment to Articles of Incorporation) |
Where any amendments to the articles of incorporation of the debtor are prescribed in the rehabilitation plan pursuant to the provisions of Article 202, such articles of incorporation shall be amended according to the rehabilitation plan when it is decided to grant authorization for the rehabilitation plan.
| Article 263 (Special Cases concerning Change in Directors) |
| (1) | Where the appointment of directors and the selection of the chief executive officer are prescribed in the rehabilitation plan pursuant to the provisions of Article 203, they shall be deemed appointed at the time authorization is granted for the rehabilitation plan. |
| (2) | Where means of appointing directors or of selecting the chief executive officer are prescribed in the rehabilitation plan pursuant to the provisions of Article 203, such directors may be appointed and the chief executive officer may be selected according to the means prescribed in the rehabilitation plan. In such cases, the provisions of other statutes and regulations or the articles of incorporation governing the appointment of directors and the selection of the chief executive officer shall not apply. |
| (3) | When the court appoints any auditor pursuant to the provisions of Article 203 (4), the provisions of other statues and regulations or the articles of incorporation governing the appointment of auditors shall not apply to the appointment of such auditors. |
| (4) | Any director or any chief executive officer who is not prescribed in the rehabilitation plan as to remain in his or her position shall be deemed dismissed at the time that authorization is granted for the rehabilitation plan. Any auditor who is not appointed pursuant to the provisions of Article 203 (4) shall be deemed dismissed at the time the court appoints an auditor pursuant to the provisions of Article 203 (4). |
| (5) | The terms of office for directors or the chief executive officer who are selected or appointed pursuant to the provisions of paragraphs (1) and (2), the terms of office for directors or the chief executive officer who are or are decided to stay in their positions and means by which the chief executive officer represents the board shall be prescribed in the rehabilitation plan and the terms of office of any auditor who is appointed pursuant to the provisions of Article 203 (4) shall be prescribed by the court. |
| Article 264 (Special Cases concerning Decrease in Capital) |
| (1) | When any decrease in capital is prescribed in the rehabilitation plan pursuant to the provisions of Article 205, such capital may be decreased according to the rehabilitation plan. |
| (3) | In cases falling under paragraph (1), an application filed for rectifying the register on the grounds of a decrease in the debtor's capital shall be accompanied by a certified copy or an abridged copy of a written decision to grant authorization for the rehabilitation plan. |
| Article 265 (Special Cases concerning Issuance of New Shares without Payment. therefor) |
| (1) | When it is prescribed in the rehabilitation plan pursuant to Article 206 (1) and (4) that the debtor issue new shares without requiring rehabilitation creditors, rehabilitation secured creditors or shareholders to make new payments or investments in kind, the rightful claimants shall become shareholders at the time that it is decided to grant authorization for the rehabilitation plan: Provided, That when any specific timing is prescribed in the rehabilitation plan, the rightful claimants shall become shareholders at such specific time. |
| (2) | The provisions of the articles of incorporation governing the underwriting of newly issued shares shall not apply to cases falling under paragraph (1). |
| Article 266 (Special Cases concerning Issuance of New Shares for which Payments are Made) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor issues new shares pursuant to Article 206 (2) and (3), he or she may issue such new shares according to the rehabilitation plan. |
| (3) | The provisions of the articles of incorporation that govern rights to underwrite newly issued shares shall not apply to cases falling under paragraph (1) and cases provided for in Article 306 of the Commercial Act that are applied mutatis mutandis under Article 425 (1) of the same Act shall be placed under the jurisdiction of the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| (5) | When new shares are issued by requiring rehabilitation creditors, rehabilitation secured creditors or shareholders to make new payments or make investments in kind, the rightful claimants thereof may pay the amount or make investments in kind as prescribed in the rehabilitation plan. |
| (6) | Article 265 (3) shall apply mutatis mutandis where there is an odd lot of shares to be distributed to shareholders by requiring them to make payments and investments in kind: Provided. That the amount corresponding to the investment in kind to be made or the amount to be paid for an odd lot of shares shall be deducted from the price to be paid to the previous shareholders. |
| (7) | In cases falling under paragraph (1), the letter of commission for the register of a change caused by the issuance of shares by the debtor or an application thereof shall be accompanied by a certified copy or an abridged copy of the written decision authorizing the rehabilitation plan, a written statement attesting to the subscription and takeover of shares and a certificate attesting to the custody of payments. |
| Article 267 (Special Cases concerning Issuance of Bonds without Payments by Stock Companies) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor which is a stock company issues bonds without requiring rehabilitation creditors, rehabilitation secured creditors or shareholders to make new payments pursuant to the provisions of Article 209, these rightful claimants shall become debenture holders when it is decided to grant authorization for the rehabilitation plan. |
| (3) | In cases falling under paragraph (1), the amount of bonds that are issued to rehabilitation creditors or rehabilitation secured creditors according to the provisions of the rehabilitation plan shall not be included in the total amount of the bonds provided for in the provisions of Article 470 of the Commercial Act. |
| Article 268 (Special Cases concerning Issuance of Bonds with Payments by Stock Companies) |
| (1) | With the exception of cases provided for in the provisions of Article 267, when it is prescribed in the rehabilitation plan that the debtor which is a stock company issues bonds under Article 209, the debtor may issue such bonds according to the rehabilitation plan. |
| (2) | When bonds are issued by requiring rehabilitation creditors, rehabilitation secured creditors or shareholders to make new payments, these rightful claimants shall become debenture holders at the time the amount prescribed in the rehabilitation plan is paid. |
| (3) | The provisions of Articles 266 (4) and 267 (2) and (3) shall apply mutatis mutandis to cases falling under paragraph (1). |
| (4) | In cases under paragraph (1), a letter of commission or an application for the registration of convertible bonds or warrant bonds shall be accompanied by the written statements falling under each of the following subparagraphs: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | A written statement attesting to the subscription and underwriting of convertible bonds or warrant bonds; |
| 3. | A written statement attesting to the payment for each convertible bond or each warrant bond. |
| Article 269 (Special Cases concerning All-Inclusive Share Swap of Stock Companies) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor which is a stock company perform an all-inclusive share swap with another company pursuant to the provisions of Article 207, the debtor may perform such all-inclusive share swap according to the rehabilitation plan. |
| (2) | In cases under paragraph (1), rehabilitation creditors or rehabilitation secured creditors who receive a distribution of shares of the company that becomes a wholly owning parent company shall become the underwriters of shares at the time that authorization is granted for the rehabilitation plan and become shareholders at the time that the all-inclusive share swap becomes effective. |
| (4) | In cases under paragraph (1), when the provisions of Article 360-8 of the Commercial Act apply to the debtor, the "approval provided for in the provisions of Article 360-3 (1)" in the same Article shall be deemed "the authorization granted for the rehabilitation plan, the terms of which are geared toward the all-inclusive share swap." |
| (5) | The provisions of paragraphs (1) through (4) shall not affect the application of the Commercial Act to the other company that is the other party to the all-inclusive share swap. |
| (6) | In cases under paragraph (1), when the debtor becomes a wholly owning parent company, the letter of commission or the application for registration of the company change resulting from the all-inclusive share swap shall be accompanied by documents falling under each of the following subparagraphs: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | The contract for the all-inclusive share swap. |
| (7) | In cases under paragraph (1), when the other company that is the other party in the all-inclusive share swap becomes a wholly owning parent company, the application for the change registration caused by the all-inclusive share swap of the company shall be accompanied by documents falling under each of the following subparagraphs: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | The minutes of the general meeting of shareholders of the company (when the company performs an all-inclusive share swap without obtaining approval therefor from the general meeting of shareholders, the minutes of the meeting of the board of directors of the company). |
| Article 270 (Special Cases concerning Comprehensive Transfer of Shares of Stock Companies) |
| (1) | When the comprehensive transfer of shares by the debtor which is a stock company is prescribed in the rehabilitation plan pursuant to the provisions of Article 208, the debtor may perform such comprehensive transfer of shares according to the rehabilitation plan. |
| (2) | In cases under paragraph (1), rehabilitation creditors or rehabilitation secured creditors who receive a distribution of shares of a newly incorporated company that is a wholly owning parent company shall become the underwriters of shares at the time that authorization is granted for the rehabilitation plan, and shall become shareholders at the time that the comprehensive transfer of shares becomes effective. |
| (4) | In cases under paragraph (1), with respect to the application of the provisions of Article 360-19 of the Commercial Act to companies, the "resolution provided for in the provisions of Article 360-16 (1)" in the same Article shall be deemed the "authorization granted for the rehabilitation plan the contents of which are geared toward the comprehensive transfer of shares." |
| (5) | The letter of commission or the application for register of incorporation arising from the comprehensive transfer of shares shall be accompanied by the documents falling under each of the following subparagraphs: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | The minutes of the meeting of the board of directors with respect to the chief executive officer. |
| Article 271 (Special Cases concerning Mergers and Consolidations) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor is to merge or consolidate with another company pursuant to Article 210 or 211, the debtor may do so with any other company according to the rehabilitation plan. |
| (2) | In cases under paragraph (1), rehabilitation creditors or rehabilitation secured creditors who receive the distribution of shares or equity shares of the company surviving the merger or resulting from the consolidation shall become underwriters of the shares or equity shares at the time it is decided to grant authorization for the rehabilitation plan and the shareholders or members thereof at the time that the merger or consolidation becomes effective. |
| (6) | Paragraphs (1) through (5) shall not affect the application of the Commercial Act to the company that is the other party to merger. |
| (7) | Article 267 shall apply mutatis mutandis to cases where bonds are distributed to shareholders pursuant to subparagraph 5 of Article 210 or subparagraph 6 of Article 211. In such cases, the shareholders become the debenture holders when the merger becomes effective. |
| (8) | In cases under paragraph (1), the letter of commission or the application for the register of the dissolution or the change in the debtor on the grounds of merger shall be accompanied by the following documents: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| (9) | In cases under paragraph (1), the letter of commission or the application for the company registration that is newly incorporated by merger shall be accompanied by any of the following documents: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 3. | The articles of incorporation; |
| 4. | The minutes of the general meeting of incorporation; |
| 5. | The minutes of the meeting of the board of directors with regard to the chief executive officer; |
| 6. | The written statement attesting to the qualifications of incorporating members appointed by the other debtor who is the other party to merger. |
| Article 272 (Special Cases concerning Merger or Merger after Divestiture) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor which is a stock company is to be split, or part of the debtor which is a stock company is to be divided and then merged with the whole or part of another company pursuant to Articles 212 through 214, the debtor may perform the merger or the merger after divestiture as prescribed in the rehabilitation plan. |
| (2) | In cases under paragraph (1), the surviving debtor after the merger after divestiture or the shareholders, rehabilitation creditors or rehabilitation secured creditors of the debtor who receive a distribution of shares of the company that is newly incorporated by the merger after divestiture shall become underwriters of the shares at the time that it is decided to grant authorization for the rehabilitation plan, and shall become shareholders at the time that the merger after divestiture becomes effective. |
| (5) | Paragraphs (1) through (4) shall not affect the application of the Commercial Act to the company that is the other party to the merger after divestiture. |
| (6) | Article 267 shall apply mutatis mutandis to cases where bonds are distributed to shareholders pursuant to Article 212 (1) 5 or Article 213 (1) 4, or Article 213 (2) 8. In such cases, the shareholders shall become the debenture holders at the time the merger or the merger after divestiture becomes effective. |
| (7) | In cases under paragraph (1), the letter of commission or the application for registration of the debtor's dissolution or the registration of change on the grounds of split shall be accompanied by a certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan. The letter of commission or the application for registration of the debtor's dissolution or registration of change on the grounds of the merger after divestiture shall be accompanied by the written agreement on merger after divestiture in addition to a certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan. |
| (8) | In cases under paragraph (1), the letter of commission or the application for registration of incorporation on the grounds of the merger after divestiture shall be accompanied by the following documents: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | The written agreement on merger after divestiture; |
| 3. | The articles of incorporation; |
| 4. | The minutes of the general meeting of incorporation; |
| 5. | The minutes of the meeting of the board of directors with regard to the chief executive officer. |
| Article 273 (Special Cases concerning Incorporations of New Companies without New Investments) |
| (1) | When it is prescribed in the rehabilitation plan that a new company is to be incorporated only with an investment made by the debtor which is a stock company after splitting the debtor pursuant to Article 212 (1) or 214, or it is prescribed in the rehabilitation plan that a new company is incorporated by causing rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders to underwrite its shares or equity shares instead of causing them to make new payments or investments in kind therein pursuant to Article 215, the new company shall be formally incorporated when it prepares the articles of incorporation and have its incorporation entered on the register after obtaining a certification from the court with pending rehabilitation cases. <Amended on Dec. 27, 2016> |
| (2) | In cases under paragraph (1), the debtor's properties that are prescribed to be transferred to the newly incorporated company in the rehabilitation plan when the new company is incorporated shall be transferred to the newly incorporated company and the rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders of the debtor who all receive the distribution of shares, equity shares or bonds of the newly incorporated company shall become shareholders, equity right holders or debenture holders of the newly incorporated company. |
| (3) | Articles 263 (1), (2) and (5) and 265 (3) and 268 shall apply mutatis mutandis to cases falling under paragraphs (1) and (2). |
| (4) | In cases under paragraph (1), the letter of commission that is aimed at placing the newly incorporated company on the register shall be accompanied by the following documents: |
| 1. | A certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan; |
| 2. | The articles of incorporation; |
| 3. | When means of appointing directors or auditors and of selecting the chief executive officer are prescribed in the rehabilitation plan, the document pertaining to their appointment; |
| 4. | When any transfer agent is employed on payroll, a written statement attesting to his or her employment. |
| Article 274 (Other Special Cases concerning Incorporation of New Companies) |
| (1) | With the exception of cases provided for in Article 273, when it is prescribed in the rehabilitation plan that the debtor which is a stock company is split to incorporate a new company pursuant to Article 212 (1) or 214 and it is prescribed in the rehabilitation plan that a new company is to be incorporated pursuant to Article 215 without resorting to any merger, split or merger after divestiture, a new company may be incorporated according to the rehabilitation plan. |
| (2) | Articles 288, 291 through 293, 295 (1), 296, 299, 300, 302 (2) 4, 310, 311, 313 (2), 314, 315, 321 through 324, 327 and 328 of the Commercial Act shall not apply to cases falling under paragraph (1). |
| (3) | In cases under paragraph (1), a certification for the articles of incorporation shall be obtained from the court with pending rehabilitation cases. Cases provided for under Article 306 of the Commercial Act shall be placed under the jurisdiction of the court with pending rehabilitation cases. A general meeting of incorporation shall not amend the articles of incorporation in violation of the purposes of the rehabilitation plan. The debtor shall assume the responsibilities of the promoters provided for in Article 326 of the same Act. <Amended on Dec. 27, 2016> |
| (4) | In cases under paragraph (1), when the debtor, rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders are requested to underwrite shares or equity shares without being required to make new payments or investments in kind, or they are requested to underwrite bonds without being required to make new payments, the rightful claimants shall become shareholders, equity right holders or debenture holders at the time that a new company is incorporated. |
| (5) | In cases under paragraph (1), when rehabilitation creditors, rehabilitation secured creditor, shareholders or third persons are requested to underwrite shares by being required to make new payments and investments in kind, any shares that they have not underwritten among the shares that are to be issued for them may be subtracted from the total number of shares enlisting issued at the time that a new company is incorporated without enlisting new shareholders unless this measure is contrary to Article 289 (2) of the Commercial Act. |
| (6) | Articles 263 (1), (2) and (5), 265 (3), 266 (4) through (6), 267 (3), and 268 shall apply mutatis mutandis to cases falling under paragraphs (1) through (5). |
| (7) | In cases under paragraph (1), the letter of commission or the application for registration of any newly incorporated company shall be accompanied by the following documents: |
| 1. | The document provided for in each subparagraph of Article 273 (4); |
| 2. | The written statement attesting to the subscription and underwriting of shares; |
| 3. | The inspection report of directors and any auditors and other documents attached thereto; |
| 4. | The minutes of the general meeting of incorporation; |
| 5. | The written statement attesting to the custody of payments in any financial institution. |
| Article 275 (Special Cases concerning Dissolution) |
| (1) | When it is prescribed in the rehabilitation plan that the debtor is dissolved pursuant to the provisions of Article 216 without resorting to the merger, the division or the merger after divestiture, the debtor shall be dissolved at the time stipulated in the rehabilitation plan. |
| (2) | In cases under paragraph (1), the application for registration of dissolution register shall be accompanied by a certified copy or an abridged copy of the written decision to grant authorization for the rehabilitation plan. |
| Article 276 (Transfer of Rights to Underwrite Shares) |
When rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders hold rights to underwrite shares, equity shares or bonds of the debtor or any newly incorporated company according to the rehabilitation plan, they may transfer such rights to any other persons.
| Article 277 (Exclusion of Application of the Financial Investment Services and Capital Markets Act) |
[Title Amended on Aug. 3, 2007]
| Article 278 (Special Cases concerning Restrictions on Disposal of Factory Assets) |
When the debtor's property is disposed of according to the rehabilitation plan, statutes and regulations governing restrictions on the disposal of factory assets and any other assets or the property that belong to any assets shall not apply thereto.
| Article 279 (Succession of Rights by Means of Permission and Authorization) |
When it is prescribed in the rehabilitation plan that the debtor is to transfer any rights and any obligations that accrue from any permission, authorization, license and any other disposition that he or she has acquired from administrative agencies, the newly incorporated company shall succeed to such rights and such obligations, notwithstanding the provisions of other statutes and regulations.
| Article 280 (Succession to Tax Liabilities) |
When it is prescribed in the rehabilitation plan that any newly incorporated company succeeds to the debtor's tax liabilities, the newly incorporated company shall bear responsibility for paying such tax liabilities and the debtor's tax liabilities shall be extinguished thereafter.
| Article 281 (Severance Pays) |
| (1) | Persons who were directors, the chief executive officer, auditors and workers of the debtor and who continue to work for any newly incorporated company as directors, the chief executive officer, auditors and workers after rehabilitation procedures commence shall not receive payment of their severance pay, etc. on the basis of their retirements from the debtor. |
| (2) | The period during which the persons referred to in the provisions of paragraph (1) have worked for the debtor shall be deemed the period during which they have worked for the newly incorporated company. |
| Article 282 (Amendment to Rehabilitation Plan) |
| (1) | When the need arises to amend the matters that are prescribed in the rehabilitation plan on the grounds of inevitability after it is decided to grant authorization for the rehabilitation plan, the court may change the rehabilitation plan at the request of any custodian, the debtor or any rehabilitation creditors, any rehabilitation secured creditors, any shareholder or any equity right holder, each of whom are all entered on the list or reported only before rehabilitation procedures are completed. |
| (2) | When an application is filed for amending the rehabilitation plan pursuant to the provisions of paragraph (1), which is deemed to prejudice any rehabilitation creditor, rehabilitation secured creditor, shareholder, or equity right holder on the grounds of such amendment, the provisions governing the procedures for submitting the rehabilitation proposal shall apply mutatis mutandis thereto: Provided, That in such cases, the aforesaid procedures does not require the participation of any rightful claimant who is not prejudiced by any amendment to the rehabilitation proposal. |
| (3) | The provisions of Articles 246 and 247 shall apply to cases where it is decided to amend the rehabilitation proposal. |
| (4) | In cases falling under either of the following subparagraphs, anyone who agrees to the previous rehabilitation proposal shall be deemed to agree to the amended rehabilitation proposal: |
| 1. | Where he or she is absent from the assembly of related persons that is called to resolve on amendment to the rehabilitation proposal; |
| 2. | Where he or she fails to send a response in the written resolution procedures for an amendment to the rehabilitation proposal. |
| Article 283 (Discontinuation of Rehabilitation Procedures) |
| (1) | When repayments commence according to the rehabilitation plan, the court shall decide to discontinue the rehabilitation procedures, at the request of any of the following persons or ex officio: Provided, That this shall not apply when deemed to impede the rehabilitation plan: |
| 2. | Any rehabilitation creditor or any rehabilitation secured creditor who is entered in the list or reported. |
| (2) | The court shall, when it makes the decision referred to in the provisions of paragraph (1), publicly notify the operative part of such decision and the gist of its reasoning. In this case, no service need be made. |
| (3) | The provisions of Article 40 (1) shall apply mutatis mutandis to cases where the decision referred to in the provisions of paragraph (1) is made. |
| Article 284 (Prohibition on Participation in Corporate Governance by Directors) |
Directors or the chief executive officer who fail to retain their positions pursuant to the provisions of the proviso to Article 203 (2) shall be prohibited from being selected or appointed as directors or being selected as the chief executive officer of the debtor even after it is decided to discontinue the rehabilitation procedures.
CHAPTER VIII DISCONTINUATION OF REHABILITATION PROCEDURES
| Article 285 Deleted. <Dec. 30, 2014> |
| Article 286 (Discontinuation before Authorization Granted for Rehabilitation Plan) |
| (1) | In each of the following cases, the court shall ex officio determine to discontinue rehabilitation procedures: |
| 1. | Where a rehabilitation proposal is not submitted within the period or extended period respectively, set by the court or all of the draft; |
| 2. | Where a rehabilitation proposal is voted against or is not resolved upon at the assembly of related persons within two months or the extended period from the first day of the assembly of related persons; |
| 3. | A rehabilitation proposal is not resolved upon at the assembly of related persons within the period provided for in the provisions of Article 239 (3); |
| 4. | When it is decided to place a rehabilitation proposal in a written resolution pursuant to the provisions of Article 240 (1), however the rehabilitation proposal is not resolved upon according to the written resolution: Provided, That when the hearing continuation date provided for in the provisions of Article 238 is designated with respect to the rehabilitation proposal that is not resolved upon by a written resolution, it shall mean the time the written resolution is not passed. |
| (2) | When the value of the debtor's business at the time is liquidated is deemed evidently higher than the value thereof when the debtor's business continues before or after a rehabilitation proposal is submitted, the court may, at the request of any custodian or ex officio, decide to discontinue the rehabilitation procedures before it is decided to grant authorization for the rehabilitation plan: Provided, That the same shall not apply to cases where the court permits the drawing up of a rehabilitation proposal, the content of which is about the liquidation, etc. in accordance with Article 222. <Amended on Dec. 30, 2014> |
| Article 287 (Discontinuation by Application) |
| (1) | When it is evidently clear that the debtor is able to fully fulfil his or her obligations to rehabilitation creditors and rehabilitation secured creditors who are entered in the list or are reported, the court shall determine to discontinue the rehabilitation procedures at the request of persons falling under any of the following subparagraphs: |
| 3. | Any rehabilitation creditor or any rehabilitation secured creditor, each of whom are entered in the list or are reported. |
| (2) | The applicant shall substantiate the factual grounds for discontinuing the rehabilitation procedures referred to in the provisions of paragraph (1). |
| (3) | When the application referred to in the provisions of paragraph (1) is filed, the court shall notify the debtor, the Custodial Committee, the creditors' consultative council, rehabilitation creditors and rehabilitation secured creditors who are entered in the list and are reported of the gist of such application, request them to present any opinions they may have with respect to the application and keep documents concerning the application in the court for inspection by the interested persons. |
| (4) | The court shall be prohibited from determining to discontinue the rehabilitation procedures unless at least one month has lapsed after the notification referred to in the provisions of paragraph (3) is delivered. |
| Article 288 (Discontinuation after Authorization Granted for Rehabilitation Plan) |
| (1) | When it is evidently impossible to implement the rehabilitation plan after it is decided to grant authorization for the rehabilitation plan, the court shall determine to discontinue the rehabilitation procedures, ex officio or at the request of the custodian, rehabilitation creditors or rehabilitation secured creditors entered in the list or reported. |
| (2) | The court may hear opinions of the Custodial Committee, the creditors' consultative council and interested persons on a fixed date before it makes the decision referred to in the provisions of paragraph (1): Provided, That when the court fails to specify the fixed date, it shall provide each of them with an opportunity to present their opinions within a specified deadline. |
| (3) | The decision to specify the date or the deadline referred to in the provisions of paragraph (2) shall be publicly notified and such fixed date or such specified deadline shall be delivered to persons who are known as persons who hold the rights recognized in the rehabilitation plan on the basis of the rehabilitation claims or rehabilitation security rights that are confirmed respectively. |
| (4) | The discontinuation of the rehabilitation procedures referred to in the provisions of paragraph (1) shall not affect the implementation of the rehabilitation plan and effects that accrue from the provisions of this Act. |
| Article 289 (Public Notice of Discontinuation Decision) |
When the court it decides to discontinue the rehabilitation procedures, it shall publicly notify the operative part of such decision and the gist of its reasoning thereof. In this case, no service need be made.
| (1) | The provisions of Article 247 (1), (2) and (4) through (7) shall apply mutatis mutandis to the appeal filed against the decision to discontinue the rehabilitation procedures. |
| (2) | The provisions of Article 40 (1) shall apply mutatis mutandis to cases where a decision to discontinue the rehabilitation procedures becomes final and conclusive. |
| Article 291 (Repayment of Priority Claims) |
When a decision to discontinue the rehabilitation procedures becomes final and conclusive, the custodian shall pay priority claims out of the debtor's properties and with respect to the payment of any priority disputed claim, the payment in question shall be deposited for creditors, except in cases where bankruptcy must be declared pursuant to the provisions of Article 6 (1).
| Article 292 (Effect of Entries in Tables of Rehabilitation Creditors) |
| (1) | When a decision to discontinue rehabilitation procedures becomes final and conclusive pursuant to the provisions of Article 286 or 287, with respect to the determined rehabilitation claims or determined rehabilitation security rights, the entries in the table of rehabilitation creditors or the table of rehabilitation secured creditors shall have the same effect as that of a final and conclusive judgment on the debtor: Provided, That the same shall be limited to cases where the debtor does not raise any objection to such claims and such rights during the inspection period of the rehabilitation claims and the rehabilitation security rights or on the special inspection date. |
| (2) | Rehabilitation creditors or rehabilitation secured creditors may perform the compulsory execution on the debtor based on the table of rehabilitation creditors or the table of rehabilitation secured creditors except in cases where the debtor is declared bankrupt pursuant to the provisions of Article 6 after the completion of the rehabilitation procedures. |
| (3) | The provisions of Article 225 (3) shall apply mutatis mutandis to cases falling under paragraph (2). |
| Article 293 (Provisions Applicable Mutatis Mutandis) |
The provisions of Article 255 (2) and (3) shall apply mutatis mutandis to cases where a decision to discontinue the rehabilitation procedures becomes final and conclusive pursuant to the provisions of Article 288 (1).
CHAPTER IX SIMPLIFIED REHABILITATION PROCEDURES FOR SMALL OPERATING INCOME EARNERS
| Article 293-2 (Definitions of Terms) |
The terms used in this Chapter are defined as follows:
| 1. | The term “operating income earner” means a debtor who is likely to continuously or repeatedly obtain real estate rental incomes, business incomes, agricultural incomes, forestry incomes or other similar incomes in the future; |
| 2. | The term “small operating income earner” means an operating income earner who has obligations not exceeding the amount prescribed by Presidential Decree, of which the total amount of rehabilitation claims and rehabilitation security rights is not more than five billion won at the time of making an application for the commencement of rehabilitation; |
| 3. | The term "simplified rehabilitation procedures" means the rehabilitation procedures which are applied to small operating income earners in accordance with the provisions of this Chapter. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-3 (Applicable Provisions) |
| (1) | Except as otherwise provided in this Chapter, the provisions of Part II (Rehabilitation Procedures) shall apply to simplified rehabilitation procedures. |
| (2) | References to rehabilitation procedures in this Act [excluding Part II (Rehabilitation Procedures)] or any other statute or regulation shall, except as expressly provided in the relevant statute or regulation, be deemed to include simplified rehabilitation procedures, and such statute or regulation shall apply accordingly. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-4 (Application for Commencement of Simplified Rehabilitation Procedures) |
| (1) | A small operating income earner may apply for the commencement of simplified rehabilitation procedures to the court: Provided, That this shall not apply where a small operating income earner who is an individual has ever received immunity by means of individual rehabilitation procedures or bankruptcy procedures within five years before the date of application. |
| (2) | A person who applies for the commencement of simplified rehabilitation procedures shall, when making an application under paragraph (1), clearly state whether he or she has an intention of applying for rehabilitation procedures where the aforesaid application fails to meet the requirements under the same paragraph. |
| (3) | An application for simplified rehabilitation procedures shall be made in a form of document specifying the following matters: |
| 1. | The name, resident registration number, and address of the debtor where the debtor is an individual; |
| 2. | The trade name, location of principal office or business place, and name of the representative of the debtor, where the debtor is not an individual; |
| 3. | The intention of seeking to apply for the commencement of simplified rehabilitation procedures; |
| 4. | Causes for the commencement of simplified rehabilitation procedures; |
| 5. | The business details and property status of the debtor; |
| 6. | The debt amount corresponding to small operating income earners and the basis for calculation thereof; |
| 7. | The intention to apply for the commencement of rehabilitation procedures under paragraph (2). |
| (4) | The document under paragraph (3) shall be accompanied by the following documents: |
| 2. | Materials concerning the business details of the debtor; |
| 3. | Materials concerning the property status of the debtor; |
| 4. | Other documents prescribed by the Supreme Court Regulations. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-5 (Determination of Commencement of Rehabilitation Procedures) |
| (1) | The court shall, upon receipt of an application under the main clause of Article 293-4 (1), make a decision of simplified rehabilitation procedures, where the debtor who is a small operating income earner falls under any of the subparagraphs of Article 34 (1) and does neither fall under the ground for dismissing an application for rehabilitation procedures under Article 42 nor under the proviso of Article 293-4 (1). |
| (2) | The court made, upon receipt of an application under the main clause of Article 293-4 (1), make a decision as classified in the following subparagraphs, where the debtor does not fall under a small operating income earner or where the debtor falls under the proviso of the same paragraph above: |
| 1. | A case where the debtor has clarified that he or she/it has no intention of applying for the commencement of rehabilitation procedures in accordance with Article 293-4 (2): a decision of dismissal of an application for the commencement of simplified rehabilitation procedures; |
| 2. | A case where the debtor has clarified that he or she/it has the intention of applying for the commencement of rehabilitation procedures in accordance with Article 293-4 (2): a decision of dismissal of an application for the commencement of simplified rehabilitation procedures and a decision falling under any of the following items: |
| (a) | A decision on commencement of rehabilitation procedures; |
| (b) | A decision of dismissal of the commencement of rehabilitation procedures. |
| (3) | The court, at the request of an interested person or ex officio, shall make a decision on discontinuation of simplified rehabilitation procedures, in any of the following cases before the final confirmation of a rehabilitation proposal after the decision on commencement of simplified rehabilitation procedures under paragraph (1): |
| 1. | It has been proved that the debtor does not constitute a small operating income earner; |
| 2. | It has been proved that the debtor falls under the proviso of Article 293-4 (1). |
| (4) | The court may, in cases of making a decision on discontinuation of simplified rehabilitation procedures in accordance with paragraph (3), proceed with rehabilitation procedures in consideration of the interests of the creditors in general and the possibility of rehabilitation of the debtor. In this case, any such disposal, act, etc. of the person falling under any of the subparagraphs of Article 6 (7) as was conducted in simplified rehabilitation procedures shall, unless it is contrary to its nature, be deemed to be still effective in rehabilitation procedures as well. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-6 (Non-Appointment of Custodian) |
| (1) | A custodian shall not be appointed in simplified rehabilitation procedures: Provided, That a custodian may be appointed in any case which is deemed to fall under any of the subparagraphs of Article 74 (2). |
| (2) | In cases falling under the main clause of paragraph (1), the debtor (referring to its representative where the debtor is not an individual) shall be deemed to be a custodian under this Part. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-7 (Simplified Inspection Commissioner) |
| (1) | The court may, at the request of an interested person or ex officio, appoint any person who falls under any of the subparagraphs of Article 601 (1) as a simplified inspection commissioner. Articles 79, 81, 82, 83 (1) and 87 shall apply mutatis mutandis to a simplified inspection commissioner. |
| (2) | A simplified inspection commissioner may conduct the duties of an inspection commissioner referred to in Article 87 in a simplified manner, as prescribed by the Supreme Court Regulations. |
| (3) | Where a simplified inspection commissioner has been appointed, a custodian may conduct the duties of an custodian under Articles 91 through 93 in a simplified manner as prescribed by the Supreme Court Regulations. |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 293-8 (Special Cases concerning Requirements for Approval of Rehabilitation Proposal) |
In an assembly of related persons, a rehabilitation proposal shall, notwithstanding the subparagraph 1 of Article 237, be deemed to be approved by the group of creditors, where any of the following requirements is satisfied: | 1. | To obtain a consent of the persons who have voting rights equivalent to 2/3 of the total amount of the voting rights of rehabilitation creditors who are entitled to exercise voting rights; |
| 2. | To obtain both a consent of the persons who have voting rights exceeding 1/2 of the total amount of the voting rights of rehabilitation creditors who are entitled to exercise voting rights and a consent of the majority of the persons with voting rights. |
[This Article Newly Inserted on Dec. 30, 2014]
PART III BANKRUPTCY PROCEDURES
CHAPTER I COMMENCEMENT OF BANKRUPTCY PROCEDURES
SECTION 1 Petition for Bankruptcy
| Article 294 (Holders of Right to File Petition for Bankruptcy) |
| (1) | Any creditor or the debtor may file a petition for bankruptcy. |
| (2) | When any creditor files a petition for bankruptcy, he or she shall explain the existence of his or her claim and the facts leading to bankruptcy. |
| Article 295 (Holders of Rights to File Petition for Bankruptcy of Corporation) |
| (1) | A director of a corporation may file a petition for bankruptcy of the corporation incorporated pursuant to the Civil Act or any other statute; a general partner of an unlimited or limited partnership may file a petition for bankruptcy of the partnership; and a director of a stock company or limited company may file a petition of the stock company or limited company. |
| (2) | Any liquidator may file a petition for bankruptcy on any corporation under liquidation. |
| Article 296 (Petition for Bankruptcy Filed by Directors) |
When no petition for bankruptcy has been filed by any of the directors, general partners or liquidators, the facts leading to bankruptcy shall be explained.
| Article 297 (Application Mutatis Mutandis to Other Corporations) |
The provisions of Articles 295 and 296 shall apply mutatis mutandis to any corporation, other than the corporations provided for in the provisions of Article 295, any incorporated association or any foundation that is not a corporation, each of which have its representative or custodian.
| Article 298 (Petition for Bankruptcy Filed after Corporation Dissolution) |
With respect to any corporation, any petition for bankruptcy shall be filed in any period during which the delivery or the distribution of its residual properties have not been completed even after such corporation is dissolved.
| Article 299 (Holders of Rights to File Petition for Bankruptcy on Inherited Estate) |
| (1) | Any inheritance creditor, anyone who receives any legacy, inheritor, administrator of inherited estate, and executor of a will may file a petition for bankruptcy against any inherited estate. |
| (2) | When any administrator of inherited estate, any executor of a will or any inheritor, where the qualified acceptance is made or the property is separated, finds it difficult to fully pay back obligations with the inherited estate to any inheritance creditor and any person who receives the legacy, they shall promptly file a petition for bankruptcy. |
| (3) | Any inheritor, any administrator of inherited estate or any executor of a will shall, when each of them files a petition for bankruptcy, explain the facts leading to bankruptcy. |
| Article 300 (Period in Which Petition for Bankruptcy May Be Filed for Inherited Estate) |
With respect to inherited estate, a petition for bankruptcy may be filed only within the period during which a claim may be filed for dividing up the properties pursuant to the provisions of Article 1045 of the Civil Act. In such cases, when the qualified acceptance is made or the properties are divided up during the period, a petition for bankruptcy may be filed with the period during which the repayment to any inheritance creditor and any person who receives the legacy is not completed.
| Article 301 (Where Bankruptcy Is Declared Overseas) |
When the debtor has already been declared bankrupt overseas at the time that a petition for bankruptcy is filed against him or her, the facts leading to bankruptcy shall be presumed to exist.
| Article 302 (Written Petition) |
| (1) | Every petition for bankruptcy shall be filed in a written statement containing matters falling under each of the following subparagraphs: |
| 1. | The names and domiciles of the applicant and his or her legal representative; |
| 2. | Where the debtor is an individual, his or her name, resident registration number and domicile; |
| 3. | Where the debtor is not an individual, the trading name, the location of the principal office or the place of business of the debtor and the name of the representative; |
| 4. | The purpose of the petition; |
| 5. | The grounds for the petition; |
| 6. | The purposes of the debtor's business and his or her current business; |
| 7. | The total number of shares or equity shares that are issued by the debtor, the amount of his or her capital, and the current state of his or her assets, his or her obligations and property; |
| 8. | Other procedures for or any dispositions on the debtor's property, of which the applicant is aware; |
| 9. | When any creditor files a petition for bankruptcy, the amount of, and the ground for the claim that is held by him or her; |
| 10. | When any shareholder or any equity right holder files a petition for bankruptcy, the number and the amount of shares or equity shares that are held by him or her. |
| (2) | The written statement referred to in the provisions of paragraph (1) shall be accompanied by documents falling under each of the following subparagraphs: Provided, That it is impossible to annex the document at the time that the written statement is filed, the reasons for such failure shall be provided and the relevant document shall be submitted without delay: |
| 1. | The list of creditors; |
| 3. | The list concerning the revenue and expenditure of the debtor; |
| 4. | Other documents that are prescribed by the Supreme Court Regulations. |
| Article 303 (Prepayment of Expenses for Bankruptcy Procedures) |
When anyone files a petition for bankruptcy, he or she shall prepay the amount as expenses necessary for the bankruptcy procedures, which is recognized as being appropriate by the court.
| Article 304 (Provisional Payment of Expenses for Bankruptcy Procedures) |
When anyone who files a petition for bankruptcy is not a creditor, the expenses for the bankruptcy procedures may be provisionally paid from the national treasury. The same shall apply to cases when any prepayment falls short of the fixed amount, when the court declares bankruptcy ex officio and when the petitioner of bankruptcy is the creditor and the court declares the debtor bankrupt, notwithstanding the nonpayment of the expenses.
SECTION 2 Declaration of Bankruptcy
| Article 305 (Grounds for General Bankruptcy) |
| (1) | When the debtor is insolvent, the court shall declare him or her bankrupt, at a request or ex officio. |
| (2) | When the debtor suspends making his or her payment, it shall be presumed that he or she is unable to make such payment. |
| Article 306 (Grounds for Corporate Bankruptcy) |
| (1) | With respect to any corporation, even when the total amount of its liabilities exceeds the total amount of its assets, such corporation may be declared bankrupt. |
| (2) | The provisions of paragraph (1) shall not apply to the period during which any unlimited or limited partnership is in existence. |
| Article 307 (Grounds for Bankruptcy regarding Inherited Estate) |
When it is unable to fully repay the obligations to any inheritance creditor and anyone who receives a legacy with their inherited estate, the court shall by judgment declare bankruptcy if a request therefor is made.
| Article 308 (Inheritance after Petition for Bankruptcy or Declaration of Bankruptcy) |
When any inheritance commences after a petition for bankruptcy is filed or the bankruptcy is declared, the bankruptcy procedures continue on the inherited estate.
| Article 309 (Grounds for Dismissal) |
| (1) | The court may dismiss any petition for bankruptcy in any of the following cases: |
| 1. | When the petitioner fails to pay the expenses for the bankruptcy procedures in advance; |
| 2. | When rehabilitation procedures or individual rehabilitation procedures are pending in the court and the means of resorting to such procedures is in the interests of the creditors in general; |
| 3. | When the debtor is not responsible for the cause of the bankruptcy; |
| 4. | When it is impossible to locate the petitioner; |
| 5. | When the petition is filed in bad faith. |
| (2) | Even in cases where the debtor is responsible for the facts leading to bankruptcy, when it is recognized that the petition for bankruptcy amounts to an abuse of bankruptcy procedures, the court may dismiss the petition for bankruptcy after going through examination. |
| Article 310 (Declaration of Bankruptcy) |
The year, month, date and time of the declaration of bankruptcy shall be entered in the written bankruptcy decision.
| Article 311 (Time When Bankruptcy Takes Effect) |
Bankruptcy shall take effect from the time that such bankruptcy is declared.
| Article 312 (Matters Needed to be Prescribed at Declaration of Bankruptcy) |
| (1) | The court shall appoint the trustee in bankruptcy at the time that bankruptcy is declared and prescribe the matters falling under each of the following subparagraphs: |
| 1. | The period during which claims are to be reported. In such cases, such period shall be from not less than two weeks to not more than three months from the date on which the bankruptcy is declared; |
| 2. | The date on which the first meeting of creditors is to be held. In such cases, the date shall be set within four months from the date on which the bankruptcy is declared; |
| 3. | The date on which the claims are to be inspected. In this case, the period of between not less than one week to not more than one month is required between such date and the last date of the period during which the claims are reported pursuant to the provisions of subparagraph 1. |
| (2) | The dates referred to in the provisions of paragraph (1) 2 and 3 may coincide. |
| Article 313 (Public Notice and Service of Declaration of Bankruptcy) |
| (1) | The court shall, when it declares bankruptcy, publicly notify without delay the matters falling under each of the following subparagraphs: |
| 1. | The operative part of the bankruptcy decision; |
| 2. | The name, domicile and office of the trustee in bankruptcy; |
| 3. | The period and the date provided for in the provisions of Article 312; |
| 4. | The gist of an order that is given to the effect that the debtor of the debtor declared bankrupt and the owner of the properties that belong to the bankruptcy estate are prohibited from making any repayments or transferring any assets to the debtor declared bankrupt; |
| 5. | The gist of an order that is given to the effect that the debtor of the debtor declared bankrupt and the owner of the properties that belongs to the bankruptcy estate report the matters falling under each of the following items to the trustee in bankruptcy within the fixed period: |
| (a) | Matters concerning the obligations they bear; |
| (b) | Matters concerning the properties they own; |
| (c) | When the holders have the right to foreclose outside bankruptcy, matters concerning the claims that they hold. |
| (2) | The court shall deliver a written statement in which the matters referred to in the provisions of paragraph (1) are entered to each creditor, the debtor and each asset owner who the court is aware of. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to cases where any change takes place in the matters referred to in paragraph (1) 2 through 5. |
| (4) | Anyone who neglects making the report provided for in the provisions of paragraph (1) 5 shall compensate for the damage caused by his or her negligence to the bankruptcy estate. |
| Article 314 (Notification of Corporate Bankruptcy) |
| (1) | Where any corporation is declared bankrupt, when permission for its incorporation and business which is its objectives is obtained from any administrative agency, the court shall notify such administrative agency of the declaration of its bankruptcy. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to cases where a decision to revoke any bankruptcy or to discontinue any bankruptcy becomes final and conclusive or a decision to terminate any bankruptcy is made. |
| Article 315 (Notification to Prosecutors) |
If it is deemed necessary, the court may notify prosecutors of the fact of its declaration of bankruptcy.
| Article 316 (Immediate Appeal Filed against Judgment on Petition for Bankruptcy) |
| (1) | An immediate appeal may be filed against any judgment on a petition for bankruptcy. |
| (2) | The provisions of Articles 323 and 324 shall apply mutatis mutandis to cases where an immediate appeal is filed against the decision to dismiss the petition for bankruptcy. |
| (3) | The immediate appeal referred to in the provisions of paragraph (1) shall not have the effect of suspending any execution. |
| (4) | When the procedures for filing the immediate appeal are in violation of statutes and the immediate appeal is deemed groundless, the appellate court shall, by decision, dismiss such immediate appeal with or without prejudice. |
| (5) | When the immediate appeal is deemed well grounded, the appellate court shall revoke its original decision and remand the case to the lower court. |
| Article 317 (Declaration of Bankruptcy and Simultaneous Discontinuation of Bankruptcy) |
| (1) | When the appropriation of funds for expenses for bankruptcy procedures with any bankruptcy estate is deemed insufficient, the court shall determine to declare such foundation bankrupt and to discontinue such bankruptcy simultaneously. |
| (2) | In cases falling under paragraph (1), the court shall publicly notify the operative part of the bankruptcy decision, the operative part of the decision to discontinue the bankruptcy procedures and the summary of the reasons thereof. |
| (3) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| (4) | The immediate appeal referred to in the provisions of paragraph (3) shall not have the effect of suspending any execution. |
| (5) | The provisions of Articles 313 through 315 shall apply mutatis mutandis to cases where the decision to discontinue the bankruptcy procedures referred to in the provisions of paragraph (1) becomes final and conclusive. |
| Article 318 (Exception to Simultaneous Discontinuation of Bankruptcy Procedures) |
The provisions of Article 317 shall not apply to cases where the prepayment has been made in an amount sufficient to cover expenses for the bankruptcy procedures.
| Article 319 (Arrest of Debtor Declared Bankrupt) |
| (1) | When it is deemed necessary, the court may order the arrest of a debtor declared bankrupt. |
| (2) | The provisions of the Criminal Procedure Act governing the arrest shall apply mutatis mutandis to the arrest referred to in the provisions of paragraph (1). |
| (3) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| Article 320 (Arrest of Legal Representative of Debtor who is Declared Bankrupt) |
The provisions of Article 319 shall apply mutatis mutandis to persons falling under any of the following subparagraphs: | 1. | The legal representative of a debtor declared bankrupt; |
| 2. | The director of a debtor declared bankrupt; |
| 3. | The manager of the debtor declared bankrupt; |
| 4. | In the case where inherited estate is insolvent, the inheritor, the legal representative and the manager. |
| Article 321 (Debtor’s Obligation to Explain) |
| (1) | Each of the following persons shall provide explanations necessary for the bankruptcy at the request of the trustee in bankruptcy, the members of the audit committee, or the meeting of creditors: |
| 1. | The debtor and his or her agent; |
| 2. | The debtor's director; |
| 4. | In the case of insolvent estate, the inheritors, their agents, the administrator of inherited estate and the executor of the will. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to anyone to whom the qualifications referred to in the provisions of the previous paragraph (1) apply. |
| Article 322 (Arrest before Declaration of Bankruptcy) |
| (1) | When a petition for bankruptcy is filed, the court may order the arrest of the debtor and the person provided for in the provisions of Article 320 even before the debtor is declared bankrupt. |
| (2) | The provisions of Article 319 (2) and (3) shall apply mutatis mutandis to cases falling under paragraph (1). |
| Article 323 (Preservative Measure before Declaration of Bankruptcy) |
| (1) | The court may, at the request of an interested person or ex officio, order the provisional seizure, the preliminary injunction and other necessary preservative measures regarding the debtor's properties, even before the debtor is declared bankrupt. The same shall apply to cases where the court declares the debtor bankrupt ex officio. |
| (2) | The court may alter or rescind the dispositions referred to in the provisions of paragraph (1). |
| (3) | The judgment on the matters referred to in the provisions of paragraphs (1) and (2) shall be made by determination. |
| (4) | An immediate appeal may be filed against the judgment referred to in the provisions of paragraphs (1) and (2). |
| (5) | The immediate appeal referred to in the provisions of paragraph (4) shall not have the effect of suspending any execution. |
| Article 324 (Order Given to Suspend limitation of Liability Procedures) |
| (2) | The court may cancel the suspension decision referred to in the provisions of paragraph (1). |
| Article 325 (Public Notice and Service of Revocation of Bankruptcy) |
| (1) | When a decision to revoke the bankruptcy becomes final and conclusive, the court shall publicly notify the operative part of such decision. |
| (2) | The provisions of Articles 313 (2), 315 and 547 shall apply mutatis mutandis to cases falling under paragraph (1). |
| Article 326 (Suspension of Bankruptcy Procedures until Decision to Discontinue Limitation of Liability Procedures Becomes Final and Conclusive) |
When it is decided to discontinue the limitation of liability procedures that has commenced for a debtor declared bankrupt, the bankruptcy procedures shall be suspended until such decision becomes final and conclusive.
| Article 327 (Measures in Cases of Discontinuation of Limitation of Liability Procedures) |
| (1) | When a decision to discontinue the limitation of liability procedures that has commenced for a debtor declared bankrupt becomes final and conclusive, the court shall prescribed the matters falling under both of the following subparagraphs for creditors with limited liability: |
| 1. | The period during which claims are reported. In such cases, such period shall last for between not less than one week up to not more than two months from the date on which a decision to discontinue the limitation of liability procedures becomes final and conclusive; |
| 2. | The date on which claims are inspected. In such cases, the period of from not less than one week up to not more than one month between such date and the last date of the reporting period that is set pursuant to the provisions of subparagraph 1 shall be set. |
| (2) | The court shall publicly notify a period and the date referred to in the provisions of paragraph (1). |
| (3) | The court shall serve a written document stating the following on creditors known to it: |
| 1. | The period and the date referred to in the provisions of paragraph (1); |
| 2. | The matters referred to in Article 313 (1) 1 and 313 (1) 2. |
| (4) | The written statement in which the period and the date referred to in the provisions of paragraph (1) are entered shall be served on the following persons: Provided, That where the date prescribed in the provisions of paragraph (1) 2 is the same as the date prescribed in the provisions of Article 312 (1) 2, the foregoing shall not apply to the bankruptcy creditors who are reported: |
| 1. | The trustee in bankruptcy; |
| 2. | The debtor declared bankrupt; |
| 3. | Each of the bankruptcy creditors who are reported. |
| (5) | The provisions of paragraphs (2), (3) and the main clause of paragraph (4) shall apply mutatis mutandis to cases where the period and the date referred to in the provisions of paragraph (1) are altered. |
SECTION 3 Effect of Bankruptcy on Legal Acts
| Article 328 (Dissolved Corporations) |
Every corporation that is dissolved shall be deemed to still exist within the scope of the purposes of bankruptcy.
| Article 329 (Legal Act after Debtor is Declared Bankrupt) |
| (1) | Any legal act performed by a debtor declared bankrupt on the properties that belongs to the bankruptcy estate after he or she is declared bankrupt may not be asserted against bankruptcy creditors. |
| (2) | Any legal act that is performed by a debtor on the date on which a debtor is declared bankrupt shall be presumed to be performed after the debtor is declared bankrupt. |
| Article 330 (Acquisition of Rights after Declaration of Bankruptcy) |
| (1) | Even in cases where rights to properties that belong to any bankruptcy estate are acquired after it is declared bankrupt without resorting to the debtor's legal acts, the acquisition of such rights may not be asserted against bankruptcy creditors. |
| (2) | The provisions of Article 329 (2) shall apply mutatis mutandis to the rights acquired pursuant to the provisions of paragraph (1). |
| Article 331 (Registration and Register after Bankruptcy Declaration) |
| (1) | Any registration or any provisional registration that is effected after bankruptcy is declared by fulfilling obligations that accrue before that bankruptcy is declared with respect to any real estate or any ship may not be asserted against bankruptcy creditors: Provided, That the same shall not apply to any registration that is effected by the registration authority without knowledge of the fact that such bankruptcy has been declared. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to the register or the provisional register of the establishment, transfer or change of rights. |
| Article 332 (Repayment Made to Debtor after Bankruptcy Declaration) |
| (1) | Any repayment made to the debtor after he or she is declared bankrupt without knowledge of his or her bankruptcy may be asserted against bankruptcy creditors. |
| (2) | Any repayment made to the debtor after he or she is declared bankrupt with knowledge of his or her bankruptcy may be asserted against bankruptcy creditors within the limitation of the benefits that the bankruptcy estate receives. |
| Article 333 (Underwriting and Paying Bills after Declaration of Bankruptcy) |
| (1) | Where the issuer or the endorser of bills of exchange is declared bankrupt, if the payer or the preliminary payer underwrites or pays the bills of exchange without knowledge of such bankruptcy, he or she may exercise his or her rights as a bankruptcy creditor to the claim arising out of such act. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to the securities that are geared towards paying checks, cash, goods and other securities. |
| Article 334 (Presumption of Good Faith or Bad Faith) |
In applying Articles 331 through 333, bankruptcy shall be presumed unknown until the declaration of bankruptcy is publicly notified.
| Article 335 (Options concerning Bilateral Contract Unfulfilled by Both Parties) |
| (1) | When a debtor and the other party to a bilateral contract have yet to fulfill the contract at the time they are each declared bankrupt, the bankruptcy trustee shall cancel or terminate the relevant bilateral contract or require the fulfillment of the other party's obligations after fulfilling the debtor's obligations. |
| (2) | In cases falling under paragraph (1), the other party may demand that the bankruptcy trustee cancel or terminate the contract or provide confirmation as to whether he or she will fulfill the contract within a reasonable period after stipulating such reasonable period. In such cases, when the bankruptcy trustee does not confirm within such reasonable period, the contract shall be deemed canceled or terminated. |
| (3) | Where the bankruptcy trustee cancels or terminates a contract to which the State is a party, concerning a project for improvement of defense capability under Article 3 of the Defense Acquisition Program Act pursuant to paragraph (1), he or she shall consult with the Minister of Defense Acquisition Program Administration. <Newly Inserted on May 20, 2014> |
| Article 336 (Special Rules concerning Payment and Settlement System) |
The provisions of Article 120 shall apply mutatis mutandis where any participant of the payment and settlement system and the liquidation settlement system or any party of the competent financial transaction, each of which are prescribed in the same Article, are declared bankrupt. In such cases, "where rehabilitation procedures commence" in Article 120 (1) through (3) shall be deemed "case where bankruptcy is declared" and "rehabilitation creditors or rehabilitation secured creditors" in the proviso to Article 120 (3) shall be deemed "bankruptcy creditors or the holders of the rights to foreclose outside of bankruptcy".
| Article 337 (Cancellation and Termination by Trustee in Bankruptcy and Right of Other Parties) |
| (1) | When the contract is cancelled or terminated pursuant to the provisions of Article 335, the other party may exercise his or her rights to claim compensation for damage as a bankruptcy creditor. |
| (2) | Where the contract is canceled or terminated pursuant to the provisions of paragraph (1), if any benefit in return that is taken by the debtor exists in the bankruptcy estate, the other party may claim the refund thereof, and if such benefit in return is nonexistent, the other party may exercise his or her rights to the amount of the value of such benefit as an estate creditor. |
| Article 338 (Regular Purchase and Sale of Marketable Goods in Exchange) |
| (1) | Where the failure to effect the purchase and sale of marketable goods in exchange on a fixed date, at a fixed time or within a fixed period makes it impossible to attain the purposes of the contract, if such time arrives after the declaration of bankruptcy, the contract shall be deemed canceled. In this case, the amount of damages shall be determined according to the difference between the market price and the price of the purchase and sale at the time that a transaction of the same kind is effected in the same place. |
| (2) | The provisions of Article 337 (1) shall apply mutatis mutandis to the damages referred to in the provisions of paragraph (1). |
| (3) | In cases under paragraph (1), when the exchange prescribes otherwise, such provisions shall apply. |
| Article 339 (Where the Civil Act Prescribes Right to Terminate or Cancel) |
The provisions of Article 335 (2) shall apply mutatis mutandis to the exercise of the right to terminate or the right to cancel that is held by the other party or the trustee in bankruptcy pursuant to the provisions of Article 637, 663 or 674 of the Civil Act.
| Article 340 (Lease Agreements) |
| (1) | When any lessor is declared bankrupt, prepayment of rent or disposal of rent claims may not be asserted against any bankruptcy creditor, with the exception of those for the current and following terms. |
| (2) | Anyone who suffers loss due to his or her inability assert claims against any bankruptcy creditor pursuant to the provisions of paragraph (1) may exercise his or her right to claim compensation for such loss as a bankruptcy creditor. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the surface right. |
| (4) | Where the lessor is declared bankrupt and the lessee falls under any of the following subparagraphs, the provisions of Article 335 shall not apply: |
| Article 341 (Contract for Work) |
| (1) | Where the debtor is obliged to perform any work according to a contract, the bankruptcy trustee may require him or her to perform that work by providing the debtor with necessary materials. In such cases, if the debtor is not required to perform the work in person, he or she may have any third person perform the work on his or her behalf. |
| (2) | In cases falling under paragraph (1), the remuneration that the debtor is to receive from the other party to the contract shall belong to the bankruptcy estate. |
| Article 342 (Delegation Contracts) |
Where a delegating person is declared bankrupt, if the delegated person performs the delegated clerical work without being notified of such bankruptcy and without knowledge thereof, the delegated person may exercise his or her right to any claims arising therefrom against the delegating person in the capacity of a bankruptcy creditor.
| Article 343 (Mutual Accounting) |
| (1) | Mutual accounting shall be brought to a close when either of the parties thereto is declared bankrupt. In this case, each party may close the mutual accounting and claim the payment of any balance. |
| (2) | When the debtor holds the claim referred to in the provisions of paragraph (1), such claim shall revert to the bankruptcy estate and when the other part holds the claim, such claim shall become a bankruptcy claim. |
| Article 344 (Bankruptcy of Co-Owners) |
| (1) | When any co-owner is declared bankrupt, even if an agreement prohibiting any split exists, such split may be effected without resorting to bankruptcy procedures. |
| (2) | In cases under paragraph (1), any other co-owner who is not declared bankrupt may acquire the shares of the person who is declared bankrupt after paying a reasonable price therefor. |
| Article 345 (Management of Spouse’s Property) |
The provisions of Article 829 (3) and (5) of the Civil Act shall apply mutatis mutandis to cases where anyone who manages his or her spouse's properties is declared bankrupt and the provisions of Article 924 of the same Act shall apply mutatis mutandis to cases where anyone who exercises parental authority is declared bankrupt, respectively.
| Article 346 (Bankruptcy, Qualified Approval and Property Division) |
Declaration of bankruptcy with regard to any inheritor or any inherited estate shall not affect qualified acceptance or properties division: Provided, That the procedures therefor shall be suspended until a decision to cancel the bankruptcy or to discontinue the bankruptcy becomes final and conclusive or a decision to complete the bankruptcy becomes final and conclusive.
| Article 347 (Takeover of Lawsuit Involving Properties Belonging to Bankruptcy Estate) |
| (1) | The trustee in bankruptcy or the other party may take over a lawsuit involving properties that belong to the bankruptcy estate, insofar as it is pending in the court at the time the bankruptcy is declared. The same shall apply to a lawsuit involving claims held by the other party when the trustee in bankruptcy performs obligations pursuant to the provisions of Article 335 (1). |
| (2) | The expenses of the lawsuit provided for in the provisions of paragraph (1) shall constitute estate claims. |
| Article 348 (Effects of Compulsory Execution and Preservative Measure) |
| (1) | Any compulsory execution, provisional seizure or preliminary injunction, either of which is performed on properties that belong to the bankruptcy estate based on bankruptcy claims shall lose its effects against the bankruptcy estate: Provided, That the trustee in bankruptcy may continue compulsory execution procedures for the bankruptcy estate. |
| (2) | Expenses incurred by the trustee in bankruptcy to continue compulsory execution procedures pursuant to the provisions of the proviso to paragraph (1) shall constitute estate claims, and the trustee in bankruptcy shall be named as a defendant in the lawsuit filed by a third party objecting to such compulsory execution. |
| Article 349 (Effect of Disposition on Delinquency) |
| (1) | Where a deposition on delinquency is made against any property which belongs to the bankruptcy estate before the declaration of bankruptcy, on the basis of any claim (including claims to collect taxes in the same manner as national taxes, which takes priority over general rehabilitation claims in collection) to collect taxes under the National Tax Collection Act or the Local Tax Collection Act, the declaration of bankruptcy shall not interfere with the continuation of such disposition. <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| (2) | After the declaration of bankruptcy, a diposition for arrears shall not be taken against any property which belongs to the bankruptcy estate, on the basis of any claim by which taxes are to be collected pursuant to the National Tax Collection Act or the Local Tax Collection Act (including claims by which taxes are to be collected according to the example of collecting a national tax). <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| Article 350 (Effect on Administrative Cases) |
| (1) | When any case is pending in any administrative agency at the time that the properties that belongs to the bankruptcy estate are made subject to bankruptcy, the procedures for such case shall be suspended by the time the takeover thereof or the bankruptcy procedures are completed. |
| (2) | The provisions of Article 347 shall apply mutatis mutandis to cases falling under paragraph (1). |
SECTION 4 Responsibilities of Corporate Directors
| Article 351 (Preservative Measures on Properties of Corporate Directors) |
| (1) | Where a corporate debtor is declared bankrupt, if deemed necessary, the court may take a preservative measure on the properties of directors, etc., at the request of the trustee in bankruptcy or ex officio, in order to preserve the right to make a capital call to the debtor's promoters, directors (including a deemed director under Article 401-2 (1) of the Commercial Act), auditors, inspectors or liquidators (hereafter, in this Article through Article 353 referred to as "directors, etc.") and to seek damages relating to directors’ duties, etc. |
| (2) | When the trustee in bankruptcy becomes aware of the existence of the claims referred to in the provisions of paragraph (1), he or she shall request the court to take a preservative measure referred to in the provisions of paragraph (1). |
| (3) | When it is deemed urgent, the court may take a preservative measure referred to in the provisions of paragraph (1), at the request of the debtor or ex officio, even before the debtor is declared bankrupt. |
| (4) | The court may decide to alter or rescind the preservative measure referred to in the provisions of paragraph (1) or (3) after hearing the opinions of the Custodial Committee. |
| (5) | An immediate appeal may be filed against the preservative measure referred to in the provisions of paragraph (1) or (3) and the decision referred to in the provisions of paragraph (4). |
| (6) | The immediate appeal referred to in the provisions of paragraph (5) shall not have the effect of suspending any execution. |
| (7) | When a judgment is made on the immediate appeal filed against the preservative measure referred to in the provisions of paragraph (1) or (3) and the decision referred to in the provisions of paragraph (4), a written judgment shall be delivered to each of the parties. |
| Article 352 (Judgment in Claim Allowance Proceedings on Right to Seek Damages) |
| (1) | Where a corporate debtor is declared bankrupt, if deemed necessary, the court may, at the request of the trustee in bankruptcy or ex officio, issue a judgment calling for inspection and determination as to whether the right to make a capital call to directors, etc. and the right to seek damages relating to directors' duties, etc. exist and the nature of such rights. |
| (2) | When the trustee in bankruptcy becomes aware of the claim rights referred to in the provisions of paragraph (1), he or she shall file an application with the court for the judgment referred to in the provisions of paragraph (1). |
| (3) | When the trustee in bankruptcy files the application referred to in the provisions of paragraph (1), he or she shall explain the factual grounds thereof. |
| (4) | When intending to initiate a claim allowance proceeding ex officio, the court shall render judgment to that effect. |
| (5) | When the application referred to in the provisions of paragraph (1) is filed or it is decided to initiate a claim allowance proceedings referred to in the provisions of paragraph (4), it shall be deemed a judicial claim in regard to the interruption of prescription. |
| (6) | Any judgment that dismisses a judgment in claim allowance proceedings and the application therefor under paragraph (1) shall be made by a decision that is accompanied by the grounds thereof. |
| (7) | When the court makes the decision under paragraph (6), it shall examine interested persons in advance. |
| (8) | The claim allowance proceedings (excluding any claim allowance proceedings after a claim allowance decision is rendered) shall be completed when the bankruptcy procedures are completed. |
| (9) | When a claim allowance decision is rendered, the written decision shall be delivered to the parties. |
| Article 353 (Lawsuit Filed for Objection) |
| (1) | Anyone who is dissatisfied with judgment in a claim allowance proceeding provided for in Article 352 (1) may file a lawsuit objecting to such judgment within one month from the date he or she receives the delivery of the judgment. |
| (2) | The period referred to in paragraph (1) shall be invariable. |
| (3) | When the director, etc. files the lawsuit referred to in paragraph (1), the trustee in bankruptcy shall be named as a defendant and when the trustee in bankruptcy files the lawsuit, the director, etc. shall be the defendant, etc., respectively. |
| (4) | The lawsuit referred to in paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending bankruptcy cases (referring to the rehabilitation court in which the bankruptcy case is pending; hereinafter the same shall apply) and the pleading shall not start until at least one month after the decision is delivered. <Amended on Dec. 27, 2016> |
| (5) | When multiple lawsuits are pending, the court shall merge pleadings. |
| (6) | The judgment that is given in the lawsuit referred to in paragraph (1) shall authorize, alter and rescind the decision under the same paragraph: Provided, That the same shall not apply where the lawsuit is dismissed without prejudice for being unlawful. |
| (7) | The judgment that authorizes or changes a decision on the inspection and confirmation shall have the same effect as that of a judgment ordering the implementation of compulsory execution. |
| Article 354 (Effect of Judgment in Claim Allowance Proceedings) |
When the lawsuit provided for in the provisions of Article 353 (1) is not filed or, is withdrawn or dismissed without prejudice within the period provided for in the provisions of the same paragraph, judgment in a claim allowance proceeding shall have the same effect as that of a final and conclusive judgment ordering the implementation.
CHAPTER II INSTITUTIONS IN CHARGE OF BANKRUPTCY PROCEDURES
SECTION 1 Trustees in Bankruptcy
| Article 355 (Appointment of Trustees in Bankruptcy) |
| (1) | The court shall appoint the trustee in bankruptcy after hearing the opinion of the Custodial Committee. |
| (2) | Any corporation may become a trustee in bankruptcy. In this case, the corporation shall designate one of its directors to perform the duties of a trustee in bankruptcy and report its designation to the court. |
| Article 356 (Number of Trustees in Bankruptcy) |
There shall be one trustee in bankruptcy: Provided, that multiple trustees in bankruptcy may be appointed if the court deems it necessary.
| Article 357 (Qualification Certificates) |
| (1) | The court shall deliver to every trustee in bankruptcy a written statement attesting to their appointment. |
| (2) | Every trustee in bankruptcy shall, while performing his or her duties, produce the written statement referred to in the provisions of paragraph (1) at the request of any of the interested persons. |
| Article 358 (Supervision of Court) |
Every trustee in bankruptcy shall be placed under the supervision of the court.
| Article 359 (Standing to Sue) |
The trustee in bankruptcy shall become a party to lawsuit involving the bankruptcy estate.
| Article 360 (Performance of Duties by Multiple Trustees in Bankruptcy) |
| (1) | When there is at least one trustee in bankruptcy is not less than one, they shall perform their duties jointly. In such cases, they may divide duties among themselves after obtaining permission therefor from the court. |
| (2) | When multiple trustees in bankruptcy perform their duties, it shall be sufficient for a third party to declare his or her intent to only one of them. |
| Article 361 (Obligations of Trustees in Bankruptcy) |
| (1) | Every trustee in bankruptcy shall perform his or her duties with the due care of a good manager. |
| (2) | When any trustee in bankruptcy neglects such due care, he or she shall be liable for the damages incurred by interested persons. In such cases, while multiple trustees in bankruptcy are involved in the neglect of such due care, they shall be jointly and severally liable for the damages. |
| Article 362 (Agents for Trustees in Bankruptcy) |
| (1) | When it is deemed necessary, every trustee in bankruptcy may at his or her own responsibility appoint an agent to perform his or her duties. |
| (2) | Permission shall be obtained from the court for appointing any agent referred to in the provisions of paragraph (1). |
| (3) | Where the debtor is a corporation, and the permission referred to in the provisions of paragraph (1) is granted, the court official of Grade V, etc. shall, ex officio and without delay, commission the registry office to register the appointment of the agent by providing the registry office with a letter of commission accompanied by a certified copy of the written decision. The same shall apply to cases where the permission for appointing such an agent is altered or rescinded. |
| (4) | The agent referred to in the provisions of paragraph (1) may be involved in any judicial and extrajudicial activities on behalf of the trustee in bankruptcy. |
| Article 363 (Resignation of Trustee in Bankruptcy) |
Any trustee in bankruptcy may resign after obtaining permission therefor from the court when there are justifiable grounds for his or her resignation.
| Article 364 (Dismissal of Trustee in Bankruptcy) |
| (1) | The court may dismiss any trustee in bankruptcy, by a resolution of the meeting of creditors, at the request of any member of the audit committee or ex officio. In such cases, the court shall examine the trustee in bankruptcy. |
| (2) | An immediate appeal may be filed against the decision to dismiss the trustee in bankruptcy pursuant to the provisions of paragraph (1). |
| (3) | The immediate appeal referred to in the provisions of paragraph (2) shall not have the effect of suspending any execution. |
| Article 365 (Obligation to Report Accounting) |
| (1) | When the trustee in bankruptcy completes his or her duties, he or she or the inheritor shall promptly make a report on his or her accounting to a meeting of creditors. |
| (2) | When the debtor, the bankruptcy creditors, or the successor of the trustee in bankruptcy do not raise any objections to the accounting at the meeting of creditors, such accounting report shall be deemed approved. |
| (3) | Every trustee in bankruptcy shall submit the accounting report and the written opinions of the members of the audit committee thereon to the court by three days prior to the meeting of creditors being held in order for interested persons to inspect them. |
| Article 366 (Emergency Disposition upon Completion of Duties) |
Where the duties of the trustee in bankruptcy are completed, when an emergency situation occurs, the trustee in bankruptcy and the inheritors shall take necessary measures to manage the properties until the time what the successor trustee in bankruptcy and the debtor become able to manage such properties.
SECTION 2 Meeting of Creditors
| Article 367 (Convocation) |
The court shall call the meeting of creditors, ex officio or at the request of the trustee in bankruptcy or any member of the audit committee. The same shall apply to cases where an application is filed by any bankruptcy creditor who holds not less than 1/5 of the amount of total claims as appraised by the court.
| Article 368 (Public Notice of Date and Agenda of Meeting) |
| (1) | The court shall publicly notify the date and the agenda of the meeting of creditors. |
| (2) | When an extension or continuation of the meeting of creditors is announced, the court may elect not to make either service or public notice. |
| Article 369 (Presiding Over by Court) |
The meeting of creditors shall be presided over by the court.
| Article 370 (Requirements for Passing Resolutions) |
| (1) | A resolution of the meeting of creditors requires the agreement of persons who hold not less than 1/2 of the total amount of the claims held by bankruptcy creditors who attend the meeting of creditors and are entitled to exercise their voting rights. |
| (2) | Anyone who has any special interest in the resolution of the meeting of creditors may not exercise his or her voting rights. |
| Article 371 (Split Voting) |
| (1) | A bankruptcy creditor may split his or her votes. |
| (2) | In cases under paragraph (1), the bankruptcy creditors shall report in writing the purposes of their meeting to the court at least seven days prior to the date on which the meeting of creditors is held. |
| Article 372 (Vote by Proxy) |
| (1) | Any bankruptcy creditor may exercise his or her vote by proxy. In such cases, the proxy shall submit written evidence of proxy. |
| (2) | The provisions of Article 371 (2) shall apply mutatis mutandis to cases where a proxy split his or her delegated votes. |
| Article 373 (The Amount of Claims over which Voting Rights Can be Exercised) |
| (1) | The bankruptcy creditors may exercise their voting rights according to the confirmed amount of their claims. |
| (2) | When the trustee in bankruptcy or any bankruptcy creditor raises an objection to the amount of claims that cannot be repaid by the exercise of unconfirmed claims, condition precedent claims, future claims, the court shall determine whether to permit them to exercise their voting rights and the amount on which the voting rights are exercised. |
| (3) | The court may alter the decision referred to in the provisions of paragraph (2) at any time at the request of an interested person. |
| (4) | Where a decision is made under paragraph (2) or (3), no service need be made. |
| (5) | The bankruptcy creditors may not exercise their voting rights on the claims provided for in the provisions of Article 446. |
| Article 374 (Effect in Lieu of Agreement of Members of Audit Committee) |
| (1) | Agreement by the members of the audit committee may be substituted for a resolution of the meeting of creditors. |
| (2) | When the resolution of the meeting of creditors differs from the opinions of the members of the audit committee, the resolution shall prevail over such opinions. |
| Article 375 (Prohibition on Execution of Resolution) |
| (1) | When any resolution of the meeting of creditors runs counter to the interests of the bankruptcy creditors in general, the court may prohibit the resolution from being executed, ex officio or at the request of the trustees in bankruptcy, members of the audit committee, or bankruptcy creditors. |
| (2) | When any bankruptcy creditor who does not have voting rights files the application referred to in the provisions of paragraph (1), he or she shall substantiate that he or she is a bankruptcy creditor. |
| (3) | When a decision is rendered on the prohibition referred to in the provisions of paragraph (1), no service need be made. |
| (4) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
SECTION 3 Members of Audit Committee
| Article 376 (Resolution on Establishment of Audit Committee) |
Where it is proposed at the first meeting of creditors that the audit committee be set up, the first meeting of creditors may resolve on whether to set up the audit committee and the number of its members: Provided, That such resolution may be altered at the meeting of creditors after the first meeting of creditors.
| Article 377 (Qualifications for Members of Audit Committee) |
| (1) | The members of the audit committee shall be appointed at an meeting of creditors. |
| (2) | All of the members of the audit committee are required to be experts in law and corporate governance who are disinterested with respect to the bankruptcy procedures. |
| (3) | Any resolution on the appointment of the members of the audit committee shall obtain an authorization thereof from the court. |
| Article 378 (Methods of Performing Duties) |
| (1) | Where the number of members of the audit committee is not less than 3, the performance of their duties shall be decided by the agreement of a majority of them. |
| (2) | Any member of the audit committee who is related by special interest shall be prohibited from participating in the decision referred to in the provisions of paragraph (1). |
| Article 379 (Performance of Duties of Members of Audit Committee) |
| (1) | Members of the audit committee shall oversee the performance of the duties of the trustees in bankruptcy. |
| (2) | Each member of the audit committee may request the trustee in bankruptcy to make a report on the bankruptcy estate and inspect the current state of the bankruptcy estate at any time. |
| (3) | When any member of the audit committee finds a fact that will inflict substantial loss upon any bankruptcy creditor, he or she shall, without delay, make a report thereon to the court or at a meeting of creditors. |
| Article 380 (Dismissal of Members of Audit Committee) |
| (1) | Any member of the audit committee may be dismissed from his or her post by a resolution of an meeting of creditors. |
| (2) | The court may, on reasonable grounds, dismiss any member of the audit committee at the request of an interested person. |
| (3) | An immediate appeal may be filed against the judgment on the dismissal of any member of the audit committee provided for in the provisions of paragraph (2). |
| (4) | The immediate appeal referred to in the provisions of paragraph (3) shall not have the effect of suspending any execution. |
| Article 381 (Provisions Applicable Mutatis Mutandis) |
The provisions of Articles 30 (1) and 361 shall apply mutatis mutandis to the members of the audit committee.
CHAPTER III COMPOSITION AND CONFIRMATION OF BANKRUPTCY ESTATE
SECTION 1 Composition of Bankruptcy Estate
| Article 382 (Bankruptcy Estate) |
| (1) | All properties held by the debtor at the time he or she is declared bankrupt shall revert to the bankruptcy estate. |
| (2) | Any claim based on grounds arising before the debtor is declared bankrupt and is to be exercised by the debtor in the future shall revert to the bankruptcy estate. |
| Article 383 (Properties not Belonging to Bankruptcy Estate) |
| (1) | Any properties that cannot be seized shall not revert to the bankruptcy estate. |
| (2) | The court may exempt the properties falling under either of the following subparagraphs from reverting to the bankruptcy estate at the request of an individual debtor: |
| 1. | Any portion that does not exceed the amount prescribed by the Presidential Decree within the scope of the amount preferentially repayable pursuant to the provisions of Article 8 of the Housing Lease Protection Act, which is the claim for refund of the security money for lease of a building used by the debtor or his or her dependents for residential purposes; |
| 2. | The portion of specific properties which will be used to cover the living expenses of the debtor and his or her dependents for 6 months, in an amount not exceeding that prescribed by the Presidential Decree. |
| (3) | The application referred to in the provisions of paragraph (2) shall be filed in a written statement accompanied by the list of exempted properties and documents necessary for substantiation within 14 days from the date on which the bankruptcy is declared after a petition for bankruptcy is filed. |
| (4) | Where the application referred to in the provisions of paragraph (2) is filed before the bankruptcy is declared or where the application referred to in the provisions of paragraph (2) is filed after the bankruptcy is declared, the court shall decide whether to grant the exemption, and on the scope of such exemption within 14 days from the date on which such application is filed. |
| (5) | When the decision referred to in the provisions of paragraph (4) is made, the court shall deliver a written decision to the debtor and each of the creditors who are known. |
| (6) | An immediate appeal may be filed against the decision made pursuant to the provisions of paragraph (4). |
| (7) | The immediate appeal referred to in the provisions of paragraph (6) shall not have the effect of suspending any execution. |
| (8) | Where an exception application is filed before the bankruptcy is declared, the court may, at the request of the debtor or ex officio, order the suspension or the prohibition of any compulsory execution, provisional seizure or preliminary injunction on the exempted properties referred to in the provisions of paragraph (2) based on the bankruptcy claims by the time bankruptcy is declared. |
| (9) | When the exemption decision becomes final and conclusive, the procedures suspended pursuant to the provisions of paragraph (8) shall lose their effect. |
| (10) | With respect to the properties exempted pursuant to the provisions of paragraph (4), any compulsory execution, provisional seizure or preliminary injunction based on bankruptcy claims shall not be performed by the deadline when the immunity application may be filed pursuant to the provisions of Article 556 (1). |
| Article 384 (Authority to Perform Management and Disposal) |
The authority to manage and dispose of a bankruptcy estate shall be held by the trustees in bankruptcy.
| Article 385 (Absolute Acceptance after Bankruptcy Declaration) |
Where any inheritance commences for a debtor before the debtor is declared bankrupt, the debtor's absolute acceptance after he or she is declared bankrupt shall have the effect of performing a qualified acceptance on the bankruptcy estate.
| Article 386 (Renunciation of Inheritance after Bankruptcy Declaration) |
| (1) | Where the inheritance commences for a debtor before he or she is declared bankrupt, any inheritance that is renounced by the debtor after he or she is declared bankrupt shall have the effect of a qualified acceptance on the bankruptcy estate. |
| (2) | Notwithstanding the provisions of paragraph (1), the trustee in bankruptcy may recognize the effect of the renunciation of inheritance. In such cases, the trustee in bankruptcy shall report the gist thereof to the court within three months from the date on which he or she becomes aware of such renunciation of inheritance. |
| Article 387 (Bankruptcy and General Legacy) |
The provisions of Articles 385 and 386 shall apply mutatis mutandis to a general legacy.
| Article 388 (Bankruptcy and Specific Legacy) |
| (1) | Where any specific legacy is held by the debtor before he or she is declared bankrupt, when the debtor does not approve of or renounces such specific legacy at the time that he or she is declared bankrupt, the trustee in bankruptcy may approve of or renounce the specific legacy on behalf of the debtor. |
| Article 389 (Insolvent Estate) |
| (1) | When any inherited estate is declared bankrupt, all of such insolvent estate shall revert to the bankruptcy estate. |
| (2) | Where any inherited estate declared bankrupt, the rights held by the predecessor over the inheritor and those held by the inheritor over the predecessor shall not be extinguished. |
| (3) | When the inherited estate declared bankrupt, the inheritor thereof shall be deemed accepted on a qualified basis: Provided, That the same shall not apply to cases where the inheritor is deemed to have accepted his or her inheritance absolutely pursuant to the provisions of subparagraph 3 of Article 1026 of the Civil Act. |
| Article 390 (Inheritor's Disposal of Properties) |
| (1) | When the inherited estate is declared bankrupt after the inheritor disposes of the whole or part of such inherited estate, rights to benefits in return held by the inheritor shall revert to the bankruptcy estate. |
| (2) | In cases under paragraph (1), when the inheritor has already received the benefits in return, he or she shall return such benefits in return to the bankruptcy estate: Provided, That when the inheritor is not aware of the existence of the facts leading to bankruptcy or the petition for bankruptcy when he or she receives the benefits in return, such inheritor may return such benefits in return within the limitation of the existing interest thereof. |
SECTION 2 Avoidance Power
| Article 391 (Avoidable Acts) |
Any trustee in bankruptcy may avoid any of the following acts for the bankruptcy estate:
| 1. | An act performed by the debtor with knowledge that such act is detrimental to bankruptcy creditors: Provided, that the same shall not apply to cases where any beneficiary from the act is not aware of the fact that the debtor's act is detrimental to the bankruptcy creditors at the time such act is performed; |
| 2. | An act by the debtor that is detrimental to bankruptcy creditors and an act of furnishing any security or extinguishing any obligation by the debtor after the suspension of payments or a petition for bankruptcy is made: Provided, That it is limited to the event when any beneficiary from the act learns of the fact that the debtor files an application for suspending payments or a petition for bankruptcy at the time that the debtor performs such act; |
| 3. | The act of furnishing any security or extinguishing any debt by the debtor, which does not pertain to the debtor's obligations and whose means and time do not pertain to the debtor's obligations before or after 60 days from the date on which the debtor files an application for suspending payments or a petition for bankruptcy: Provided, That the same shall not apply to cases where creditors are not aware of the fact that the debtor files an application for suspending payments or a petition for bankruptcy and is detrimental to them at the time that he or she performs such act; |
| 4. | A gratuitous act or act for consideration that can be deemed identical to the former, performed by the debtor before or after six months from the date on which he or she files an application for suspending payments or files a petition for bankruptcy. |
| Article 392 (Special Rules Governing Acts Performed with Specially Related Persons as Other Parties) |
| (1) | For purposes of applying the proviso to subparagraph 2 of Article 391 if a beneficiary is a person who is in a special relationship with the debtor (hereafter in this Article referred to as "specially related person"), the scope of which is prescribed by the Presidential Decree, the specially related person shall be presumed to be aware of the fact that the suspension of payments is made or a petition for bankruptcy is filed at the time that the debtor performs such act. |
| (2) | For purposes of applying the provisions of subparagraph 3 of Article 391, with respect to the act performed with the specially related person as the other party, "60 days" provided for in the main clause of the same subparagraph shall be made "one year" and in the application of the proviso to the same subparagraph, it shall be presumed that the specially related person is aware of the fact that the debtor files an application for suspending payments or a petition for bankruptcy and is detrimental to bankruptcy creditors at the time that he or she performs such act. |
| (3) | For purposes of applying the provisions of subparagraph 4 of Article 391, when any act is performed with a specially related person as the other party, "six months" provided for in the same subparagraph shall be made "one year." |
| Article 393 (Exception of Payment on Promissory Notes) |
| (1) | The provisions of Article 391 shall not apply if rights to one or multiple persons under a promissory note are extinguished unless the person entitled to payment on promissory note from the debtor receives such payment. |
| (2) | In cases under paragraph (1), when any person who is obligated to make final payment or any person who commissions the issuance of promissory notes becomes aware of the fact that the debtor files an application for suspending payments or a petition for bankruptcy or does not become aware of the fact due to negligence at the time that such promissory notes are issued, the trustee in bankruptcy may require such person to refund the amount paid by the debtor. |
| Article 394 (Requirements for Establishing Alteration of Rights or Avoidance of Requirements for Counter) |
| (1) | Where any registration or any register that has the effect of establishing, transferring or altering rights is effected after the debtor files an application for suspending payments or a petition for bankruptcy, when the act of incurring obligations by way of such registration or such register is performed with the knowledge that the debtor files an application for suspending payments or a petition for bankruptcy after the lapse of 15 days from the date of an act of bearing the debt, a cause of such registration or register, such act may be denied: Provided, That the same shall not apply to cases where any principal registration or any principal register is effected after any provisional registration or any provisional register is effected based on the former. |
| (2) | Where the act of establishing, transferring or altering the right is performed out of the need to oppose any third person after the debtor files an application for suspending payments or a petition for bankruptcy, when such act is performed with the knowledge that the debtor files an application for suspending payments or a petition for bankruptcy after the lapse of 15 days from the date on which the act of establishing, transferring or altering the right is performed, the provisions of paragraph (1) shall apply to such cases. |
| Article 395 (Avoidance of Act of Execution) |
The avoidance power may be exercised when a title of execution over an act to be avoided exists or when the act is based on an act of execution.
| Article 396 (Means of Exercising Avoidance Power) |
| (1) | The avoidance power shall be exercised by the trustee in bankruptcy by means of lawsuit, claim for avoidance or defense. |
| (2) | The court may order the trustee in bankruptcy to exercise the avoidance power, at the request of bankruptcy creditors or ex officio. |
| (3) | The lawsuits and cases of claims for avoidance referred to in paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending bankruptcy cases. <Amended on Dec. 27, 2016> |
| (4) | Articles 106 and 107 shall apply mutatis mutandis to the claims for avoidance referred to in paragraph (1). |
| Article 397 (Effect of Exercise of Avoidance Power) |
| (1) | The effect of exercising the avoidance power shall restore the bankruptcy estate to its original state. |
| (2) | Where the act provided for in the provisions of subparagraph 4 of Article 391 is avoided, if the other party is bona fide at the time that the other party performs the act, the refund may be made within the limits of the existing profit. |
| Article 398 (Status of Other Party) |
| (1) | Where the debtor's act is avoided, if the benefits in return that is paid to him or her is included in the bankruptcy estate, the other party may claim a refund thereof, and if any profit arising out of the benefit in return exists in the bankruptcy estate, the debtor may exercise his or her rights as an estate creditor within the limits of such profit. |
| (2) | Where the debtor's act is avoided, when no profit arising out of the benefit in return, the other party may exercise his or her rights as a bankruptcy creditor to have the value of such profit refunded. In cases where the value of the benefits in return is higher than that of the existing profit, the same shall apply to the difference between them. |
| Article 399 (Restoration of Claim of Other Party) |
Where the debtor's act is avoided, when the other party returns any payment that he or she has received or refunds its value, the other party's claim shall be restored to its original state.
| Article 400 (Avoidance Power against Insolvent Estate) |
Where any inherited estate is declared bankrupt, the provisions of Articles 391, 392, 393, 398 and 399 shall apply mutatis mutandis to an act performed by any predecessor, any inheritor, the administrator of inherited estate and the executor of the will with respect to the inherited estate.
| Article 401 (Avoidance of Repayment to Person Who Takes Legacy) |
Where the inherited estate is declared bankrupt, when the act of making any repayment and extinguishing any obligation to the person who takes the legacy is detrimental to any bankruptcy creditor who holds preferential claims, such act may be avoided.
| Article 402 (Repayment to Other Party of Avoidance) |
Where the inherited estate is declared bankrupt, if the act performed by the predecessor, any inheritor, the administrator of inherited estate and the executor of a will on the inheritance estate is avoided, the residual properties shall be distributed according to the value of the rights to the other party of the act that is avoided after making a repayment to the inheritance creditor.
| Article 403 (Avoidance Power on Subsequent Purchasers) |
| (1) | In any of the following cases, the avoidance power may be exercised on a subsequent purchaser: |
| 1. | When the subsequent purchaser is aware that the grounds for avoidance on the former exists at the time that the subsequent purchase is made; |
| 2. | When the subsequent purchaser is a specially related person provided for in the provisions of Article 392: Provided, That the same shall not apply to cases where the subsequent purchaser is unaware of the grounds for avoidance on the former; |
| 3. | Where the subsequent purchaser performs the subsequent purchase by means of a gratuitous act or an act for consideration that is deemed identical to the former, when the grounds for avoidance on the former exists. |
| (2) | The provisions of Article 397 (2) shall apply mutatis mutandis to cases where the avoidance power is exercised pursuant to the provisions of paragraph (1) 3. |
| Article 404 (Restrictions on Avoidance on Grounds of Awareness of Payment Suspension) |
Any act that is performed at least one year prior to the date on which bankruptcy is declared may not be avoided on the grounds of awareness of the fact that the payment is suspended.
| Article 405 (Period during Which Avoidance Power is Exercised) |
The avoidance power shall not be exercised after two years lapse from the date on which bankruptcy is declared. The same shall apply to cases where ten years lapse from the date on which the act provided for in each subparagraph of Article 391 is performed.
| Article 406 (Interruption of Revocation Litigation Filed by Creditors) |
| (1) | Where a litigation filed by any bankruptcy creditor pursuant to the provisions of Article 406 (1) of the Civil Act or Article 8 of the Trust Act is pending in the court at the time that the bankruptcy is declared, the litigation procedures shall be interrupted until such litigation is taken over by the bankruptcy trustee or the bankruptcy procedure is completed. <Amended on May 28, 2013> |
| (2) | The provisions of Article 347 shall apply mutatis mutandis to cases falling under paragraph (1). |
[Title Amended on May 28, 2013]
| Article 406-2 (Special Rules concerning Avoidance of Act of Trust) |
Where a debtor who is the trustor is declared bankrupt, Article 113-2 shall apply mutatis mutandis to the avoidance of any act of trust which has been conducted by the debtor pursuant to the Trust Act. In such cases, "Article 100 (1)," "property of the debtor," and "priority creditor" shall be deemed "Article 391", "bankruptcy estate," and "bankruptcy estate creditor", respectively. [This Article Newly Inserted on May 28, 2013]
SECTION 3 Repossession Rights
| Article 407 (Repossession of Properties Not Belonging to Debtor) |
A declaration of bankruptcy shall not affect rights to repossess from the bankruptcy estate any properties that do not belong to the debtor.
| Article 407-2 (Special Rules concerning Repossession Rights in Bankruptcy Procedures for Trustee) |
| (1) | Where a trustee is declared bankrupt after a trust has been established pursuant to the Trust Act, the right to repossess the trust property shall be exercised by the new trustee or the administrator of trust property. |
| (2) | Where a trust is terminated, any person who acquires ownership in the trust property pursuant to Article 101 of the Trust Act shall exercise the right prescribed in paragraph (1). |
[This Article Newly Inserted on May 28, 2013]
| Article 408 (Repossession of Sold Goods in Transit) |
| (1) | Where any seller ships out his or her goods, a subject of sale, to a purchaser who fails both to pay the price therefor in full and to take over such goods at the destination of the goods, if the purchaser is declared bankrupt, the seller may repossess such goods: Provided, That this shall not apply to cases where the trustee in bankruptcy requests the delivery of such goods after paying the price therefor in full. |
| (2) | The provisions of paragraph (1) shall not exclude the application of the provisions of Article 335. |
| Article 409 (Repossession Rights of Commission Agents) |
The provisions of Article 408 (1) shall apply mutatis mutandis to cases where any commission agent entrusted to purchase goods ships out such goods to any entrusting person.
| Article 410 (Alternative Repossession Rights) |
| (1) | When the debtor transfers his or her properties that are subject to the repossession right before he or she is declared bankrupt, the holder of the repossession right may claim the transfer of the right to claim the payment of the benefits in return. The same shall apply to cases where the trustee in bankruptcy transfers properties that are subject to the repossession right. |
| (2) | In cases under paragraph (1), when the trustee in bankruptcy has received payment of the benefits in return, the repossession right holder may claim the return of the properties that the trustee in bankruptcy takes as the benefits in return. |
SECTION 4 Right to Foreclose Outside Bankruptcy
| Article 411 (Holders of Right to Foreclose Outside Bankruptcy) |
A person who has any lien, pledge, mortgage, security right prescribed in the Act on Security over Movable Property, Claims, Etc., or right to lease on a deposit basis, over any property that belongs to the bankruptcy estate, shall, regardless of the bankruptcy procedure, have the right to foreclose outside bankruptcy, with respect to the property which is the object of the lien, etc. <Amended on Jun. 10, 2010>
| Article 412 (Exercise of Right to Foreclose Outside Bankruptcy) |
The right to foreclose outside bankruptcy shall be exercised without resorting to bankruptcy procedures.
| Article 413 (Exercise of Bankruptcy Claims by Holders of Right to Foreclose Outside Bankruptcy) |
A person who has the right to foreclose outside bankruptcy may exercise his or her right to foreclose outside bankruptcy as a bankruptcy creditor on the amount of a claim that cannot be met by the exercise of the right to foreclose outside bankruptcy: Provided, That this shall not affect the exercise of the right as a bankruptcy creditor on the renounced amount of the claim on which the right to foreclose outside bankruptcy.
| Article 414 (Holders of Quasi-Right to Foreclosure Outside Bankruptcy) |
| (1) | A person who has any pledge, mortgage, security right under the Act on Security over Movable Property, Claims, Etc. over any property of the debtor, which does not belong to the bankruptcy estate, may exercise the pledge, etc. as a bankruptcy creditor, only to the extent of the amount of the claim that is not to be reimbursed by exercising the pledge, etc. <Amended on Jun. 10, 2010> |
| (2) | The provisions concerning the right to foreclose outside bankruptcy shall apply mutatis mutandis to anyone who has the rights referred to in the provisions of paragraph (1). |
| Article 415 (Residential Lessees) |
| (1) | Any lessee given a confirmation date in a lease agreement certificate after meeting the requirements for opposing power as provided for in the provisions of Article 3 (1) of the Housing Lease Protection Act shall be entitled to have his or her security deposit repaid in preference to the subsequent creditors and other creditors from the proceeds of realization of the housing that belongs to the bankruptcy estate. |
| (2) | Any lessee provided for in the provisions of Article 8 of the Housing Lease Protection Act shall be entitled to have his or her security deposit as provided for in the provisions of the same Article, repaid in preference to other holders of a real right granted by way of security from the proceeds of realization of the housing that belong to the bankruptcy estate. In such cases, the lessee shall meet the requirements for opposing power as provided for in the provisions of Article 3 (1) of the Housing Lease Protection Act by the date a petition for bankruptcy is filed. |
| Article 415-2 (Wage Creditors) |
[This Article Newly Inserted on Dec. 30, 2014]
| Article 416 (Offset Right) |
When any bankruptcy creditor bears obligations for the debtor at the time that the debtor is declared bankrupt, such obligations may be offset without resorting to bankruptcy procedures.
| Article 417 (Offset of Claims and Obligations Subject to Deadline and Condition Subsequent) |
Even when the claim of any bankruptcy creditor is subject to deadline or subject to a condition subsequent at the time that the debtor is declared bankrupt and the claim provided for in the provisions of Article 426, such claims may be offset. The same shall apply to cases where any obligation is subject to deadline and subject to rescission or to future claims.
| Article 418 (Offset of Condition Precedent Claim and Claim of Future) |
When anyone holding a condition precedent claim or future claim who fulfill his or her obligations, he or she may claim the depositing of the amount of the repayment within the limit of the amount of offset of the future claim.
| Article 419 (Offset of Claim Subject to Condition Subsequent) |
Where anyone holding a claim subject to a condition subsequent offsets such claim, he or she shall furnish security or make a deposit for the amount of offset.
| Article 420 (Offset Amount of Automatic Claims) |
| (1) | When the claim of any bankruptcy creditor is an interest-free claim or a periodic payment claim, his or her claim may be offset within the limit of the amount obtained by deducting the portion falling under Article 446 (1) 5 through 7. |
| (2) | The provisions of Articles 426 and 427 shall apply mutatis mutandis to the claims of bankruptcy creditors. |
| Article 421 (Offset of Rents, Security Deposits and Land Rents) |
| (1) | When the bankruptcy creditor is a lessee, his or her rents for the current term and the following term may offset one another at the time that the debtor is declared bankrupt. Where any security deposit exists, the same shall apply to rents thereafter. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to land rents. |
| Article 422 (Prohibition on Offset) |
Offset shall be prohibited in events falling under any of the following subparagraphs:
| 1. | When a bankruptcy creditor bears obligations for the bankruptcy estate after the debtor is declared bankrupt; |
| 2. | When a bankruptcy creditor bears obligations for the debtor with knowledge that the debtor files an application for suspending payments or a petition for bankruptcy; Provided, That the same shall not apply to events falling under any of the following items: |
| (a) | When the bearing of obligations is based on statutory grounds; |
| (b) | When the bearing of obligations accrues before the bankruptcy creditor becomes aware of the fact that the debtor files an application for suspending payments or a petition for bankruptcy; |
| (c) | The bearing of obligations accrues one year prior to the date on which the debtor is declared bankrupt; |
| 3. | When a debtor to the debtor declared bankrupt acquires any bankruptcy claim from another person after he or she is declared bankrupt; |
| 4. | When a debtor to the debtor declared bankrupt acquires any bankruptcy claim with knowledge of the fact that the latter files an application for suspending payments and a petition for bankruptcy: Provided, That the same shall not apply to the events falling under any of the items of subparagraph 2. |
CHAPTER IV BANKRUPTCY CLAIMS AND ESTATE CLAIMS
SECTION 1 Bankruptcy Claims
| Article 423 (Bankruptcy Claims) |
Any property claim that accrues before the debtor is declared bankrupt shall constitute a bankruptcy claim.
| Article 424 (Exercise of Bankruptcy Claims) |
No bankruptcy claim shall not be exercised without resorting to bankruptcy procedures.
| Article 425 (Arrival of Repayment Period for Claims with Maturity) |
Claims with maturity shall be deemed due and payable when bankruptcy is declared.
| Article 426 (Amount of Bankruptcy Claim of Non-Monetary Claims) |
| (1) | When the purpose of any claim is not monetary and the amount of such claim is indeterminate or such claim is denominated in any foreign currency, the appraised amount of such claim at the time bankruptcy is declared shall be the amount of the bankruptcy claim. |
| (2) | The provisions of paragraph (1) shall apply to cases where the amount of the claim for the money payable by periodic installments or the period of existence are indeterminate. |
| Article 427 (Bankruptcy Claim Sum of Conditional Claims) |
| (1) | The total amount of conditional claims shall become the amount of the bankruptcy claim. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to future claims on the debtor. |
| Article 428 (Sum of Bankruptcy Claims Where Person Liable to Fulfill Total Amount of Obligations Declared Bankrupt) |
Where multiple debtors are jointly and severally liable for an obligation, if all or some of such debtors are declared bankrupt, creditors may exercise their rights as bankruptcy creditors on the total amount of claims they hold when the debtors are declared bankrupt to each bankruptcy estate.
| Article 429 (Amount of Bankruptcy Claim Where Guarantor Declared Bankrupt) |
When any guarantor is declared bankrupt, creditors may exercise their rights as bankruptcy creditors on the total amount of claim that he or she holds at the time that the guarantor is declared bankrupt.
| Article 430 (Persons Holding Rights to Claim Reimbursements in Future) |
| (1) | Where multiple debtors are jointly and severally liable for an obligation, if all or some of such debtors are declared bankrupt, persons who hold rights to future claims for reimbursements of on the debtors may exercise their rights as bankruptcy creditors on the total amount of such reimbursements on each bankruptcy estate: Provided, That the same shall not apply to cases where the creditors exercise their rights as bankruptcy creditors on the total amount of their claims. |
| (2) | In cases falling under the proviso to paragraph (1), anyone who holds the right to claim reimbursements pursuant to the provisions of paragraph (1) makes the repayment, he or she shall acquire rights as creditor according to the ratio of his or her repayment. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the right to future claims for reimbursement that is held by any third person who furnishes any security on the debtor. |
| Article 431 (Amount of Bankruptcy Claims When Multiple Persons Stand as Guarantees) |
The provisions of Articles 428, 429 and 430 (1) and (2) shall apply mutatis mutandis to the portion of the guarantee that multiple guarantors are respectively liable for a part of the same obligation.
| Article 432 (Bankruptcy of General Partners) |
When any partner who has unlimited liability for the obligations of any corporation is declared bankrupt, the creditors of such corporation may exercise their rights as bankruptcy creditors on the total amount of claims held by them at the time that he or she is declared bankrupt on the bankruptcy estate.
| Article 433 (Bankruptcy of Limited Partners) |
When any partner who has limited liability for the obligations of any corporation or such corporation is declared bankrupt, the creditors of such corporation shall not exercise their rights on the partner who has limited liability for the obligations of the corporation: Provided, That the corporation may exercise a claim to its investment as a bankruptcy claim.
| Article 434 (Bankruptcy of Inheritors) |
Where any inheritor is declared bankrupt, even when his or her properties are divided out, inheritance creditors and persons who take the legacy may exercise their rights as bankruptcy creditors on the total amount of their claims to the bankruptcy estate.
| Article 435 (Insolvent Estate and Insolvent Inheritor) |
When any inheritance estate and its inheritor are each declared bankrupt, inheritance creditors and persons who take the legacy may exercise their rights as bankruptcy creditors on the total amount of their claims to the bankruptcy estate.
| Article 436 (Qualified Acceptance of Inheritors) |
In cases under Articles 434 and 435, when any inheritor who is declared bankrupt receives qualified acceptance, inheritance creditors and persons who take the legacy shall not exercise their rights as bankruptcy creditors on the inherent estate of such inheritor. The same shall apply to cases where the effect of the qualified acceptance exists pursuant to the provisions of Articles 385 or 386 (1).
| Article 437 (Claims of Inheritors on Predecessors) |
When any inherited estate is declared bankrupt, the inheritor thereof shall have the same rights as those of inheritance creditors on claims on the predecessor and any investment that is made in order to extinguish claims on the predecessor and obligations of the predecessor.
| Article 438 (Creditors of Inheritor) |
When any inherited estate is declared bankrupt, the creditors of the inheritors thereof shall be prohibited from exercising their rights as bankruptcy creditors on the bankruptcy estate.
| Article 439 (Expenses Incurred from Participation in Bankruptcy Procedures) |
Expenses incurred from participation in bankruptcy procedures shall be covered by bankruptcy claims.
| Article 440 (Equal Repayments to Persons on Same Order) |
Claims with the same priority shall be repaid in proportion to the amount of each claim.
| Article 441 (Priority Bankruptcy Claims) |
Bankruptcy claims with general preferential rights to the properties that belong to the bankruptcy estate shall take precedence over other claims.
| Article 442 (Calculation of Preferential Right Period) |
Where preferential rights exist on the amount of claims during a certain period, such period shall be calculated retroactively from the time bankruptcy is declared.
| Article 443 (Superiority of Inheritance Creditors) |
When inherited estate is declared bankrupt, the claims of inheritance creditors shall take precedence over the claims of persons who take the legacy.
| Article 444 (Ranking of Creditors Where Inheritor Declared Bankrupt) |
Where any inheritor is declared bankrupt on the grounds of a petition for bankruptcy filed within the period during which the petition for bankruptcy is filed on the inheritance estate, the claims of the inheritor’s creditor shall take precedence over claims of inheritance creditors and the person who takes the legacy on the inherent properties of the inheritor. The claims of the inheritance creditors and the claim of the person who takes the legacy shall take precedence over the claims of the creditors of the inheritor on the inheritance estate.
| Article 445 (Ranking of Inherited Estate and Bankruptcy Estate of Inheritors) |
When inherited estate and any inheritor are declared bankrupt, the claims of the creditors of the inheritor shall take precedence over the claims of inheritance creditors and the person who takes the legacy with respect to the bankruptcy estate of the inheritor.
| Article 446 (Subordinate Bankruptcy Claims) |
| (1) | Claims falling under the following subparagraphs shall constitute subordinate bankruptcy claims compared with other bankruptcy claims: |
| 1. | The interest that accrues after bankruptcy is declared; |
| 2. | The amount of damages and the penalties for failure to pay such amount after bankruptcy is declared; |
| 3. | Expenses incurred from participating in bankruptcy procedures; |
| 4. | Fines, penalties, expenses for criminal litigation costs, additional levies, and the administrative fines; |
| 5. | In the case of interest-free claims that fall due after bankruptcy is declared, the portion equivalent to the interest calculated by the account that makes the total amount of the principal calculated based the statutory interest from the time bankruptcy is declared until the deadline of the claim; |
| 6. | In the case of interest-free claims with indefinite maturity dates, the portion equivalent to the difference between the claim amount and the amount appraised at the time bankruptcy is declared; |
| 7. | In the case of periodic payment claims, the claim amount and period of existence of which are confirmed, when the portion equivalent to the total amount of interest calculated according to the provisions of subparagraph 5 concerning the periodic payments and the total principal calculated according to the provisions of the same subparagraph concerning the periodic payments exceeds the principal from which statutory interest equivalent accrues on the periodic payments. |
| (2) | Any claim on which the debtor agrees with creditors to rank lower than that of other claims shall be ranked lower than that of other claims, as agreed. |
SECTION 2 Reporting and Inspection of Bankruptcy Claims
| Article 447 (Means of Reporting Claims) |
| (1) | Every bankruptcy creditor shall report the matters falling under each of the following subparagraphs to the court within the period set by the court (hereinafter referred to as "reporting period") and submit evidential documents or certified copies and abridged copies thereof to the court: |
| 1. | The amount of claims and the grounds thereof; |
| 2. | When claims carry general preferential rights, the rights thereof; |
| 3. | When the claims falling under any subparagraph of Article 446 (1) are included, the categorization thereof; |
| (2) | The holder of the right to foreclose outside bankruptcy shall report the amount of claims that cannot be repaid according to the purpose and exercise of such rights. |
| (3) | When a lawsuit is pending bankruptcy claims at the time bankruptcy is declared, bankruptcy creditors shall report to the Court the parties, the name and the number of cases other than the matters referred to in each subparagraph of paragraph (1). |
| Article 448 (Preparation of Table of Bankruptcy Creditors) |
| (1) | The court official of Grade V, etc. shall prepare a table of bankruptcy creditors in which the matters falling under each of the following subparagraphs are entered: |
| 1. | Names and domiciles of creditors; |
| 2. | The amount of claims and the grounds thereof; |
| 3. | General preferential rights, if any; |
| 4. | When claims falling under any of the subparagraphs of Article 446 (1) are included, the categorization thereof; |
| 5. | The amount of claims reported by the holder of the right to foreclose outside bankruptcy. |
| (2) | The court official of Grade V, etc. shall deliver a certified copy of the table of bankruptcy creditors to the trustee in bankruptcy. |
| Article 449 (Maintaining Table of Bankruptcy Creditors and Documents concerning Claim Reports) |
| (1) | The court shall maintain a table of bankruptcy creditors and documents concerning claim reports in order for interested persons to inspect them. |
| (2) | The court official of Grade V, etc. shall, at the request of any creditor deliver to him or her an abridged copy of the table of bankruptcy creditors concerning the claims of creditors. |
| Article 450 (Inspection of Claims) |
The matters provided for in each subparagraph of Article 448 (1) with respect to reported claims shall be inspected on the date for claim inspection.
| Article 451 (Presence of Persons Concerned) |
| (1) | The debtor and the bankruptcy creditors who make the report or their agents may be present to state their opinions on the claim inspection date. |
| (2) | The agents referred to in the provisions of paragraph (1) shall each submit to the court written evidence of proxy. |
| Article 452 (Presence of Trustees in Bankruptcy) |
No claims shall be inspected without the presence of the trustee in bankruptcy.
| Article 453 (Inspection of Claims Reported After Expiration of Report Period) |
| (1) | Claims that are reported after the expiration of the reporting period may be inspected on the general claim inspection date except when an objection is raised thereto by the trustee in bankruptcy and any bankruptcy creditor. |
| (2) | When the trustee in bankruptcy or any bankruptcy creditor raises an objection, the court shall set a special date in order to conduct the claim inspection referred to in the provisions of paragraph (1). In this case, expenses necessary for the claim inspection shall be borne by bankruptcy creditors who report after the reporting period. |
| Article 454 (Changes Prejudicing Interests of Bankruptcy Creditors) |
The provisions of Article 453 shall apply mutatis mutandis to cases where an amendment is made to the matters reported by bankruptcy creditors to the effect of prejudicing the interests of other bankruptcy creditors after the reporting period.
| Article 455 (Report of Claims after General Date) |
The provisions of Article 453 (2) shall apply mutatis mutandis where any bankruptcy creditor reports claims after the general date on which the inspection of claims is conducted.
| Article 456 (Public Notice and Notification of Special Date) |
Any decision to set a special date on which claims are inspected shall be publicly notified, and the trustees in bankruptcy, the debtor and the bankruptcy creditors who report their claims shall be notified of such special date.
| Article 457 (Change in Claim Inspection Date) |
The provisions of Article 456 shall apply mutatis mutandis to any change in a claim inspection date, the extension of a claim inspection and the continuation of claim inspection: Provided, That when the claim inspection date is declared, the notification and the public notice thereof need not be made.
| Article 458 (Confirmation of Claims) |
When the trustee in bankruptcy or any bankruptcy creditor does not raise any objection on the claim inspection date, the matters falling under each of the following subparagraphs shall be confirmed:
| 3. | The categorization of the claims that fall under any of the subparagraphs of Article 446 (1). |
| Article 459 (Entry of Inspection Results in Table of Bankruptcy Creditors) |
| (1) | The court official of Grade V, etc. shall enter the result of the claim inspection and any objections stated by the debtor in the table of bankruptcy creditors. |
| (2) | The court official of Grade V, etc. shall enter the gist of the confirmation in the documents evidencing the claims and affix the court seal thereto. |
| Article 460 (Effect of Entry of Confirmed Claims in Table of Bankruptcy Creditors on Bankruptcy Creditors) |
When confirmed claims are entered in the table of bankruptcy creditors, the entries thereof shall have the same effect as that of a confirmed judgment on all of the bankruptcy creditors.
| Article 461 (Notification of Objection to Bankruptcy Claims) |
| (1) | Where any bankruptcy creditor fails to be present on the claim inspection date, if an objection is raised against the relevant claim, the court shall notify such bankruptcy creditor of the fact. |
| (2) | The notification referred to in the provisions of paragraph (1) may be made by mail. |
| Article 462 (Judgment in Claim Allowance Proceedings) |
| (1) | When the trustee in bankruptcy or any bankruptcy creditor raises an objection to the contents of any bankruptcy claim reported in the course of bankruptcy claim inspection, the bankruptcy creditor who holds such bankruptcy claim (hereinafter referred to as "disputed claim") may file an application with the court for a judgment in claim allowance proceedings (hereafter referred to as "judgment in claim allowance proceedings" in this Part), naming all objectors as opposing parties: Provided, That the same shall not apply to cases falling under Articles 464 and 466. |
| (2) | Whether any disputed bankruptcy claim exists and the contents thereof shall be prescribed in the judgment in claim allowance proceedings. |
| (3) | The court shall, when it gives the judgment in claim allowance proceedings, examine each person who raises an objection. |
| (4) | The court shall deliver a written judgment in claim allowance proceedings to each of the parties. |
| (5) | The application referred to in the provisions of paragraph (1) shall be filed within one month from the general inspection date or the special inspection date set for the inspection of any disputed bankruptcy claim. |
| Article 463 (Lawsuit Objecting to Judgment in Claim Allowance Proceedings) |
| (1) | Anyone who is dissatisfied with a judgment in claim allowance proceedings may file a lawsuit objecting to such judgment within one month from the date on which he or she receives delivery of the written decision. |
| (2) | The lawsuit referred to in paragraph (1) shall be placed under the exclusive jurisdiction of the court with pending bankruptcy cases. <Amended on Dec. 27, 2016> |
| (3) | When the person who files the appeal referred to in paragraph (1) is a bankruptcy creditor who holds disputed claims, all of the objectors shall be named as defendants and when the bankruptcy creditor is an objector, the bankruptcy creditor shall be named as a defendant. |
| (4) | When multiple lawsuits are pending on the same claim, the court shall merge pleadings therefor. |
| (5) | The judgment on the lawsuit referred to in paragraph (1) shall authorize or amend the judgment referred to in the same paragraph except when the court dismisses the lawsuit without prejudice for being unlawful. |
| Article 464 (Taking Over Lawsuit Involving Disputed Claims) |
Where any lawsuit is pending on the disputed claims at the time bankruptcy is declared, if a creditor thereof seeks to have his or her right thereon confirmed, such creditor shall take over the lawsuit, naming all objectors as opposing parties.
| Article 465 (Restrictions on Grounds of Claims) |
Any bankruptcy creditor may file an application for a judgment in claim allowance proceedings on the matters entered in the table of the bankruptcy creditors pursuant to the provisions of Article 459 (1), may file the lawsuit provided for in the provisions of Article 463 (1) or may take over a lawsuit pursuant to the provisions of Article 464.
| Article 466 (Ways to Raise Objections to Claims with Title of Execution) |
| (1) | Anyone who has an objection to the title of execution with power to execute and any claim on which a final and conclusive judgment is given may raise an objection only by resorting to the same litigation procedures that may be brought by the debtor. |
| (2) | Where a lawsuit on the bankruptcy claim as provided for in the provisions of paragraph (1) is pending in the court at the time bankruptcy is declared, if any objector intends to raise the objection referred to in the same paragraph, such objector shall take over the litigation procedures naming the bankruptcy creditor who holds the bankruptcy claim as the opposing party. |
| (3) | The provisions of Articles 463 (4) and 465 shall apply mutatis mutandis to the provisions of paragraphs (1) and (2). |
| Article 467 (Entry of Results of Bankruptcy Claim Allowance Proceedings) |
The court official of Grade V, etc. shall, at the request of the trustee in bankruptcy or any bankruptcy creditor, enter the results of bankruptcy claim allowance proceedings (when the lawsuit objecting to the judgment in claim allowance proceedings is not filed, or is dismissed without prejudice within the period provided for in the provisions of Article 463 (1), this refers to the contents of such judgment) in the table of bankruptcy creditors.
| Article 468 (Effect of Judgment in Bankruptcy Claim Allowance Proceedings) |
| (1) | The judgment in bankruptcy claim allowance proceedings shall take effect on all bankruptcy creditors. |
| (2) | When any lawsuit objecting to the judgment in claim allowance proceedings is not filed, or is dismissed without prejudice within the period provided for in the provisions of Article 463 (1), such judgment shall have the same effect on all bankruptcy creditors as that of a final and conclusive judgment. |
| Article 469 (Refund of Litigation Costs) |
When the bankruptcy estate receives benefits from bankruptcy claim allowance proceedings (including a judgment in claim allowance proceedings), any bankruptcy creditor who claims an objection may claim a refund of litigation costs as an estate creditor within the limits of such benefits.
| Article 470 (Value of Subject Matter of Bankruptcy Claim Confirmation Lawsuit) |
The value of the subject matter of bankruptcy claim allowance proceedings shall be determined by the court with pending bankruptcy cases on the basis of the amount scheduled for distribution. <Amended on Dec. 27, 2016>
| Article 471 (Report on Fines) |
| (1) | Anyone who holds a claim provided for in the provisions of Article 446 (1) 4 shall, without delay, report the amount and the grounds of such claim to the court. |
| (2) | The provisions of Article 459 (1) shall apply mutatis mutandis to the claim that is reported pursuant to the provisions of paragraph (1). |
| Article 472 (Administrative Trial or Administrative Litigation) |
| (1) | When the grounds of a claim reported pursuant to the provisions of Article 471 (1) is a disposition subject to administrative trial or administrative litigation, the court shall promptly notify the trustee in bankruptcy of the amount and the grounds of such claim. |
| (2) | The provisions of Articles 466 through 468 shall apply mutatis mutandis to cases where the trustee in bankruptcy claims an objection. |
| Article 473 (Scope of Estate Claims) |
Any of the following claims shall constitute an estate claim: <Amended on Mar. 31, 2010; May 20, 2014; Dec. 27, 2016>
| 1. | A claim for trial costs for common interest of bankruptcy creditors; |
| 2. | A claim to collect taxes under the National Tax Collection Act or the Local Tax Collection Act (including claims to collect taxes in the same manner as national taxes, which take priority over general bankruptcy claims in collection, but subordinate claims provided for in Article 446 shall be excluded): Provided, That claims on grounds arising after bankruptcy is declared shall be limited to claims that accrue to the bankruptcy estate; |
| 3. | Expenses necessary for the management, realization, and distribution of the bankruptcy estate; |
| 4. | Claims arising from acts performed by the trustee in bankruptcy for the bankruptcy estate; |
| 5. | Claims that accrue to the bankruptcy estate after bankruptcy is declared on the grounds of clerical work or unlawful profits; |
| 6. | Claims that accrue to the bankruptcy estate on the grounds of acts performed out of the need to deal with emergencies after the commission is terminated or the agency authority is terminated; |
| 7. | Claims held by the other party where the trustee in bankruptcy fulfills any obligation pursuant to Article 335 (1); |
| 8. | Claims that accrue by the time when a bilateral contract is terminated on grounds of a declaration of bankruptcy; |
| 9. | Supporting money to the creditor and his or her dependents; |
| 10. | Wages, severance allowances, and disaster compensation for the debtor's employees; |
| 11. | The debtor’s employees’ right to claim for a refund of bailment monies and fidelity guarantee monies, which have been created for any reason before the declaration of bankruptcy. |
| Article 474 (Claim of Encumbrance against Encumbered Legacy) |
When a trustee in bankruptcy claims is provided with an encumbered legacy, a claim that is entitled to benefit from the encumbrance shall constitute an estate claim within the limits of not exceeding the value of the legacy.
| Article 475 (Repayment of Estate Claims) |
Estate claims shall be satisfied at any time without going through bankruptcy procedures.
| Article 476 (Preferential Repayments of Estate Claims) |
Estate claims shall have priority in repayment over bankruptcy claims.
| Article 477 (Methods of Reimbursement in Cases of Insufficient Bankruptcy Estate) |
| (1) | Where it becomes clear that the value of the bankruptcy estate is insufficient to repay in full the estate claims, the repayment for the estate claims shall be made in proportion to the outstanding amounts of claims, notwithstanding the preferential rights provided for in other statutes and regulations: Provided, That this shall not affect the effect of any such lien, pledge, mortgage, security right under the Act on Security over Movable Property, Claims, Etc., and right to lease on a deposit basis, as established over the estate claims. <Amended on Jun. 10, 2010> |
| (2) | Estate claims enumerated in the provisions of subparagraphs 1 through 7 and 10 of Article 473 shall have priority over other estate claims. |
| (3) | In cases falling under paragraph (1), when funds borrowed with permission from the court in order to continue the debtor’s business (hereafter in this Article, referred to as “newly borrowed funds”), among the claims falling under subparagraphs 5 and 12 of Article 179 (1) that constitute estate claims pursuant to Article 6 (4), 6(9), and 7 (1), the claims for newly borrowed funds and estate claims under subparagraph 10 of Article 473 shall take precedence over other estate claims, notwithstanding paragraph (2). In such cases, the priority order of estate claims, excluding the claims for newly borrowed funds and estate claims under subparagraph 10 of Article 473, shall be determined in accordance with paragraph (2). <Newly Inserted on Feb. 4, 2020> |
| Article 478 (Mutatis Mutandis Application of Provisions Governing Bankruptcy Claims) |
| (1) | The provisions of Articles 425, 426 and 427 (1) shall apply mutatis mutandis to the estate claims provided for in the provisions of subparagraph 7 of Articles 473 and 474. |
| (2) | When the estate claims provided for in the provisions of paragraph (1) are interest-free claims or the claims for cash payable by periodic installments, if such claims are the bankruptcy claims, the amount obtained by deducting the amount falling under the portion ranked lower than that of other bankruptcy claims pursuant to the provisions of Article 446 (1) 5 through 7 shall be made the value thereof. |
CHAPTER V MANAGEMENT, REALIZATION AND DISTRIBUTION
SECTION 1 Management and Realization of Bankruptcy Estate
| Article 479 (Possession and Management of Bankruptcy Estate) |
The trustee in bankruptcy shall commence possession and management of the properties that belong to the bankruptcy estate immediately after he or she takes office.
| (1) | When it is deemed necessary, the trustee in bankruptcy may cause the court official of Grade V, etc., the executor or the notary public to seal the properties that belongs to the bankruptcy estate. In such cases, anyone who performs the sealing shall prepare an investigation record. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to cases where the seal is removed. |
| Article 481 (Closure of Property Books) |
The trustee in bankruptcy shall promptly close the books of the debtor's property after he or she is declared bankrupt and enter the gist of such closure on the book and subscribe his or her name and affix his or her seal to the book.
| Article 482 (Appraisal of Property's Value) |
The trustee in bankruptcy shall appraise the value of all properties belonging to the bankruptcy estate at the time bankruptcy is declared. In this case, the debtor may be allowed to participate in the value appraisal.
| Article 483 (Preparation of Properties List and Balance Sheet) |
| (1) | The trustee in bankruptcy shall prepare a properties list and a balance sheet. |
| (2) | The trustee in bankruptcy shall affix his or her name and seal to certified copies of the properties list and the balance sheet and submit them to the court. The same shall apply to the inspection record concerning the seal. |
| (3) | Interested persons may request an inspection of documents referred to in the provisions of paragraph (2). |
| Article 484 (Management of Mails) |
| (1) | The court may commission any postal administrative agency, transporter and other person to deliver mails, telegrams and other goods in transit, each of which are destined for the debtor to the trustee in bankruptcy. |
| (2) | The trustee in bankruptcy may open the mails, telegrams and other goods referred to in the provisions of paragraph (1) after receiving them. |
| (3) | The debtor may request for an inspection of the mails, telegrams and other goods that the trustee in bankruptcy receives and request for delivery to him or her of anything that is unrelated with the bankruptcy estate. |
| Article 485 (Cancellation of Management of Mails) |
| (1) | The court may, at the request of the debtor or the trustee in bankruptcy, cancel or change the commission provided for in the provisions of Article 484 (1). |
| (2) | When a decision to revoke or terminate the bankruptcy becomes final and conclusive or it is decided to discontinue the bankruptcy, the court shall cancel the commission provided for in the provisions of Article 484 (1). |
| Article 486 (Continuation of Business) |
A trustee in bankruptcy may cause the debtor to continue his or her business after obtaining permission therefor from the court.
| Article 487 (Means of Safekeeping Valuable Goods) |
Means of safekeeping currency, securities and other valuable goods shall be prescribed by the court.
| Article 488 (Report on History of Bankruptcy) |
A trustee in bankruptcy shall report on circumstances leading to the declaration of bankruptcy and the past and current status of the debtors and the bankruptcy estate at the first meeting of creditors.
| Article 489 (Matters on Which Meeting of Creditors Resolves) |
The meeting of creditors may resolve upon each of the following matters:
| 1. | The discontinuation and the continuation of business; |
| 2. | Means of safekeeping valuable goods. |
| Article 490 (Presentation of Properties Subject to Right to Foreclose Outside Bankruptcy) |
| (1) | A trustee in bankruptcy may request the holder of the right to separate settlement to present the properties subject to his or her right. |
| (2) | When the trustee in bankruptcy intends to appraise the property referred to in the provisions of paragraph (1), the holder of the right to foreclose outside bankruptcy may not refuse the former's wishes. |
| Article 491 (Restrictions on Timing of Liquidation) |
A trustee in bankruptcy shall be prohibited from realizing properties belonging to the bankruptcy estate before the claim inspection date provided for in the provisions of Article 312 (1) 3 expires: Provided, That the same shall not apply to cases where an agreement is obtained from the members of the audit committee or permission therefor is obtained from the court.
| Article 492 (Acts Requiring Court Permission) |
Where any trustee in bankruptcy intends to perform any of the following acts, he or she shall obtain permission therefor from the court, and where the members of the audit committee are appointed, he or she shall obtain agreement from the members of the audit committee: Provided, That the foregoing shall not apply to cases where the value is not more than 10 million won and that it falls short of the amount set by the court among the cases falling under subparagraphs 7 through 15: <Amended on Aug. 27, 2019>
| 1. | The voluntary sale of real rights to real estate, any domestic ship and any foreign ship, the sale of which is required to be registered; |
| 2. | The voluntary sale of a mining right, fishing right, aquaculture business rights, patent right, utility model right, design right, trade mark right, service mark right, and copyright; |
| 3. | The transfer of a business; |
| 4. | The comprehensive sale of goods; |
| 5. | Borrowing of money including funds; |
| 6. | The approval granted for renouncing inheritance provided for in the provisions of Article 386 (2), the approval granted for renouncing the general legacy provided for in the provisions of Article 387 and the renunciation of the specific legacy provided for in the provisions of Article 388 (1); |
| 7. | The voluntary sale of movable properties; |
| 8. | The transfer of bonds and securities; |
| 9. | A claim for the performance provided for in the provisions of Article 335 (1); |
| 10. | The filing of lawsuits (excluding any application filed for preliminary injunction and provisional seizure); |
| 12. | The renunciation of rights; |
| 13. | Approval granted for estate claims, repossession rights and the right to foreclose outside bankruptcy; |
| 14. | The retrieval of subject matter of the right to foreclose outside bankruptcy; |
| 15. | The conclusion of any contract that results in encumbrance to the bankruptcy estate; |
| 16. | Other acts designated by the court. |
| Article 493 (Hearing of Debtor's Opinions) |
In cases under Article 492, the debtor may state his or her opinion to the trustee in bankruptcy.
| Article 494 (Stay Order Issued By Court) |
Even when a trustee in bankruptcy performs acts provided for in the provisions of any subparagraph of Article 492 after obtaining agreement thereon from the members of the audit committee, the court may order the trustee in bankruptcy to discontinue performing any of such acts upon receiving an application field by the debtor or call an assembly of the creditors for a resolution on any of such acts.
| Article 495 (Protection of Bona Fide Third Parties) |
Even in cases where a trustee in bankruptcy violates either Article 491 or 492 or stay order under Article 494, such violation may not be asserted against bona fide third parties.
| Article 496 (Means of Realization) |
| (2) | Notwithstanding the provisions of paragraph (1), a trustee in bankruptcy may perform realization by other means including the transfer of a business after obtaining permission therefor from the court. |
| Article 497 (Realization of Goods Subject to Right to Foreclose Outside Bankruptcy) |
| (1) | A trustee in bankruptcy may liquidate properties, which are subject to the right to foreclose outside bankruptcy pursuant to the Civil Execution Act. In this case, the holder of the right to foreclose outside bankruptcy may not refuse such liquidation. |
| (2) | In cases under paragraph (1), when the amount to be paid to the holder of the right to foreclose outside bankruptcy is not yet confirmed, a trustee in bankruptcy shall deposit the sum thereof separately. In this case, the right to foreclose outside bankruptcy shall attach to the sum. |
| Article 498 (Designation of Disposal Period by Holder of Right to Foreclose Outside Bankruptcy) |
| (1) | When the holder of the right to foreclose outside bankruptcy holds the right to dispose of good subject to the right to foreclose outside bankruptcy without resorting to the means prescribed by Acts, at the request of the trustee in bankruptcy, the court shall fix a period during which the holder of the right to foreclose outside bankruptcy has to dispose of the subject matter. |
| (2) | When the holder of the right to foreclose outside bankruptcy fails to dispose of the subject matter during the period referred to in the provisions of paragraph (1), he or she shall lose the right referred to in the provisions of paragraph (1). |
| Article 499 (Report on Current Status by Trustee in Bankruptcy) |
A trustee in bankruptcy shall report on the current status of the bankruptcy estate to the meeting of creditors or the members of the audit committee under the conditions prescribed by the meeting of creditors.
| Article 500 (Claim for Return of Bailed Goods) |
| (1) | When the trustee in bankruptcy intends to request for the return of currency, securities and valuable goods, each of which are bailed, he or she shall obtain agreement thereon from the members of the audit committee and when such members of the audit committee are not available, he or she shall obtain permission therefor from the court: Provided, That when any other resolution is passed at the meeting of creditors, their return shall be governed by such resolution. |
| (2) | Where the trustee in bankruptcy violates the provisions of paragraph (1), when the depositee is bona fide and is not negligent, the repayment shall be effective. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to cases where the trustees in bankruptcy issue securities in order to cause the depositee to make payments or pay benefits. |
| Article 501 (Realization of Corporate Bankruptcy Estate) |
| Article 502 (Claim for Investments made by Anonymous Partners) |
Where the contract of an anonymous association is terminated on the grounds that any business operator is declared bankrupt, the trustee in bankruptcy may cause the members of such association to make investment up to the amount of loss to be borne by the anonymous partner.
| Article 503 (Inheritor's Bankruptcy and Disposal of Inherited Estate) |
| (1) | When any inheritor makes a qualified acceptance or his or her properties are divided after he or she is declared bankrupt, the trustee in bankruptcy shall dispose of such inherited estate. The same shall apply to cases where the inheritor is declared bankrupt after the qualified acceptance is made and his or her properties are divided. |
| (2) | When the trustee in bankruptcy completes the disposal referred to in the provisions of paragraph (1), any residual properties shall be entered in the properties list and the balance sheet of the bankruptcy estate. |
| (3) | The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to cases where anyone who takes a general legacy is declared bankrupt. |
| Article 504 (Provisions Applicable Mutatis Mutandis) |
The provisions of Article 503 shall apply mutatis mutandis to cases where the effect of the qualified acceptance accrues pursuant to the provisions of Article 385 or 386 (1).
SECTION 2 Distribution of Dividends
| Article 505 (Timing of Distributing Dividends) |
The trustee in bankruptcy shall distribute dividends without delay whenever the money therefor is available after the claim inspection date provided for in the provisions of Article 312 (1) 3 expires.
| Article 506 (Permission Required for Distributing Dividends) |
When the trustee in bankruptcy intends to distribute dividends, he or she shall obtain permission therefor from the court: Provided, That agreement thereon shall be obtained from the members of the audit committee, when they are available.
| Article 507 (Preparation of Dividend Table) |
| (1) | The trustee in bankruptcy shall prepare a dividend table showing the following: |
| 1. | The names and domiciles of creditors who are entitled to the dividends; |
| 2. | The amount of claims included in the dividends; |
| 3. | The amount available for distributing dividends. |
| (2) | The claims that are available for distributing dividends shall be categorized depending on whether a preferential right exist. In this case, the claims with a preferential right shall be entered in the dividend table according to the rank of such preferential right and the claims without preferential right shall be arranged into a rank lower than that of other claims and then entered in the table. |
| Article 508 (Submission of Dividend Tables) |
The trustee in bankruptcy shall submit the dividend table to the court in order for interested persons to inspect them.
| Article 509 (Public Notice of Amount of Dividends) |
The trustee in bankruptcy shall publicly notify the total amount of claims included in the dividends and the amount of the dividends: Provided, That the same shall not apply to cases where the dividend table is corrected pursuant to the provisions of Articles 513 and 527.
| Article 510 (Public Notice of Discontinuation of Distributing Dividends) |
When the court orders the discontinuation of a distribution of dividends pursuant to the provisions of Article 44 (1) at the request for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures, the court shall publicly notify the gist thereof. <Amended on Dec. 30, 2014>
| Article 511 (Continuation of Procedures for Distributing Dividends and Public Notification Thereof) |
Where an order is given to discontinue the distribution of dividends pursuant to the provisions of Article 44 (1) 1, if a decision falling under any of the following subparagraphs becomes final and conclusive, the court shall continue the procedures for distributing dividends and publicly notify the gist thereof: <Amended on Dec. 30, 2014> | 1. | Dismissal of an application for commencement of rehabilitation procedures or an application for commencement of simplified rehabilitation procedures; |
| 2. | Discontinuation of rehabilitation procedures or simplified rehabilitation procedures (excluding cases where rehabilitation procedures continue after a decision is rendered to discontinue simplified rehabilitation procedures under Article 293-5 (4)) |
| 3. | A decision made not to grant authorization for a rehabilitation plan. |
| Article 512 (Exclusion of Creditors and Holders of Rights to Foreclose Outside Bankruptcy with Objection to Dividends) |
| (1) | With respect to any disputed claim, if any creditor fails to file an application with a trustee in bankruptcy for a judgment in claim allowance proceedings and a lawsuit pursuant to the provisions of Article 463 (1) or to attest the takeover of any lawsuit within 14 days from the date on which the dividends are publicly notified, he or she shall be excluded from receiving the dividends. |
| (2) | If the holder of the right to foreclose outside bankruptcy fails to prove that he or she has begun disposing of the subject matter of his or her right and to substantiate the amount of a claim that cannot be repaid through such disposal within the period for excluding dividends under paragraph (1), he or she shall be excluded from dividend payment. |
| Article 513 (Correction of Dividend Table) |
In any of the following cases, the trustee in bankruptcy shall immediately correct the dividend table:
| 1. | When the grounds for correcting the table of bankruptcy creditors accrues within the period during which the dividends are excluded; |
| 2. | When the attestant and the substantiation provided for in the provisions of Article 512 are made; |
| 3. | When the holder of the right to foreclose outside bankruptcy expresses to the trustee in bankruptcy an intention to renounce his or her right and proves the amount of claims that cannot not be repaid by the exercise of his or her right within the period during he or she is excluded from dividend payment. |
| Article 514 (Objection to Dividend Tables Distribution Statement) |
| (1) | Any creditor may raise objections to the court with respect to the dividend table only within seven days after the lapse of the dividend exclusion period. |
| (2) | When the court orders any correction of the dividend table, it shall maintain the written decision for inspection by interested parties. In this case, the appeal period shall be calculated from the date on which such written decision is made available for such inspection. |
| (3) | An immediate appeal may be filed against the decision made by the court upon the application referred to in the provisions of paragraph (1). In this case, the appeal period when the court orders the correction of the dividend table shall be calculated from the date on which the written decision is made available for inspection by interested parties. |
| Article 515 (Notification of Decision on Dividend Rates) |
| (1) | When an objection is raised after the lapse of the period provided for in the provisions of Article 514 (1), the trustee in bankruptcy shall promptly set the dividend rates after a decision is made on such objection and notify creditors who are entitled to the dividends of such dividend rates. |
| (2) | When the dividend rates are set, approval thereof shall be obtained from the court: Provided, That agreement thereon shall be obtained from the members of the audit committee, if any such members exist. |
| Article 516 (Distribution of Dividends to Creditors Subject to Condition Subsequent) |
Anyone who holds the claims subject to a condition subsequent shall not be entitled to the distribution of dividends unless he or she furnishes substantial security.
| Article 517 (Means of Distributing Dividends) |
| (1) | Bankruptcy creditors shall receive the distribution of their dividends at the place in which the trustee in bankruptcy performs his or her duties: Provided, That the same shall not apply to cases where any agreement is reached between the trustee in bankruptcy and the bankruptcy creditors with respect to the place in which they receive the distribution of such dividends. |
| (2) | The trustee in bankruptcy shall, when he or she distributes dividends, enter the amount of dividends that are distributed in the table of bankruptcy creditors and the evidential document of claims and affix his or her name and seal to such table and such evidential document. |
| Article 518 (Preferential Distribution of Dividends to Persons Excluded from Previous Distribution of Dividends) |
When any creditor excluded from a previous distribution of dividends on the grounds of his/her failure to make the attestation and substantiation provided for in the provisions of Article 512 makes such attestation and substantiation within the dividend exclusion period for the subsequent dividend payment, he/she shall have over priority over other creditors of the same rank in respect of the amount that he/she would have received from the previous dividend payment.
| Article 519 (Bailment of Proceeds of Dividends) |
The trustee in bankruptcy shall bail the dividend proceeds for claims falling under any of the following subparagraphs:
| 1. | Claims to which an objection is raised pursuant to the provisions of Articles 462 through 464 or 466 and for which an application is filed for the judgment in claim allowance proceedings and a lawsuit is filed and the lawsuit is taken over; |
| 2. | Claims for which any administrative trial, lawsuit and objection procedures are pending before the notification of the dividend rates are made; |
| 3. | Claim amounts that are substantiated by the holder of the right to foreclose outside bankruptcy pursuant to the provisions of Article 512 (2); |
| 4. | Condition precedent claims and future claims; |
| 5. | Claims subject to a condition subsequent for which no security is offered pursuant to the provisions of Article 516. |
| Article 520 (Permission for Final Dividends) |
Where the trustee in bankruptcy distributes final dividends, he or she shall obtain permission therefor from the court even if agreement is obtained from a member of the audit committee.
| Article 521 (Dividend Exclusion Period for Final Dividend) |
The court shall set the period during which the distribution of the final dividend must be excluded, which shall be not less than 14 nor more than 30 days from the date on which the distribution of dividends is publicly notified.
| Article 522 (Decision on Amount of Final Dividend and Notification Thereof) |
In the final dividend, the trustee in bankruptcy shall promptly set the amount of dividends for each of the creditors and notify the creditors of the amount of such dividends after any objections raised to the dividend table are settled.
| Article 523 (Exclusion of Condition-Precedent Creditors) |
When condition precedent claims or future claims cannot be exercised within the dividend exclusion period for the final dividends, the relevant creditors shall be excluded from the distribution of dividends.
| Article 524 (Payments to Creditors Subject to Condition Subsequent) |
When conditions on the claims subject to a condition subsequent are not met within the dividend exclusion period for the final dividends, any security provided pursuant to the provisions of Article 516 shall lose its effect and the sum bailed pursuant to the provisions of subparagraph 5 of Article 519 shall be paid to creditors. The same shall apply to the security furnished and the sum bailed pursuant to the provisions of Article 419.
| Article 525 (Exclusion of Holder of Right to Foreclose Outside Bankruptcy) |
When a holder of the right to foreclose outside bankruptcy fails to express his or her intention to renounce his or her right to the trustee in bankruptcy and to attest of the amount of claims that cannot be repaid by the exercise of his or her right within the dividend exclusion period, he or she shall be excluded from the distribution of dividends.
| Article 526 (Distribution of Bailment Funds) |
The sum bailed for creditors who are excluded from the distribution of dividends pursuant to the provisions of Article 523 or 525 shall be distributed to other creditors. The same shall apply to the sum bailed pursuant to the provisions of Article 418.
| Article 527 (Correction of Dividend Table if New Properties Are Found to Exist) |
When any properties are found to exist, which are to be appropriated for new dividends, before the notification of the dividend amount is mailed out, the trustee in bankruptcy shall correct the dividend table without delay.
| Article 528 (Deposit of Dividends) |
The trustee in bankruptcy shall deposit the dividends falling under each of the following subparagraphs for creditors:
| 1. | A dividend bailed pursuant to the provisions of subparagraph 1 or 2 of Article 519; |
| 2. | A dividend on any claim for which an administrative trial, lawsuit or objection procedures are still pending before the notification of the dividend amount is mailed out; |
| 3. | A dividend that remains unpaid to creditors. |
| Article 529 (Accounting Report at Meeting of Creditors) |
An meeting of creditors called to deliberate on the accounting report shall pass a resolution concerning the disposal of the properties that are not realized after the trustee in bankruptcy recognizes it as being valueless.
| Article 530 (Decision and Public Notice of Bankruptcy Termination) |
When the meeting of creditors is closed, the court shall decide on the termination of bankruptcy and publicly notify the operative part of such decision and the summary of the grounds thereof.
| Article 531 (Public Notice of Additional Dividends and Notification of Dividend Amount) |
| (1) | When any new properties are found to be appropriated for dividends after the amount of dividend is notified, the trustee in bankruptcy shall further distribute dividends after obtaining permission therefor from the court. The same shall apply to cases where any new properties are found to be appropriated to dividends after the termination of bankruptcy. |
| (2) | When the trustee in bankruptcy obtains permission to make additional dividends, he or she shall without delay publicly notify the amount of dividend and then set the amount for each creditor and notify such creditors thereof. |
| Article 532 (Standards for Additional Dividends) |
The additional dividends shall be paid according to the dividend table prepared for final dividends.
| Article 533 (Accounting Report) |
| (1) | When the trustee in bankruptcy distributes additional dividends, he or she shall promptly prepare an accounting report and obtain authorization thereon from the court. |
| (2) | An immediate appeal may be filed against the authorization referred to in the provisions of paragraph (1). |
| Article 534 (Estate Creditors Unknown to Trustees in Bankruptcy) |
Any estate creditor who is not known to the trustee in bankruptcy before the dividend rates or dividend amounts are notified shall not be repaid with dividends.
| Article 535 (Effect on Confirmed Claims of Debtor Declared Bankrupt and Entered in Table of Bankruptcy Creditors) |
| (1) | When the debtor fails to state any objection to confirmed claims on the claim inspection date, his or her entry in the table of bankruptcy creditors shall have the same effect as that of final and conclusive judgment on a debtor declared bankrupt. |
| Article 536 (Application Filed for Restitution) |
| (1) | When the debtor fails to be present on the claim inspection date for a cause not attributable to him or herself, he or she may file an application with the court with pending bankruptcy cases for his or her restitution in order to supplement his or her objection later within seven days from the date such grounds cease to exist. <Amended on Dec. 27, 2016> |
| (2) | The court shall ex officio deliver the application for restitution to the creditor of claims to which the debtor raises an objection. |
| (3) | When the court permits the restitution, the court's act shall have the same effect as that of an objection that is stated by the debtor on the claim inspection date. In such cases, the court official of Grade V, etc. shall enter the objection in the table of bankruptcy creditors. |
| (4) | An immediate appeal may be filed against any judgment on the application filed for restitution provided for in paragraph (1). |
| Article 537 (Residual Inherited Estate) |
When inherited estate is declared bankrupt, any inheritance creditor and any person who takes the legacy who are excluded from final dividends may exercise their rights on any residual properties.
CHAPTER VI DISCONTINUATION OF BANKRUPTCY
| Article 538 (Application Filed for Discontinuation of Bankruptcy by Way of Agreement) |
| (1) | In cases falling under either of the following subparagraphs, the court may decide to discontinue a bankruptcy, at the request of the debtor: |
| 1. | The debtor obtains an agreement from all bankruptcy creditors who report their claims within the claim report period provided for in the provisions of Article 447; |
| 2. | If the debtor fails to obtain the agreement referred to in the provisions of subparagraph 1, he or she takes security from the bankruptcy estate after obtaining an agreement thereon from other bankruptcy creditors. |
| (2) | The court shall determine whether the agreement of creditors is necessary for unconfirmed claims. The same shall apply to cases whether any security offered to any bankruptcy creditor is substantial. |
| (3) | An immediate appeal may be filed against the determination referred to in the provisions of paragraph (1). |
| Article 539 (Application Filed by Corporation for Discontinuing Bankruptcy) |
| (1) | The application filed by any corporation for discontinuing the bankruptcy thereof shall require agreement from all of its directors. |
| (2) | The application for discontinuing the bankruptcy regarding any inherited estate shall be filed by the inheritor. In this case, where there are multiple inheritors, agreement from each of them is required. |
| Article 540 (Application Filed for Discontinuing Bankruptcy and Corporate Continuation) |
When any corporation that has been declared bankrupt intends to file an application for discontinuing its bankruptcy, any incorporated association shall take the same procedures for its continuation as those for making an amendment in the articles of association. Any incorporated estate shall take the procedures for its continuation after obtaining permission therefor from the competent administrative agency, respectively.
| Article 541 (Submission of Written Verification) |
When an application is filed for discontinuing a bankruptcy, a written statement attesting to the fulfillment of application requirements shall be submitted.
| Article 542 (Public Notice of Applications for Discontinuing Bankruptcies and Keeping of Documents) |
The court shall publicly notify the gist of the applications filed for discontinuing bankruptcies and keep documents concerning the applications in order for interested persons to peruse them.
| Article 543 (Objections Raised by Creditors) |
| (1) | Any bankruptcy creditor may raise objections to the court with respect to any application filed for discontinuing the bankruptcy within 14 days from the date on which the public notice provided for in the provisions of Article 542 is made. |
| (2) | Any bankruptcy creditor who makes a report before the period referred to in the provisions of paragraph (1) lapses may file an application with the court for objecting to any application filed for discontinuing the bankruptcy. |
| Article 544 (Hearing of Opinions of Related Persons) |
The court shall hear the opinions of the debtor, the trustee in bankruptcy and the bankruptcy creditor who raises an objection about whether the requirements necessary for a decision to discontinue the bankruptcy are met after the lapse of the period provided for in the provisions of Article 543 (1).
| Article 545 (Discontinuation of Bankruptcy for Lack of Funding) |
| (1) | Where the bankruptcy estate is deemed insufficient to cover expenses incurred in the bankruptcy procedures after declaration of bankruptcy, the court shall decide to discontinue the bankruptcy, at the request of the trustee in bankruptcy or ex officio. In such cases, the court shall hear the opinion of the meeting of creditors. |
| (2) | The provisions of paragraph (1) shall not apply to cases where a prepaid amount is sufficient to cover expenses incurred in the bankruptcy procedures. |
| (3) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| Article 546 (Public Notice of Decision to Discontinue Bankruptcy) |
When the court decides to discontinue any bankruptcy, it shall publicly notify the operative part of the decision and the summary of reasons thereof.
| Article 547 (Repayment and Deposit of Estate Claims) |
When a decision to discontinue the bankruptcy becomes final and conclusive, the trustee in bankruptcy shall repay the estate claims, and with respect to any disputed claim, the trustee in bankruptcy shall make a deposit for creditors.
| Article 548 (Provisions Applicable Mutatis Mutandis) |
| (1) | The provisions of Article 535 shall apply mutatis mutandis to cases where a decision to discontinue the bankruptcy becomes final and conclusive. |
| (2) | The provisions of Article 567 shall apply mutatis mutandis to cases where a corporate debtor is dissolved on the grounds of a decision to terminate or discontinue the bankruptcy. |
CHAPTER VII SUMMARY BANKRUPTCY
| Article 549 (Requirements for Summary Bankruptcy) |
| (1) | Where the amount of properties that belong to the bankruptcy estate are recognized as being less than 500 million won, the court shall invoke summary bankruptcy simultaneously with the declaration of bankruptcy. |
| (2) | In cases under paragraph (1), the court shall publicly notify the operative part of the summary bankruptcy decision in addition to the matters referred to in each subparagraph of Article 313 (1) and enter it in the written statement referred to in the provisions of paragraph (2) of the same Article. |
| Article 550 (Decision on Summary Bankruptcy in Course of Bankruptcy Procedures) |
| (1) | If it is found during the bankruptcy proceedings that the amount of properties belonging to the bankruptcy estate is less than 500 million won, the court may invoke summary bankruptcy, at the request of an interested person or ex officio. |
| (2) | When the court invokes summary bankruptcy pursuant to the provisions of paragraph (1), it shall publicly notify the operative part of the decision and deliver a written statement in which the operative part of such decision is entered to the trustee in bankruptcy, the members of the audit committee, the creditors each of whom is known and the debtor. |
| Article 551 (Cancellation of Summary Bankruptcy) |
If it is found during the summary bankruptcy procedures that the amount of the properties belonging to the bankruptcy estate is equivalent to or higher than 500 million, the court may decide to cancel the summary bankruptcy, at the request of an interested person or ex officio. In this case, the provisions of Article 550 (2) shall apply mutatis mutandis thereto.
| Article 552 (Combination of Date of Meeting of Creditors and Claim Inspection Date) |
In the case of summary bankruptcy procedures, the date on which the first meeting of creditors is held and the date on which claims are inspected shall be combined, except for unavoidable reasons.
| Article 553 (Non-Appointment of Members of Audit Committee) |
In the case of summary bankruptcy, no audit committee member shall be appointed.
| Article 554 (Decision in Lieu of Resolution of Meeting of Creditors) |
In the case of summary bankruptcy procedures, the decision made by the court shall be substituted for the resolution passed at the meeting of creditors, except for the resolution passed at the first meeting of creditors and the resolution passed at the meeting of creditors on the claim inspection and the accounting report.
| Article 555 (One-Time Distribution of Dividends) |
In the case of summary bankruptcy procedures, the distribution of dividends shall be made once and be governed by the provisions regarding the final dividends: Provided, That additional dividends may be distributed.
CHAPTER VIII IMMUNITY AND REINSTATEMENT
| Article 556 (Application for Immunity) |
| (1) | An individual debtor may file an application with the court for his or her immunity within one month after the date on which the declaration of his or her bankruptcy becomes final and conclusive from the date on which a petition of his or her bankruptcy is filed. |
| (2) | When the debtor is unable to file an application for his or her immunity referred to in the provisions of paragraph (1) for a cause not attributable to him or herself, he or she may file an application for his or her immunity within 30 days from the date on which such grounds cease to exist. |
| (3) | Where the debtor files a petition for bankruptcy, the debtor shall be deemed to file an application for his or her immunity and also to file the petition for bankruptcy, excepting cases where he or she expresses his or her intention to the contrary. |
| (4) | When an application is filed for any immunity, no application may also be filed for discontinuing the bankruptcy pursuant to the provisions of Article 538. |
| (5) | When an application is filed for discontinuing the bankruptcy pursuant to the provisions of Article 538, no application for immunity may be filed before a decision to dismiss the application filed for discontinuing the bankruptcy becomes final and conclusive. |
| (6) | The application for immunity shall be accompanied by the list of creditors: Provided, That when it is not possible to submit the list of creditors with the application for immunity, the grounds therefor shall be substantiated and then the list of creditors shall be promptly submitted. |
| (7) | Where it is deemed that the application for the immunity has been filed pursuant to the provisions of paragraph (3), the list of creditors that is submitted pursuant to the provisions of Article 302 (2) 1 shall be deemed the list of creditors referred to in the provisions of paragraph (6). |
| Article 557 (Suspension of Compulsory Execution) |
| (1) | When an application is filed for immunity, a decision to discontinue bankruptcy becomes final and conclusive or it is decided to terminate bankruptcy, any compulsory execution based on bankruptcy claims, any provisional seizure or any preliminary injunction on the debtor's properties shall be barred until a judgment on the application filed for immunity becomes final and conclusive and the compulsory execution, provisional seizure or preliminary injunction on the debtor's properties, which have already been performed before the debtor is declared bankrupt, shall be suspended. |
| (2) | When a decision for immunity becomes final and conclusive, the procedures suspended pursuant to the provisions of paragraph (1) shall lose their effect. |
| Article 558 (Examination of Debtor) |
| (1) | When anyone who files an application for immunity is declared bankrupt, the court may examine the debtor on the date that it has set. |
| (2) | When the court decides to set the date pursuant to the provisions of paragraph (1), it shall publicly notify such date and notify such decision to the trustee in bankruptcy and bankruptcy creditors, each of whom are scheduled to receive the immunity and are known to the court. |
| (3) | The provisions of paragraph (2) shall apply mutatis mutandis to any change in the date as well as the extension and the continuation of the questioning referred to in the provisions of paragraph (1). |
| (4) | The provisions of the proviso to Article 457 shall apply mutatis mutandis to the decision referred to in the provisions of paragraphs (2) and (3). |
| (5) | The date referred to in the provisions of paragraph (1) and the date on which the meeting of creditors is held and on which the claims are inspected may be combined. |
| Article 559 (Grounds for Dismissing Application Filed for Immunity) |
| (1) | In the events falling under any of the following subparagraphs, the court may dismiss any application filed for immunity: |
| 1. | When the debtor is not qualified to file any application; |
| 2. | When an application filed for bankruptcy procedures for the debtor is dismissed; |
| 3. | When the debtor fails to make advance payment to cover expenses for the bankruptcy procedures; |
| 4. | When the application is not bona fide. |
| (2) | The debtor whose application for immunity is dismissed pursuant to the provisions of paragraph (1) shall be prohibited from re-filing an application for immunity under the same bankruptcy. |
| (3) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| Article 560 (Inspection Report by Trustees in Bankruptcy) |
The court may order the trustee in bankruptcy to inspect whether grounds for refusing to permit immunity exist and to report the results thereof on the hearing date provided for in the provisions of Article 558.
| Article 561 (Keeping of Documents concerning Application for Immunity) |
The court shall keep the following documents for inspection by interested persons:
| 1. | Documents concerning application for immunity; |
| 2. | Documents concerning the reports of trustees in bankruptcy. |
| Article 562 (Objection to Application for Immunity) |
| (1) | Any prosecutor, trustee in bankruptcy or bankruptcy creditor who is entitled to the effect of immunity may raise any objections to the court regarding the application for immunity within 30 days (where the hearing date is not set, the date that is set by the court) from the hearing date provided for in the provisions of Article 558: Provided, That when any justifiable grounds exist, the court may extend the period upon receiving an application therefor. |
| (2) | When an objection is raised pursuant to the provisions of paragraph (1), the grounds for not permitting the immunity provided for in the provisions of each subparagraph of Article 564 (1) shall be substantiated. |
| Article 563 (Hearing of Opinion about Objections) |
When an objection is raised pursuant to the provisions of Article 562 (1), the court shall hear the opinions of the debtor and the person who has raised such objection.
| Article 564 (Immunity Granted) |
| (1) | The court shall grant immunity except in the events falling under any of the following subparagraphs: |
| 1. | When it is recognized that an act falling under the offense of Articles 650, 651, 653, 656 or 658 is perpetrated by the debtor; |
| 2. | When the debtor, notwithstanding the fact that the cause of his or her bankruptcy exists, acquires any properties through credit transaction by deceit or concealment of the fact, within one year before he or she is declared bankrupt, in order to mislead other persons into believing that no such cause exist; |
| 3. | When the debtor submits a falsified list of creditors and other falsified application documents to the court or falsely states the current holding of his or her properties to the court; |
| 4. | When seven years have yet to lapse for the debtor from the date on which a decision to grant him or her immunity becomes final and conclusive where he or she receives immunity pursuant to this Article before he or she files an application for the immunity, or when five hears have yet to lapse for the debtor from the date on which a decision to grant him or her immunity becomes final and conclusive where he or she receives immunity pursuant to the provisions of Article 624; |
| 5. | When the debtor violates his or her duties prescribed by this Act; |
| 6. | When the debtor’s excessive squandering of money, gambling or speculation results in a significant loss in value to his or her properties or massive indebtedness. |
| (2) | Even where the grounds for not granting immunity referred to in any subparagraph of paragraph (1) exist, the court may grant immunity taking into account the circumstances and other situations that result in the debtor's bankruptcy. |
| (3) | The court shall, when it decides to grant immunity, publicly notify the operative part of its decision and the gist of the grounds therefor. In such cases, no service need be made. |
| (4) | An immediate appeal may be filed against any decision on regarding grant immunity. |
| Article 565 (Timing of Effect of Decision to Grant Immunity) |
The effect of immunity shall arise only after a decision to grant such immunity becomes final and conclusive.
| Article 566 (Effect of Immunity) |
The debtor who has been granted immunity shall be exempted from the liabilities for his or her all debts to bankruptcy creditors, except for the dividends according to the bankruptcy procedures: Provided, That the debtor shall not be exempted from liabilities with respect to each of the following claims: <Amended on Jan. 22, 2010>
| 2. | Fines, minor fines, criminal litigation costs, additional collection charges, and administrative fines; |
| 3. | Compensation for damages caused by any illegal act which the debtor commits intentionally; |
| 4. | Compensation for damages caused by any illegal act of the debtor of, by gross negligence, inflicting harm on the life and body of any other person; |
| 5. | The wages, severance allowances, and compensation for disaster of the debtor's employees; |
| 6. | The debtor’s employees’ bailment monies and fidelity guarantee monies; |
| 7. | Claims which a debtor has maliciously omitted from the list of creditors: Provided, That the same shall not apply to a creditor of the claims who is aware of the fact that the debtor has been declared bankrupt; |
| 8. | Expenses that the debtor is to pay, as a fosterer or a person under obligation to support; |
| Article 567 (Effect on Guarantors) |
The immunity shall not affect the rights that are held by bankruptcy creditors on guarantors of the debtor and any other persons who bear obligations together with the debtor and any security that is furnished for any bankruptcy creditor.
| Article 568 (Entry of Decision to Grant Immunity) |
The clerk, etc. of the court shall, when a decision to grant immunity becomes final and conclusive, enter the gist of the confirmation of such decision in the table of bankruptcy creditors if such table exists.
| Article 569 (Revocation of Immunity) |
| (1) | When the debtor is convicted of fraudulent bankruptcy and is given a final verdict provided for in the provisions of Article 650, the court may decide to revoke his or her immunity, at the request of bankruptcy creditors or ex officio. The same shall apply to cases where the debtor receives immunity by other improper means, and so bankruptcy creditors file an application for the revocation of his or her immunity within one year after the debtor is granted such immunity. |
| (2) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| Article 570 (Hearing of Opinions about Revocation of Immunity) |
The court shall hear opinions of the debtor and applicants before it grants a judgment on the revocation of the debtor's immunity.
| Article 571 (Timing for Effect of Decision to Revoke Immunity) |
The effect of a decision to revoke immunity shall accrue after such decision becomes final and conclusive.
| Article 572 (Preferential Rights of New Creditors) |
When immunity is revoked, anyone who holds claims on grounds that accrue from between the time immunity is granted and the time such immunity is revoked shall be entitled to greater preference for repayments than other creditors.
| Article 573 (Entry of Decision to Revoke Immunity) |
Where a decision to revoke immunity becomes final and conclusive, the court official of Grade V, etc. shall, if they have the table of bankruptcy creditors, enter the gist of the confirmation of the decision to cancel the immunity in such table.
| Article 574 (Obligatory Reinstatement) |
| (1) | A debtor declared bankrupt shall be reinstated, when he or she falls under any of the following subparagraphs: |
| 1. | When a decision to grant immunity becomes final and conclusive; |
| 2. | When a decision to discontinue the bankruptcy based on the application filed pursuant to the provisions of Article 538 becomes final and conclusive; |
| 3. | When the debtor for whom 10 years have lapsed without being convicted of fraudulent bankruptcy and being given a final verdict pursuant to the provisions of Article 650 after he or she is declared bankrupt. |
| (2) | When a decision to cancel immunity becomes final and conclusive, the reinstatement referred to in the provisions of paragraph (1) 1 shall lose its effect toward the future. |
| Article 575 (Reinstatement by Application) |
| (1) | Where the debtor declared bankrupt cannot be reinstated pursuant to Article 574 is indemnified for all of his or her obligations to pay bankruptcy creditors by means of repayments and other methods, the court with pending bankruptcy cases shall decide to reinstate the debtor at the request of the debtor declared bankrupt. <Amended on Dec. 27, 2016> |
| (2) | When the debtor declared bankrupt files an application for his or her reinstatement, he shall submit a written statement attesting to his or her indemnification. |
| (3) | An immediate appeal may be filed against the decision referred to in paragraph (1). |
| Article 576 (Public Notice of Application for Reinstatement) |
Upon receiving an application for reinstatement, the court shall publicly notify the gist thereof and retain documents concerning the application for inspection by interested persons.
| Article 577 (Objection to Application for Reinstatement) |
| (1) | Any bankruptcy creditor may file with the court an objection to the application for reinstatement within 3 months from the date on which the public notice provided for in the provisions of Article 576 is made. |
| (2) | When the objection is filed pursuant to the provisions of paragraph (1), the court shall hear the opinions of the debtor declared bankrupt and the bankruptcy creditor who files such objection. |
| Article 578 (Timing of Effect of Decision on Reinstatement) |
A decision on the reinstatement shall take effect after such decision becomes final and conclusive.
CHAPTER IX SPECIAL RULES CONCERNING BANKRUPTCY OF LIMITED-LIABILITY TRUST PROPERTY
| Article 578-2 (Scope of Application) |
Except as otherwise expressly provided for in this Chapter, the provisions of the Chapters 1 through 7 of Part 3 shall apply to the bankruptcy regarding limited-liability trust property.
[This Article Newly Inserted on May 28, 2013]
| Article 578-3 (Persons Who Have Right to File Petition for Bankruptcy) |
| (1) | Any trust creditor, beneficiary, trustee, administrator of trust property, or liquidating trustee under Article 133 of the Trust Act may file a petition for bankruptcy regarding limited-liability trust property. |
| (2) | Where any trust creditor or beneficiary files a petition for bankruptcy, he or she shall clarify the existence of his or her trust claims or entitlement to benefits and the facts leading to bankruptcy. |
| (3) | Where several trustees or administrators of trust property exist, they shall clarify the facts leading to bankruptcy, unless all the trustees or administrators of trust property file a petition for bankruptcy. |
| (4) | A petition for bankruptcy regarding limited-liability trust property may be filled until the transfer of any residual property has been completed after the termination of the trust. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-4 (Grounds for Bankruptcy) |
| (1) | Where it is impossible to make payments from the limited-liability trust property alone, the court shall, by decision, declare bankruptcy at a request. |
| (2) | Where a trustee suspends payment to trust creditors or beneficiaries, it shall be presumed that it is impossible to make payments from the limited-liability trust property. |
| (3) | Where it is impossible to fully repay all obligations to trust creditors or beneficiaries with the limited-liability trust property, the court may, by decision, declare bankruptcy at a request. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-5 (Notification of Bankruptcy of Trust Property) |
| (1) | Where a court has declared bankruptcy regarding a limited-liability trust property, it shall notify the competent administrative agency thereof, if the project, which is the object of the limited-liability trust property, has been granted permission from the administrative agency. |
| (2) | Where a decision to cancel or discontinue the bankruptcy regarding a limited-liability trust property becomes final and conclusive, or where a decision to complete bankruptcy has been made, the court shall give notification in the same manner as provided in paragraph (1), if the project, which is the object of the limited-liability trust property, has been granted permission from the administrative agency. |
| (3) | Where bankruptcy regarding a limited-liability trust property has been declared, the provisions of Articles 23 through 27 shall apply mutatis mutandis to the commission, etc. of registration. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-6 (Arrest of Trustee or Other Persons with Regard to Trust Declared Bankrupt) |
| (1) | Where a court has declared bankruptcy with regard to the limited-liability trust property, it may issue an order for arrest of any of the following persons, if deemed necessary: |
| 1. | The trustee or the administrator of trust property; |
| 2. | The legal representative of the trustee; |
| 3. | The manager of the trustee; |
| 4. | The director of a corporate trustee. |
| (2) | Where a petition for bankruptcy regarding a limited-liability trust property has been filed, the court may issue an order for arrest of any person falling under any of the subparagraphs of paragraph (1) at the request of an interested person or ex officio, even before the declaration of bankruptcy. |
| (3) | Article 319 (2) and (3) shall apply mutatis mutandis to the arrest under paragraphs (1) and (2). |
[This Article Newly Inserted on May 28, 2013]
| Article 578-7 (Duty of Trustee of Trust Declared Bankrupt to Provide Explanations) |
| (1) | Where bankruptcy regarding a limited-liability trust property has been declared, each person falling under the subparagraphs of Article 578-6 (1) shall provide a necessary explanation regarding the bankruptcy, at the request of the bankruptcy trustee, the members of the audit committee, or the meeting of creditors. |
| (2) | Paragraph (1) shall apply mutatis mutandis to persons who have been eligible to serve as any person falling under any of the subparagraphs of Article 578-6 (1). |
[This Article Newly Inserted on May 28, 2013]
| Article 578-8 (Preservative Measures before Declaration of Bankruptcy) |
| (1) | The court may, at the request of an interested person or ex officio, issue an order for provisional seizure, preliminary injunction, or any other necessary preservative measure in relation to the limited-liability trust property, even before it declares bankruptcy regarding the limited-liability trust property. |
| (2) | Article 323 (2) through (5) shall apply mutatis mutandis to court judgements made under paragraph (1). |
| (3) | Where a preservative measure under paragraph (1) has been taken against any such right belonging to the limited-liability trust property as is registered, Article 24 (1) shall apply mutatis mutandis to the commission of registration of the preservative measure. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-9 (Preservative Measures on Property of Trustee) |
| (1) | Where a court has declared bankruptcy regarding the limited-liability trust property, it may, if deemed necessary, take a preservative measure on any property of the trustee, previous trustee, administrator of trust property, examiner, or liquidating trustee under Article 133 of the Trust Act (hereinafter referred to as "trustee, etc."), at the request of the bankruptcy trustee or ex officio, in order to preserve any right to seek damages based on any liability of the trustee, etc. |
| (2) | The provisions of Article 351 (2) through (7) shall apply mutatis mutandis to the preservative measures prescribed in paragraph (1). |
| (3) | Where any preservative measure is taken, Article 24 (1) shall apply mutatis mutandis to the commission of registration or register on such measure. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-10 (Judgment in Claim Allowance Proceedings on Right to Seek Damages against Trustee) |
| (1) | Where bankruptcy regarding a limited-liability trust property has been declared, if deemed necessary, the court may, at the request of the bankruptcy trustee or ex officio, make a judgement to investigate and verify whether any right to seek damages based on any liability of the trustee, etc. exist as well as the details of such claim. |
| (2) | Article 352 (2) through (9), and Articles 353 and 354 shall apply mutatis mutandis to the judgments in claim allowance proceedings under paragraph (1). |
[This Article Newly Inserted on May 28, 2013]
| Article 578-11 (Bankruptcy Trustee) |
Where bankruptcy regarding a limited-liability trust property has been declared, only the bankruptcy trustee may exercise any of the following powers:
[This Article Newly Inserted on May 28, 2013]
| Article 578-12 (Bankruptcy Estate) |
Where bankruptcy regarding a limited-liability trust property has been declared, the whole of such property shall belong to the bankruptcy estate.
[This Article Newly Inserted on May 28, 2013]
| Article 578-13 (Avoidance in Limited-liability Trust) |
Where bankruptcy regarding a limited-liability trust property has been declared, "debtor" shall be construed as "trustee or administrator of trust property" in applying Articles 391 through 392, 398 and 499. [This Article Newly Inserted on May 28, 2013]
| Article 578-14 (Repossession Rights under Limited-Liability Trust) |
Where bankruptcy regarding a limited-liability trust property has been declared, "property not belonging to the debtor" referred to in Article 407 and "debtor" referred to in Article 410 shall be construed as "property not belonging to the trust property" and "trustee or administrator of trust property", respectively, in applying Articles 407 and 410. [This Article Newly Inserted on May 28, 2013]
| Article 578-15 (Value of Bankruptcy Claims in Cases of Bankruptcy of Trust Property) |
| (1) | Where bankruptcy regarding a limited-liability trust property has been declared, the trust creditor, beneficiary, or trustee may exercise the right as a bankruptcy creditor against the bankruptcy estate, for the amount prescribed according to the following categorization: |
| 1. | The trust creditor or beneficiary: the total amount of trust claims, or beneficiary claims under Article 62 of the Trust Act, which are held by the creditor or beneficiary at the time of the declaration of bankruptcy; |
| 2. | The trustee: the total amount of claims for the trust property. |
| (2) | Where bankruptcy regarding limited-liability trust property has been declared, a person who holds any claim under Article 118 (1) of the Trust Act may, for the total amount of such claims, exercise the right as a bankruptcy creditor against the bankruptcy estate of the trustee. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-16 (Order of Priority of Bankruptcy Claims in Cases of Bankruptcy regarding Trust Property) |
| (1) | Where bankruptcy regarding a limited-liability trust property has been declared, trust claims shall take priority over beneficiary claims under Article 62 of the Trust Act. |
| (2) | Claims which the trustee or administrator of trust property, and creditors (including beneficiaries) decide to subordinate to the other claims in the bankruptcy procedure for a limited-liability trust property, shall be deemed subordinate to the other claims, as so decided. |
[This Article Newly Inserted on May 28, 2013]
| Article 578-17 (Special Rules concerning Discontinuation of Bankruptcy) |
A petition for discontinuation of bankruptcy regarding a limited-liability trust property shall be filed by the trustee or administrator of trust property. In such cases, if several trustees or administrators of trust property exist, unanimous consent shall be required for the aforesaid petition.
[This Article Newly Inserted on May 28, 2013]
PART IV INDIVIDUAL REHABILITATION PROCEDURES
CHAPTER I COMMON PROVISIONS
| Article 579 (Definition of Terms) |
The terms used in this procedure are defined as follows: <Amended on Jan. 1, 2010; Jun. 10, 2010; Jan. 1, 2014; Jun. 9, 2020; Dec. 29, 2020>
| 1. | The term "individual debtor" means a salaried income earner or operating income earner who bears debts not exceeding the amount falling under any of the following items at the time of applying for the commencement of an individual rehabilitation procedure and for whom there exists or is likely to exist any fact leading to bankruptcy: |
| (a) | One billion won, in the case of individual rehabilitation claims which are guaranteed by any lien, pledge, mortgage, right to property transferred for security, right of provisional registered security, security right under the Act on Security over Movable Property, Claims, Etc., right to lease on a deposit basis, or preferential right; |
| (b) | Five hundred million won, in the case of other individual rehabilitation claims which do not fall under item (a); |
| 2. | The term "salaried income earner" means an individual who is expected to obtain salary, annuity, or any other regular and fixed income similar thereto; |
| 3. | The term "operating income earner" means an individual who is expected to obtain real estate rental income, business income, agricultural income, forestry income, and other similar income continuously and repeatedly in the future; |
| 4. | The term "disposable income" means the remaining amount calculated by deducting the amounts of items (b) through (d) from the amount of item (a): |
| (a) | The aggregate amounts of the salary, annuity, real estate rental income, business income, agricultural income, forestry income, and all kinds of reasonably expected other incomes; |
| (b) | The amount of income tax, individual portion of resident tax, individual local income tax, health insurance premiums, and other similar incomes, as prescribed by Presidential Decree; |
| (c) | The amount of living expenses necessary for the debtor and his or her dependents to lead a life worthy of human dignity, determined by the court by generally taking into account the minimum cost of living publicly notified under Article 6 of the National Basic Living Security Act, the age of the debtor, the age and number of his or her dependents, residential district, prices situation, and other necessary matters; |
| (d) | Expenses necessary for managing, preserving, and continuing the business of the debtor, if he or she is engaged in business. |
| Article 580 (Individual Rehabilitation Estate) |
| (1) | The properties falling under both of the following subparagraphs shall belong to the individual estate: |
| 1. | All properties held by the debtor at the time that it is decided to commence individual rehabilitation procedures for him or her and the claims to be exercised by the debtor in the future on the grounds that arise before it is decided to commence such individual rehabilitation procedures; |
| 2. | The properties and income acquired by the debtor in the process of the individual rehabilitation procedures. |
| (2) | The debtor shall be entitled to manage and dispose of the individual estate: Provided, That the same shall not apply where it is prescribed otherwise in the authorized repayment plan. |
| (3) | The provisions of Article 383 shall apply mutatis mutandis to the individual rehabilitation estate referred to in the provisions of paragraph (1) 1. In such cases, "bankruptcy estate" shall be deemed "individual rehabilitation estate", "bankruptcy declaration" shall be deemed "decision to commence individual rehabilitation procedures", and "bankruptcy procedures" shall be deemed "individual rehabilitation procedures", respectively. |
| (4) | With respect to properties exempted pursuant to the provisions of paragraph (3), the compulsory execution, provisional seizure or preliminary injunction based on individual rehabilitation claims shall not be performed until a decision to discontinue the individual rehabilitation procedures or a decision on immunity becomes final and conclusive. |
| Article 581 (Individual Rehabilitation Claims) |
| (1) | Any property claim against the debtor, which arises from a cause that exists before it is decided to commence individual rehabilitation procedures, shall constitute individual rehabilitation claims. |
| (2) | The provisions of Articles 425 through 433, 439, 442, and 446 shall apply mutatis mutandis to individual rehabilitation claims. In such cases, "bankruptcy declaration" shall be deemed "decision to commence individual rehabilitation procedures", "bankruptcy estate" shall be deemed "individual rehabilitation estate", "bankruptcy claims" shall be "individual rehabilitation claims," "bankruptcy creditors" shall be deemed "individual rehabilitation creditors", "amount of bankruptcy claims" shall be deemed "amount of individual rehabilitation claims", and "bankruptcy procedures" shall be deemed "individual rehabilitation procedures", respectively. |
| Article 582 (Repayment of Individual Rehabilitation Claims) |
With respect to individual rehabilitation claims that are entered in the list of individual rehabilitation creditors, any act extinguishing such claims by repaying for them or being repaid for them shall be prohibited from being performed without resorting to the repayment plan.
| Article 583 (Individual Rehabilitation Estate Claims) |
| (1) | The following claims shall constitute individual rehabilitation estate claims: <Amended on Dec. 30, 2006; Dec. 31, 2007; Mar. 31, 2010; Dec. 27, 2016> |
| 1. | Claims for remuneration and expenses of the rehabilitation commissioner; |
| 2. | Each of the following claims, with regard to taxes, which may be collected in accordance with the National Tax Collection Act or the Local Tax Collection Act: Provided, That the foregoing shall be applied to cases where the deadline for payment of a relevant ax has yet to arrive at the time individual rehabilitation procedures commence: |
| (b) | Value-added tax, individual consumption tax, liquor tax, and traffic, energy and environment tax; |
| (c) | Local taxes to be collected and paid by any person liable for extraordinary collection; |
| (d) | Education tax, and special tax for agricultural and fishing villages levied and collected in the same manner as taxes are levied and collected pursuant to the provisions of items (a) through (c); |
| 3. | Wages, severance pay, and disaster compensation of the debtor's employees; |
| 4. | The debtor’s employees’ right to claim for a refund of bailment monies and fidelity guarantee monies, which accrue from causes arising before the individual rehabilitation procedures commence; |
| 5. | Claims that accrue from the borrowing of funds and procurement of materials that are performed by the debtor with permission therefor from the court, and other claims that accrue from acts that are inevitable in continuing the debtor’s business, after an application is filed for the commencement of the individual rehabilitation procedures and before a decision is made to commence the individual rehabilitation procedures; |
| 6. | Inevitable expenses to be incurred for the debtor, except as otherwise provided for in subparagraphs 1 through 5. |
| (2) | Articles 475 and 476 shall apply mutatis mutandis to individual rehabilitation estate claims. In such cases, "estate claim", “bankruptcy procedure”, and “bankruptcy claim” shall be construed as "individual rehabilitation claim", "individual rehabilitation procedure", and "individual rehabilitation claim", respectively. |
| Article 583 (Individual Rehabilitation Estate Claims) |
| (1) | The following claims shall constitute the individual rehabilitation estate claims: <Amended on Dec. 30, 2006; Dec. 31, 2007; Jan. 30, 2009; Mar. 31, 2010; Dec. 27, 2016> |
| 1. | Claims for remuneration and expenses of the rehabilitation commissioner; |
| 2. | Each of the following claims with regard to taxes which may be collected in accordance with the National Tax Collection Act or the Framework Act on Local Taxes: Provided, That the foregoing shall be limited to cases where the deadline for payment of a relevant tax has yet to arrive at the time individual rehabilitation procedures commence; |
| (b) | Value-added tax, individual consumption tax, and liquor tax. |
| (c) | Local taxes to be collected and paid by any person liable for extraordinary collection; |
| (d) | Education tax, and special tax for agricultural and fishing villages levied and collected in the same manner as taxes are levied and collected pursuant to items (a) through (c); |
| 3. | Wages, severance pay, and disaster compensation of the debtor's employees; |
| 4. | The debtor’s employees’ right to claim for a refund of bailment monies and fidelity guarantee monies, which accrue from causes arising before the individual rehabilitation procedures commence; |
| 5. | Claims that accrue from the borrowing of funds and procurement of materials that are performed by the debtor with permission therefor from the court, and other claims that accrue from acts that are inevitable in continuing the debtor’s business, after an application is filed for the commencement of the individual rehabilitation procedures and before a decision is made to commence the individual rehabilitation procedures; |
| 6. | Inevitable expenses to be paid for the debtor, except as otherwise provided for in subparagraphs 1 through 5. |
| (2) | Articles 475 and 476 shall apply mutatis mutandis to individual rehabilitation estate claims. In such cases, "estate claim", "bankruptcy procedure", and "bankruptcy claim" shall be construed as "individual rehabilitation claim", "individual rehabilitation procedure", and "individual rehabilitation claim", respectively. |
[Enforcement Date: Jan. 1, 2022] Article 583
| Article 584 (Avoidance Power) |
| (1) | Section 2 of Chapter III, Part III shall apply mutatis mutandis to individual rehabilitation procedures. |
| (2) | The avoidance power shall be exercised by the debtor. |
| (3) | The court may order the debtor to exercise his or her avoidance power, at the request of any creditor or any rehabilitation commissioner or ex officio. |
| (4) | Any rehabilitation commissioner may participate in the exercise of the avoidance power. |
| (5) | The avoidance power shall not be exercised after a lapse of one year from the date on which it is decided to commence individual rehabilitation procedures. The same shall apply after a lapse of five years from the date on which an act provided for in any subparagraph of Article 391 is performed. |
| Article 585 (Repossession Rights) |
The provisions of Articles 407 through 410 shall apply mutatis mutandis to individual rehabilitation procedures. In such cases, "bankruptcy estate" shall be deemed "individual rehabilitation estate" and "bankruptcy declaration" shall be deemed "decision to commence individual rehabilitation procedures," respectively.
| Article 586 (Right to Foreclose Outside Bankruptcy) |
The provisions of Articles 411 through 415 shall apply mutatis mutandis to individual rehabilitation procedures. In this case, "bankruptcy estate" shall be construed as "individual rehabilitation estate", "bankruptcy declaration" shall be construed as "decision to commence individual rehabilitation procedures", respectively.
| Article 587 (Offset Right) |
The provisions of Articles 416 through 422 shall apply mutatis mutandis to individual rehabilitation procedures. In such cases, "petition for bankruptcy" shall be construed as "application for commencement of individual bankruptcy procedures", "bankruptcy estate" shall be construed as "individual rehabilitation estate" and "bankruptcy declaration" shall be construed as "decision to commence individual rehabilitation procedure", respectively.
CHAPTER II COMMENCEMENT OF INDIVIDUAL REHABILITATION PROCEDURES
| Article 588 (Holder of Right to File Application for Commencement of Individual Bankruptcy Procedures) |
Any individual debtor may file an application with the court for commencing individual rehabilitation procedures.
| Article 589 (Written Application for Commencement of Individual Rehabilitation Procedure) |
| (1) | An application for commencement of the individual rehabilitation procedure shall be filed in writing, by specifying the following matters: |
| 1. | The name, resident registration number, and domicile of the debtor; |
| 2. | The purport and cause of the petition; |
| 3. | The property and liabilities of the debtor. |
| (2) | The written application prescribed in the provisions of paragraph (1) shall be accompanied by each of the following documents: |
| 1. | A list of the individual rehabilitation creditors (referring to a list in which the names and domiciles of creditors and the cause and amount of claims are specified); |
| 3. | A list of the debtor’s incomes and expenses; |
| 4. | Materials proving that the debtor is a salaried income earner or operating income earner; |
| 6. | Relevant documents, if the debtor has ever filed an application for rehabilitation, reconciliation, or individual rehabilitation within ten years before the application date; |
| 7. | Other documents specified by the Supreme Court Regulations. |
| (3) | Deleted. <May 20, 2014> |
| Article 589-2 (Modification of List of Individual Rehabilitation Creditors) |
| (1) | A debtor may modify or correct matters entered in the list of individual rehabilitation creditors before a decision to commence the individual rehabilitation procedures is made. |
| (2) | Notwithstanding paragraph (1), where a creditor has discovered any matter omitted or misrepresented in the list of individual rehabilitation creditors for a cause not imputable to the creditor, he or she may modify the list with permission from the court, even after the commencement of the individual rehabilitation procedure has been decided: Provided, That this shall not apply after a decision to authorize the repayment plan. |
| (3) | Where a debtor files an application for the permission of modification of the list of individual rehabilitation creditors with the court pursuant to the main clause of paragraph (2), he or she shall submit a draft repayment plan reflecting such modification without delay. If the debtor fails to submit the draft repayment plan, the court may elect to disallow the modification of the list of individual rehabilitation creditors. |
| (4) | Where any matter entered in the list of individual rehabilitation creditors is modified pursuant to the main clause of paragraph (2), the court shall set the period for filing an objection to the modified matter and make a public announcement of the period, and shall also serve on individual rehabilitation creditors who are known to the debtor and the court, a document stating such period and the modified list of individual rehabilitation creditors: Provided, That the court may elect not to make either public notice or service, where no individual rehabilitation creditor is adversely affected by such modification or where any justifiable reason exists that such modification is deemed not contrary to the will of any individual rehabilitation creditor thus adversely affected. |
[This Article Newly Inserted on May 20, 2014]
| Article 590 (Prepayment of Expenses) |
When an application is filed for commencing individual rehabilitation procedures, the amount of expenses necessary for such procedures that is prescribed by the Supreme Court Regulations shall be prepaid.
| Article 591 (Report on Accounting) |
The court and any rehabilitation commissioner may request the debtor at any time to report on his or her revenues and expenditure of funds and other work relating to properties and, if it is deemed necessary, may inspect the current status of his or her properties, request any correction and take other appropriate measures.
| Article 592 (Preservative Measure) |
| (1) | The court may conduct provisional seizure, provisional disposal and necessary preservative measure of the debtor's properties, at the request of an interested person or ex officio, before a decision is made to commence individual rehabilitation procedures. |
| (2) | The court may alter or rescind the decision referred to in the provisions of paragraph (1). |
| (3) | An immediate appeal may be filed against the decision referred to in the provisions of paragraphs (1) and (2). |
| (4) | The immediate appeal referred to in the provisions of paragraph (3) shall not have the effect of suspending any execution. |
| (1) | Where an application for the commencement of individual rehabilitation procedures has been filed, the court may, if deemed necessary, order the suspension or prohibition of the procedures or each of the following acts, at the request of an interested person or ex officio, until a decision on such application is made: <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| 1. | The rehabilitation procedure or bankruptcy procedure for the debtor; |
| 2. | The compulsory execution, provisional seizure, or provisional execution conducted against any business and property of the debtor on the basis of individual rehabilitation claims therefor; |
| 3. | The creation of a security right for any business and property of the debtor, and any auction thereof for the exercise, etc. of the security right; |
| 4. | The acts of receiving or requiring reimbursement with respect to any individual rehabilitation claim: Provided, That any litigation act shall be excluded; |
| 5. | The disposition on delinquency made in accordance with the National Tax Collection Act or the Local Tax Collection Act, the disposition on delinquent national taxes according to the manner by which national taxes are collected (including disposition on delinquent national or local taxes; hereinafter the same shall apply), or the disposal of any goods which are offered as a guarantee for tax liability. In such cases, the opinion of the collecting authority to collect such taxes shall be heard. |
| (2) | The prescriptions shall not proceed during the period in which a disposition under paragraph (1) 5 is under suspension. |
| (3) | Where an application for the commencement of individual rehabilitation procedures is rejected, the procedures suspended pursuant to paragraph (1) shall proceed. |
| (4) | If any considerable ground exists, a court may cancel or alter a stay order or prohibition prescribed in paragraph (1), at the request of an interested person or ex officio. In such cases, the court may require any security to be offered. |
| (5) | Articles 45 through 47 shall apply mutatis mutandis to the individual rehabilitation procedures. |
| Article 594 (Withdrawal of Application to Commence Individual Rehabilitation Procedures) |
The debtor may withdraw an application for commencement of individual bankruptcy procedures before a decision is made to commence such individual rehabilitation procedures: Provided. That the debtor may withdraw his or her application after obtaining permission therefor from the court after he or she takes the preservative measure provided for in the provisions of Article 592 or the stay order provided for in the provisions of Article 593.
| Article 595 (Grounds for Dismissal of Applications Filed to Commence Individual Rehabilitation Procedures) |
In any of the following cases, the court may dismiss any application filed for commencement of individual rehabilitation procedures:
| 1. | When a debtor is not qualified to file the application; |
| 2. | When a debtor fails to submit any documents falling under any item of Article 589 (2), prepares and submits a falsified document and fails to meet the deadline for submission as set by the court; |
| 3. | When a debtor fails to pay for expenses necessary for the procedures; |
| 4. | When a debtor fails to meet the deadline for submitting a draft repayment plan; |
| 5. | When a debtor receives immunity (including immunity pursuant to a bankruptcy procedures) within five years before the date on which an application is filed for such immunity; |
| 6. | When resorting to individual rehabilitation procedures is not in the interests of the creditors in general; |
| 7. | When the application is not bona fide and delays the procedures without justifiable grounds therefor. |
| Article 596 (Decision To Commence Individual Rehabilitation Procedures) |
| (1) | The court shall decide whether to commence individual procedures within one month from the date on which an application therefor is filed. |
| (2) | The court shall prescribe the matters falling under each of the following subparagraphs at the time that it decides to commence the individual rehabilitation procedures: |
| 1. | The period during which objections may be raised to individual rehabilitation claims (hereinafter referred to as "objection period"). In this case, the period shall range from not less than two weeks to not more than two weeks from the date on which it is decided to commence the individual rehabilitation procedures; |
| 2. | The date on which the assembly of individual rehabilitation creditors is to be held. In such cases, this shall be a period ranging from not less than two weeks to not more than one month between such date and the end of the objection period. |
| (3) | The court may extend the date and the period referred to in each item of paragraph (2) on the grounds of special circumstance. |
| (4) | When a decision is made pursuant to the provisions of paragraph (1), the date and time shall be entered in a written decision. |
| (5) | The decision referred to in the provisions of paragraph (1) shall take effect from the time it is made. |
| Article 597 (Public Notice and Delivery of Commencement Public Notice) |
| (1) | When the court decides to commence individual rehabilitation procedures, it shall publicly notify the following: |
| 1. | The operative part of the decision to commence individual rehabilitation procedures; |
| 3. | The gist that any individual rehabilitation creditor may file a petition for a judgment in claim allowance proceedings on individual rehabilitation claims in regards of the details of claims that are held by him or her and other individual rehabilitation creditors within the objection period; |
| 4. | The date on which the assembly of individual rehabilitation creditors is held. |
| (2) | The court shall deliver a written statement in which the matters referred to in paragraph (1) are entered, the list of individual rehabilitation creditors and the draft repayment plan to a following person: |
| 2. | The individual rehabilitation creditors who are known; |
| 3. | Persons who hold the debtor's properties or bear obligations for the debtor for whom the individual rehabilitation procedures commence. |
| (3) | The provisions of paragraphs (1) and (2) shall apply to cases where any change occurs in the matters referred to in paragraph (1) 2 and 4 and the provisions of paragraph (2) shall apply to cases where the draft repayment plan is amended. |
| Article 598 (Immediate Appeal Filed against Judgment on Commencement of Individual Rehabilitation Procedures) |
| (1) | An immediate appeal may be filed against any judgment on the application filed for commencing individual rehabilitation procedures. |
| (2) | The provisions of Articles 592 and 593 shall apply mutatis mutandis to cases where the immediate appeal referred to in the provisions of paragraph (1) is filed against a decision to dismiss the application filed for commencing individual rehabilitation procedures. |
| (3) | The immediate appeal referred to in the provisions of paragraph (1) shall not have the effect of suspending any execution. |
| (4) | Where the procedures of such immediate appeal are in violation of this Act or where it is recognized that the immediate appeal is groundless, the appellate court shall dismiss such immediate appeal with or without prejudice. |
| (5) | When any such immediate appeal is deemed justifiable, the appellate court shall revoke the original decision and remand the case to the lower court. |
| Article 599 (Cancellation of Decision to Commence Individual Rehabilitation Procedures) |
When a decision to cancel the decision to commence individual rehabilitation procedures becomes final and conclusive, the court shall, without delay, publicly notify the operative part of such decision and deliver the purport of such decision to the following persons:
| 2. | Each of the individual rehabilitation creditors who are known to the court; |
| 3. | Persons who hold the debtor's properties or bear obligations for the debtor for whom the individual rehabilitation procedures commence. |
| Article 600 (Suspension of Other Procedures) |
| (1) | Where a decision to commence the individual rehabilitation procedures has been made, each of the following procedures or acts shall be suspended or prohibited: Provided, That the procedures or acts falling under subparagraphs 2 through 4 shall be suspended or prohibited only on the basis of any claim entered in the list of creditors: <Amended on Mar. 31, 2010; Dec. 27, 2016> |
| 1. | The rehabilitation procedure or bankruptcy procedure for the debtor; |
| 2. | The compulsory execution, provisional seizure, or provisional execution conducted against any property belonging to the individual rehabilitation estate on the basis of individual rehabilitation claims; |
| 3. | All acts of receiving or requiring reimbursement for individual rehabilitation claims: Provided, That any litigation act shall be excluded; |
| 4. | A disposition on delinquency made under the National Tax Collection Act or the Local Tax Collection Act, a disposition on delinquent national taxes according to the manner by which national taxes are collected (including disposition on delinquent national or local taxes; hereinafter the same shall apply), or a disposal of any goods which are offered as a guarantee for tax liability. |
| (2) | Where a decision to commence the individual rehabilitation procedures has been rendered, the creation of a security right, or auction therefor to exercise a security rights, shall be suspended or prohibited until the earlier of the date on which the authorization of a repayment plan is determined or the date of confirmation of the discontinuation of the individual rehabilitation procedure. |
| (3) | Where any reasonable ground exists, a court may order the continuation or cancellation of any procedure or disposition which has been suspended pursuant to paragraph (1) or (2), at the request of an interested person or ex officio: Provided, That the court may order that a security be offered, in cases of cancelling the disposition. |
| (4) | Prescription shall not run during the period in which the disposition cannot be taken, or is suspended, pursuant to paragraph (1) or (2). |
CHAPTER III REHABILITATION COMMISSIONERS
| Article 601 (Appointment and Dismissal) |
| (1) | The court may appoint any of the following persons as a rehabilitation commissioner, at the request of an interested person or ex officio: <Amended on May 17, 2010> |
| 1. | Members of the Custodial Committee; |
| 2. | Court officials of Grade V, etc.; |
| 3. | Persons who have qualification for attorney-at-law, certified public account, or certified judicial scrivener; |
| 4. | Persons who have experience of working as court official or prosecution administrative officer of Grade VII or higher; |
| 5. | Persons having experience of working at a bank provided for in the Banking Act, who are adequate to the position of the rehabilitation commissioner; |
| 6. | Persons working or having experience of working for an institution or organization which performs functions such as credit management-related education and counselling of debtors, debts adjustment affairs for their credit restoration, etc., who are adequate to the position of rehabilitation commissioner; |
| 7. | Persons whose qualifications are equivalent to those of the persons falling under any of subparagraphs 1 through 6, who are adequate to the position of the rehabilitation commissioner. |
| (2) | Where any considerable ground exists, the court may, at the request of an interested person or ex officio, dismiss any rehabilitation commissioner. |
| (3) | If deemed necessary, a rehabilitation commissioner may appoint at least one representative on own his or her responsibility in order to perform his or her duties. |
| (4) | The appointment of the rehabilitation commissioner’ representative under paragraph (3) shall be permitted by the court. |
| (5) | The rehabilitation commissioner’s representative may conduct all acts other than judicial acts or litigation, on behalf of the rehabilitation commissioner. |
| Article 602 (Work of Rehabilitation Commissioners) |
| (1) | Every rehabilitation commissioner shall perform the work falling under each of the following subparagraphs under the court's supervision: |
| 1. | The inspection of the debtor's properties and income; |
| 2. | The application filed for exercising the avoidance power and participation in the procedures thereof; |
| 3. | Holding assemblies of individual rehabilitation creditors; |
| 4. | Other work prescribed by statutes and regulations or the court. |
| (2) | Upon receiving an order issued by the court or at a request from any rehabilitation commissioner, the debtor shall provide explanation regarding his or her properties and income, his or her repayment plan and other necessary matters. |
CHAPTER IV CONFIRMATION OF INDIVIDUAL REHABILITATION CLAMS
| Article 603 (Confirmation of Individual Rehabilitation Claims) |
| (1) | In cases falling under either of the following subparagraphs, claims entered in the list of individual rehabilitation creditors shall be confirmed as they are entered therein: |
| 1. | Where any creditor who is entered in the list of individual rehabilitation creditors fails to file an application for a judgment in claim allowance proceedings on individual rehabilitation claims within the objection period provided for in the provisions of Article 596 (2) 1; |
| 2. | Where any application filed for a judgment in claim allowance proceedings on individual rehabilitation claims is dismissed without prejudice. |
| (2) | When the claims referred to in the provisions of paragraph (1) are confirmed, the court official of Grade V, etc. shall prepare a table of the individual rehabilitation claims in which the matters falling under each of the following subparagraphs are entered: |
| 1. | The name and domicile of the debtor; |
| 2. | The details and grounds of the claims. |
| (3) | Where the confirmed individual rehabilitation claims are entered in the table of individual rehabilitation claims, their entry in the table shall have the same effect as that of a final and conclusive judgment on all of the individual rehabilitation creditors. |
| (4) | When a decision to discontinue individual rehabilitation procedure becomes final and conclusive, the individual rehabilitation creditors may perform compulsory execution on the debtor based on the table of individual rehabilitation creditors. |
| (5) | The provisions of Article 255 (3) shall apply mutatis mutandis to cases falling under paragraph (4). |
| Article 604 (Judgment in Claim Allowance Proceedings on Individual Rehabilitation Claims) |
| (1) | An individual rehabilitation creditor who has an objection to any content of the list of individual rehabilitation creditors, may raise an objection in writing within the objection period under Article 589-2 (4) or Article 596 (2) 1. In cases of admitting the allegations in such objection, a debtor may modify the list of individual rehabilitation creditors with permission from the court. In such cases, the court may elect not to make a decision with respect to the application for the judgment in claim allowance proceedings. <Amended on May 20, 2014> |
| (2) | Where there is an objection against any right in a pending lawsuit, no petition for a judgment in claim allowance proceedings shall be separately filed, and such pending lawsuit shall, by modifying its content, be changed into a lawsuit for examination and confirmation of individual rehabilitation claims. |
| (3) | In cases falling under paragraph (1), if an individual rehabilitation creditor files a petition for a judgment in claim allowance proceedings on individual rehabilitation claims with respect to the details of his or her individual rehabilitation claims, such petition shall be filed against a debtor, and if the individual rehabilitation creditor files such petition with respect to the details of a claim of any other individual rehabilitation creditor, the petition shall be filed against the debtor and other creditors. |
| (4) | A person who files a petition for a judgment in claim allowance proceedings on individual rehabilitation claims, shall pay expenses for procedures determined by the court in advance. Where such expenses are not paid in advance, the application shall be dismissed without prejudice. |
| (5) | After examining interested persons,?the court shall make a judgment in claim allowance proceedings on individual rehabilitation claims, and in such decision, it shall confirm whether there exists any rehabilitation claim against which an objection has been raised, or the details of such claim. |
| (6) | In cases of making a decision under paragraph (5), the court shall deliver a written decision to the parties concerned. |
| Article 605 (Lawsuit Objecting to Judgment in Claim Allowance Proceedings on Individual Rehabilitation Claims) |
| (1) | Anyone who is dissatisfied with a judgment in claim allowance proceedings on an individual rehabilitation claim may file a lawsuit objecting thereto within one month from the date he or she receives delivery of the written judgment. In such cases, the lawsuit objecting to such judgment shall be exclusively put under the jurisdiction of the court with pending individual rehabilitation (referring to the rehabilitation court in which the individual rehabilitation case is pending; hereinafter the same shall apply). <Amended on Dec. 27, 2016> |
| (2) | Arguments against the lawsuit referred to in paragraph (1) shall be submitted after the lapse of one month from the date the delivery of the written judgment referred to in paragraph (1) is received. When multiple appeals are pending on the same claim, the court may merge pleadings therefor. |
| (3) | The judgment on the appeal referred to in paragraph (1) shall authorize or amend the judgment of the same paragraph, except when the appeal is dismissed without prejudice for being unlawful. |
| Article 606 (Entry of Result of Appeal on Confirmation of Individual Rehabilitation Claims) |
The court official of Grade V, etc. shall, at the request of the debtor, any rehabilitation commissioner or any individual rehabilitation creditor, prepare a table of individual rehabilitation creditors in which the matters falling under each of the following subparagraphs are entered:
| 1. | The result of judgment in a claim allowance proceeding on the individual rehabilitation claim; |
| 2. | The result of the lawsuit objecting to a judgment in claim allowance proceedings on the individual rehabilitation claim; |
| 3. | The result of the appeal against a judgment in claim allowance proceedings on the individual rehabilitation claim, other than the result of the final and conclusive judgment on the individual rehabilitation claim referred to in the provisions of subparagraphs 1 and 2. |
| Article 607 (Effect of Judgment in Claim Allowance Proceedings on Individual Rehabilitation Claims) |
| (1) | A judgment in a lawsuit on confirmation of individual rehabilitation claims shall have effect on all of individual rehabilitation creditors. |
| (2) | When any lawsuit objecting to the judgment in claim allowance proceedings on an individual rehabilitation claim is not filed within the period provided for in the provisions of Article 605 (1) or is dismissed without prejudice, the judgment shall have the same effect as that of the final and conclusive judgment on all of the individual rehabilitation creditors. |
| Article 608 (Refund of Litigation Costs) |
When any profit accrue to the debtor's properties as a result of the claim allowance proceedings on individual rehabilitation claims, any individual rehabilitation creditor who files such lawsuit may claim a reimbursement of litigation costs as an individual rehabilitation creditor within the limit of the profit that accrues.
| Article 609 (Value of Subject Matter of Claim Allowance Proceedings on Individual Rehabilitation Claims) |
The value of the subject matter of a claim allowance proceeding on individual rehabilitation claims shall be determined by the court with pending individual rehabilitation cases based on the estimated amount of the profit that accrues according to the repayment plan. <Amended on Dec. 27, 2016>
| Article 609-2 (Transfer of Title) |
| (1) | A person who acquires any claim which is entered in the list of individual rehabilitation creditors may file an application for transfer of title. |
| (2) | A person who seeks transfer of title under paragraph (1), shall submit to the court an application stating each of the following matters and the document evidencing his or her acquisition of the individual rehabilitation credit, or a copy or abstract thereof: |
| 1. | The name or title, and address, of the person who seeks transfer of title, and of his or her representative; |
| 2. | The place of notification or delivery (limited to a place within the territory of the Republic of Korea), telephone number, and other contact details; |
| 3. | The right acquired, and the date and ground for acquisition thereof. |
[This Article Newly Inserted on May 20, 2014]
| Article 610 (Submission and Revision of Draft Repayment Plan) |
| (1) | The debtor shall submit a draft repayment plan within 14 days from the date on which an application is filed for commencing individual rehabilitation procedures: Provided, That when the court recognizes that justifiable grounds exist, it may extend the period. |
| (2) | The debtor may revise the draft repayment plan before it is authorized. |
| (3) | The court may order the debtor to revise the draft repayment plan, at the request of an interested person or ex officio. |
| (4) | When the revision order is given pursuant to the provisions of paragraph (3), the debtor shall revise the draft repayment plan within the deadline set by the court. |
| (5) | The provisions of Article 597 (2) shall apply mutatis mutandis to cases where the draft repayment plan is revised pursuant to the provisions of paragraphs (2) and (3). |
| Article 611 (Contents of Repayment Plan) |
| (1) | Each of the following matters shall be prescribed in the repayment plan: |
| 1. | Matters concerning the properties and income furnished for repaying obligations; |
| 2. | Matters concerning the repayment of the total amount of individual rehabilitation estate claims and individual rehabilitation claims with general preferential right; |
| 3. | Matters concerning the repayment of all or a part of the individual rehabilitation claims entered in the list of individual rehabilitation creditors. |
| (2) | Each of the following matters may be prescribed in the repayment plan: |
| 1. | The categorization of individual rehabilitation claims into groups; |
| 2. | The purpose for the use of property that exceed the estimated amount in the repayment plan; |
| 3. | Matters concerning restrictions on the right to manage and dispose of properties that belong to the individual rehabilitation estate after the repayment plan is authorized; |
| 4. | Other matters necessary to coordinate the debtor's obligations. |
| (3) | When claims are categorized into groups in the repayment plan, any claims that are categorized into the same group shall be handled equally: Provided, That the same shall not apply to cases where agreement is obtained from individual rehabilitation creditors who suffer disadvantages or the amount of the individual rehabilitation claim is minimal. |
| (4) | The repayment plan shall contain terms that require a regular repayment after the commencement of repayments within one month from the date on which the repayment plan is authorized: Provided, That the same shall not apply to cases where permission therefor is obtained from the court. |
| (5) | The repayment period set in the repayment plan shall not exceed three years from the date on which the repayment commences: Provided, That in any special case, such as where it is necessary to meet the requirements set forth in Article 614 (1) 4, the repayment period may be set within the extent not exceeding five years from the date on which the repayment commences. <Amended on Dec. 12, 2017> |
| (6) | When it is deemed necessary, the court may order personal and impersonal securities to be furnished in order to implement the repayment plan. |
| Article 612 (Invalidation of Preferential Benefits) |
The debtor’s act of giving special profits to some individual rehabilitation creditors without resorting to the repayment plan, in his or her name or in the name of any third person, shall be made invalid.
| Article 613 (Assembly of Individual Rehabilitation Creditors) |
| (1) | The court shall notify the debtor, individual rehabilitation creditors and rehabilitation commissioners of the date on which an assembly of individual rehabilitation creditors is held and a summary of the repayment plan. |
| (2) | The debtor shall be present at the assembly of individual rehabilitation creditors and explain the repayment plan at the request of any individual rehabilitation creditor. |
| (3) | The assembly of individual rehabilitation creditors shall be presided over by the court. |
| (4) | When any rehabilitation commissioner is appointed, the court may cause such rehabilitation commissioner to preside over the assembly of individual rehabilitation creditors. |
| (5) | Any individual rehabilitation creditor may state his or her objection to the repayment plan at the assembly of individual rehabilitation creditors. |
| Article 614 (Whether to Authorize Repayment Plan) |
| (1) | When no individual rehabilitation creditor or no rehabilitation commissioner states his or her objection to the repayment plan, and each of the following requirements is met, the court shall decide to authorize the repayment plan: Provided, That the same shall not apply to cases where any individual rehabilitation creditor or any rehabilitation commissioner does not comply with an order given to revise the draft repayment plan pursuant to the provisions of Article 610 (3): |
| 1. | The repayment plan is to conform with the provisions of statutes; |
| 2. | The repayment plan is to be fair, equitable, and executable; |
| 3. | The payable expenses, fees and other amounts are to be paid before the repayment plan is authorized; |
| 4. | The total amount to be repaid for the rehabilitation claims that are appraised as of the date on which the repayment plan is authorized is to exceed the total amount of dividends that the debtor is to take at the time that he or she enters into bankruptcy; Provided, That the same shall not apply to cases where agreement thereon is obtained from creditors. |
| (2) | When any individual rehabilitation creditor or any rehabilitation commissioner states an objection, the court may decide to authorize the repayment plan only when the requirements falling under each of the following subparagraphs are met in addition to the requirements referred to in each subparagraph of paragraph (1): |
| 1. | The total repayment amount for individual rehabilitation creditors who state their objections, which is appraised as of the date on which it is decided to authorize the repayment plan is not to be smaller than the total amount of dividends that are distributed to the debtor at the time the debtor enters into bankruptcy; |
| 2. | The whole of the disposable income that the debtor can receive during the repayment period that is set according to the repayment plan from the first repayment date is to be used for repayments according to the repayment plan; |
| 3. | The total amount of repayments for individual rehabilitation claims, which is appraised as of the date on which it is decided to authorize the repayment plan, is not to be smaller than each of the following amounts within the scope not exceeding 30 million won: |
| (a) | Where the total amount of individual rehabilitation claims appraised as of the date on which it is decided to authorize the repayment plan is not more than 50 million won, the amount obtained by multiplying 5/100 by the total amount; |
| (b) | Where the total amount of individual rehabilitation claims appraised as of the date on which it is decided to authorize the repayment plan is not less than 50 million won, the amount obtained by adding one million won to the amount obtained by multiplying 3/100 by the total amount. |
| (3) | The court shall decide on the draft repayment plan and publicly notify the operative part of such decision, the gist of its reasoning and a summary of the repayment plan. In this case, no service need be made. |
| Article 615 (Effect of Authorizing Repayment Plan) |
| (1) | The repayment plan shall take effect from the time it is decided to authorize the repayment plan: Provided, That any change in rights according to the repayment plan shall not accrue until the immunity decision becomes final and conclusive. |
| (2) | When it is decided to authorize the repayment plan, all of the properties that belong to the individual rehabilitation estate shall revert to the debtor: Provided, That the same shall not apply to cases where the repayment plan is differently prescribed in the process of deciding on and authorizing the repayment plan. |
| (3) | When it is decided to authorize the repayment plan, rehabilitation procedures and bankruptcy procedures, the compulsory execution, provisional seizure or preliminary injunction, any of which are suspended pursuant to the provisions of Article 600, shall lose their effects: Provided, That the same shall not apply to cases where the repayment plan is prescribed differently in the process of deciding to authorize the repayment plan. |
| Article 616 (Special Rules concerning Assignment Order) |
| (1) | When it is decided to authorize the repayment plan, the assignment order that becomes final and conclusive before the individual rehabilitation procedures commence with respect to the debtor’s pay, pensions, salary, bonuses and other wage claims in the nature similar thereto shall lose its effect on the portion of the labor that is provided after it is decided to authorize the repayment plan. |
| (2) | The amount of claims that cannot be repaid to all creditors on the grounds of a decision authorizing the repayment plan shall constitute individual rehabilitation claims. |
| Article 617 (Performance of Repayments) |
| (1) | The debtor shall place in the custody of rehabilitation commissioners the money to be repaid to individual rehabilitation creditors according to the repayment plan authorized. |
| (2) | Individual rehabilitation creditors shall be paid the amount that is deposited pursuant to the provisions of paragraph (1) by rehabilitation commissioners. Where any individual rehabilitation creditor is not paid the amount, rehabilitation commissioners may deposit it for such individual rehabilitation creditor. |
| (3) | The provisions of paragraphs (1) and (2) shall not apply to cases where any rehabilitation commissioner is not appointed and the repayment plan is prescribed differently in the process of authorizing the repayment plan. |
| Article 617-2 (Deposit for Debtors) |
Where a deposited amount (including interest) exists even after a decision on the discontinuation of individual rehabilitation procedures or a decision on immunity becomes final and conclusive, a rehabilitation commissioner shall return such deposited amount to a debtor: Provided, That where the debtor refuses to receive the deposited amount or where it cannot be returned because his or her whereabouts are unknown, the rehabilitation commissioner may deposit the amount for the debtor.
[This Article Newly Inserted on Dec. 12, 2017]
| Article 618 (Immediate Appeal against Decision on Whether to Authorize Repayment Plan) |
| (1) | An immediate appeal may be filed against a decision on whether to authorize a repayment plan. |
| (2) | The provisions of Article 247 (3) through 7 shall apply mutatis mutandis to an immediate appeal filed against a decision on whether to authorize the repayment plan. |
| Article 619 (Revision of Repayment Plan after Authorization Thereof) |
| (1) | The debtor, any rehabilitation commissioner and individual rehabilitation creditor may submit a draft change for the authorized repayment plan before the repayment is completed according to the repayment plan. |
| (2) | The provisions of Articles 597 (2), 611, 613, 614, 615 (1) and 617 shall apply mutatis mutandis to any draft change in the repayment plan referred to in the provisions of paragraph (1). |
CHAPTER VI DISCONTINUATION AND IMMUNITY
| Article 620 (Discontinuation of Individual Rehabilitation Procedures Prior to Authorization of Repayment Plan) |
| (1) | In the events falling under either of the following subparagraphs, the court shall decide to discontinue individual rehabilitation procedures at the request of an interested person or ex officio: |
| 1. | When the facts falling under subparagraphs 1 and 5 of Article 595 are obviously disclosed at the time individual rehabilitation procedures commence; |
| 2. | When it is impossible to authorize the draft repayment plan submitted by the debtor. |
| (2) | In the events falling under either of the following subparagraphs, the court may ex officio decide to discontinue the individual rehabilitation procedures: |
| 1. | When the procedures fall under subparagraph 2 of Article 595; |
| 2. | When the debtor fails to be present or to provide an explanation pursuant to the provisions of Article 613 (2) without any justifiable grounds thereof or provides any false explanation. |
| Article 621 (Discontinuation of Individual Rehabilitation Procedures after Authorization of Repayment Plan) |
| (1) | In the events falling under any of the following subparagraphs, the court shall decide to discontinue the individual rehabilitation procedures at the request of an interested person or ex officio: |
| 1. | When a decision not to grant immunity becomes final and conclusive; |
| 2. | When it is clear that the debtor is unable to implement the authorized repayment plan; Provided, That the same shall not apply where the debtor is granted decision on immunity under Article 624 (2); |
| 3. | When the debtor fails to implement the authorized repayment plan by concealing his or her properties and income or by other improper means. |
| (2) | The discontinuation of the individual rehabilitation procedures referred to in the provisions of paragraph (1) shall not affect any repayment that has already been made and any effect that has accrued pursuant to the provisions of this Act. |
| Article 622 (Public Notice of Decision to Discontinue Individual Rehabilitation Procedures) |
The court shall, when it decides to discontinue the individual rehabilitation procedures, publicly notify the operative part of such decision and the gist of its reasoning thereof. In such cases, no service need be made.
| Article 623 (Immediate Appeal Filed Against Discontinuation of Individual Rehabilitation Procedures) |
| (1) | An immediate appeal may be filed against the discontinuation of individual rehabilitation procedures. |
| (2) | The provisions of Articles 247 (4) through (7) shall apply mutatis mutandis to the immediate appeal filed against the discontinuation of individual rehabilitation procedures. |
| Article 624 (Immunity Decision) |
| (1) | When the debtor completes his or her repayments according to the repayment plan, the court shall decide to grant immunity to him or her, at the request of the party or ex officio. |
| (2) | Even if the debtor fails to complete repayments according to the repayment plan, when all of the following requirements are met, the court may decide to grant him or her immunity after hearing the opinions of interested persons: |
| 1. | The debtor fails to complete his or her repayments by a cause not imputable to him or herself; |
| 2. | The amount repaid to individual rehabilitation creditors by the date on which it is decided to grant the debtor immunity is no smaller than the amount of dividends the debtor receives in the bankruptcy procedures where the debtor files an application for bankruptcy procedures; |
| 3. | Any change to the repayment plan is impossible. |
| (3) | Notwithstanding the provisions of paragraphs (1) and (2), in any of the following cases, the court may decide not to grant immunity: |
| 1. | Where the debtor holds any individual rehabilitation claim that is not entered in the list of individual rehabilitation creditors due to the debtor's bad faith, by the time when it is decided to grant him or her immunity; |
| 2. | Where the debtor fails to fulfill his or her obligations prescribed by this Act. |
| (4) | The court shall, when it decides to grant immunity, publicly notify the operative part of such decision and the gist of its reasoning thereof. In such cases, no service need be made. |
| Article 625 (Effect of Decision to Grant Immunity) |
| (1) | The effect of any decision to grant immunity shall accrue only after such decision becomes final and conclusive. |
| (2) | The debtor who is granted immunity shall be exempted from responsibility for his or her obligations to individual rehabilitation creditors, except for the repayments that are made according to the repayment plan: Provided, That the debtor shall not be exempted from his or her responsibility for claims falling under any of the following subparagraphs: |
| 1. | Claims not entered in the list of individual rehabilitation creditors; |
| 2. | Claims for tax, etc. as provided for in the provisions of Article 583 (1) 2; |
| 3. | Claims for any fines, penalties, any criminal litigation costs, any additional charges, and any administrative fines; |
| 4. | Damages arising from the debtor's deliberate and illegal conduct; |
| 5. | Damages arising from a tort that results in injury to life or body of a person by the debtor’s gross negligence; |
| 6. | Any wages, severance pay and disaster compensation of the debtor's employees; |
| 7. | The debtor’s employees’ bailment monies and fidelity guarantee monies; |
| 8. | Claims for reimbursement of expenses the debtor shall bear in raising and supporting his or her family. |
| (3) | The immunity shall not affect the rights held by individual rehabilitation creditors on the debtor's guarantors and other persons who bear obligations jointly with the debtor and security furnished for individual rehabilitation creditors. |
| Article 626 (Cancellation of Immunity) |
| (1) | When the debtor is granted immunity by fraud or other improper means, the court may revoke his or her immunity, at the request of an interested person or ex officio. In this case, the court shall examine interested persons. |
| (2) | The application referred to in the provisions of paragraph (1) shall be filed within one year from the date on which a decision to grant immunity becomes final and conclusive. |
| Article 627 (Immediate Appeal Filed against Decision on Immunity) |
An immediate appeal may be filed against any decision to grant immunity and any decision to cancel immunity.
PART V INTERNATIONAL BANKRUPTCY
| Article 628 (Definitions) |
The definition of terms used in this Part shall be as follows:
| 1. | The term "foreign bankruptcy procedures" means rehabilitation procedures, bankruptcy procedures, individual rehabilitation procedures and other procedures similar thereto for each of which applications are filed with any foreign courts (including authorities equivalent thereto; hereinafter the same shall apply) and provisional procedures; |
| 2. | The term "domestic bankruptcy procedures" means rehabilitation procedures, bankruptcy procedures or individual rehabilitation procedures for each of which applications are filed with the courts of the Republic of Korea; |
| 3. | The term "approval for foreign bankruptcy procedures" means approval for the grounds on which a disposition for support is taken pursuant to this Part in the Republic of Korea for foreign bankruptcy procedures; |
| 4. | The term "support procedures" means procedures for a judgment on an application filed for approval of foreign bankruptcy procedures and for the disposition taken to support such foreign bankruptcy procedures for a debtor's business and properties in the Republic of Korea; |
| 5. | The term "representative of foreign bankruptcy procedures" means the person who is recognized by any foreign court as the manager or representative of foreign bankruptcy procedures; |
| 6. | The term "international bankruptcy custodian" means the person who is given all or a part of the authority by the court to realize a debtor's properties, to distribute dividends or to manage or dispose of a debtor's business and properties in support of foreign bankruptcy procedures. |
| Article 629 (Scope of Application) |
| (1) | The provisions of this Part shall apply to each of the following cases: |
| 1. | Where a representative of foreign bankruptcy procedures seeks any approval or support from a court of the Republic of Korea in connection with foreign bankruptcy procedures; |
| 2. | Where a representative of a foreign bankruptcy procedures files an application with a court of the Republic of Korea for domestic bankruptcy procedures or participates in pending domestic bankruptcy; |
| 3. | Where any custodian, any trustee in bankruptcy, the debtor and any other person who obtains permission from the court, etc. participates in the procedures of any foreign court and seeks approval and support from any foreign court while carrying out activities overseas; |
| 4. | Where domestic bankruptcy procedures and foreign bankruptcy procedures for the same debtor are jointly and simultaneously pending in a court of the Republic of Korea and any foreign court and coordination between the two procedures is required. |
| (2) | Matters not prescribed in this Part shall be governed by the provisions of other Parts of this Act. |
| Article 630 (Jurisdiction) |
Cases concerning approval of, and support for foreign bankruptcy procedures shall be placed under the exclusive jurisdiction of the collegiate division of the Seoul Rehabilitation Court: Provided, That when it is deemed necessary to ensure the efficient implementation of the procedures and to protect the rights of interested parties, the Seoul Rehabilitation Court may transfer such cases to the competent court provided for in Article 3 at the time it decides to approve the foreign bankruptcy procedures or after it decides to approve such foreign bankruptcy procedures, at the request of the party or ex officio. <Amended on Dec. 27, 2016>
| Article 631 (Application Filed for Approving Foreign Bankruptcy Procedures) |
| (1) | Where the debtor has his or her place of business, his or her office or his or her domicile in a nation in which an application is filed for foreign bankruptcy procedures, the representative of such foreign bankruptcy procedures may file an application accompanied by a written statements falling under each of the following subparagraphs with the court for approving the foreign bankruptcy procedures. In this case, written statements prepared in any foreign language shall be accompanied by translations of such statements: |
| 1. | A written statement concerning the legal basis and a summary of the overall foreign bankruptcy procedures; |
| 2. | A written statement attesting to the commencement of the foreign bankruptcy procedures; |
| 3. | A written statement attesting to the qualification and authority of the representative of the foreign bankruptcy procedures; |
| 4. | A written statement concerning the main points of the foreign bankruptcy procedures for which an application is filed for their approval (including statements of creditors, the debtor and interested parties); |
| 5. | A written statement concerning all other foreign bankruptcy procedures over the debtor, which are known to the representative of the foreign bankruptcy procedures. |
| (2) | When the details referred to in each item of paragraph (1) are altered after an application is filed for approving the foreign bankruptcy procedures, the applicant shall promptly submit a written statement in which altered matters are entered to the court. |
| (3) | When the application referred to in the provisions of paragraph (1) is filed, the court shall, without delay, publicly notify a summary of such application. |
| (4) | The provisions of Articles 37 and 39 shall apply mutatis mutandis to the application referred to in the provisions of paragraph (1). |
| Article 632 (Decision to Approve Foreign Bankruptcy Procedures) |
| (1) | Upon receiving an application filed for approving foreign bankruptcy procedures, the court shall decide whether to approve them within one month from the date on which such application is filed. |
| (2) | In any of the following cases, the court shall dismiss an application filed for approving foreign bankruptcy procedures: |
| 1. | Where expenses determined by the court are not prepaid; |
| 2. | Where each written statement provided for in each subparagraphs of Article 631 (1) is not submitted or the establishment and contents of any such written statement is not bona fide; |
| 3. | Where approving the foreign bankruptcy procedures is contrary to the good public morals and social order of the Republic of Korea. |
| (3) | When it is decided to approve foreign bankruptcy procedures, the court shall publicly notify the operative part of such decision and the gist of its reasoning therefor and deliver a written decision to the applicant. |
| (4) | An immediate appeal may be filed against a decision on an application filed for approving foreign bankruptcy procedures. |
| (5) | The immediate appeal referred to in the provisions of paragraph (4) shall not have the effect of suspending any execution. |
| Article 633 (Effect of Approval for Foreign Bankruptcy Procedures) |
A decision to approve foreign bankruptcy procedures shall not affect the commencement or the progress of procedures pursuant to this Act.
| Article 634 (Application by Representative of Foreign Bankruptcy Procedures for Commencing Domestic Bankruptcy Procedures) |
When foreign bankruptcy procedures are approved, the representative of the foreign bankruptcy procedures may file an application for commencement of domestic bankruptcy procedures or participate in domestic bankruptcy procedures that are in progress.
| Article 635 (Order Prior to Approval) |
| (1) | After an application is filed for foreign bankruptcy procedures, the court may order measures to be taken, as provided for in the provisions of Article 636 (1) 1 through 3 up until when a decision is made on the application for such procedures, at the request of the representative of foreign bankruptcy procedures or ex officio. |
| (2) | The provisions of paragraph (1) shall apply mutatis mutandis to cases where an immediate appeal is filed against a decision made to dismiss an application for commencement of foreign bankruptcy procedures. |
| (3) | The court may alter or rescind the disposition referred to in the provisions of paragraphs (1) and (2). |
| (4) | An immediate appeal may be filed against the decision referred to in the provisions of paragraphs (1) through (3). |
| (5) | The immediate appeal referred to in the provisions of paragraph (4) shall not have the effect of suspending any execution. |
| Article 636 (Support for Foreign Bankruptcy Procedures) |
| (1) | The court may make a decision falling under any of the following subparagraphs in order to protect the debtor's business and properties or the creditors' profits at the time that it approves the foreign bankruptcy procedures or after approving the foreign bankruptcy procedures at the request of an interested person or ex officio: |
| 1. | The suspension of a lawsuit involving the debtor's business and properties and procedures belonging to any administrative agency; |
| 2. | The suspension or prohibition of compulsory execution, an auction for the exercise of security rights, provisional seizure, preliminary injunction and preservation procedures with respect to the debtor's business and properties; |
| 3. | Prohibition of the debtor's repayment or of the disposal of the debtor's properties; |
| 4. | The appointment of international bankruptcy custodians; |
| 5. | Other dispositions necessary to preserve the debtor's business and properties and to protect the profits of creditors. |
| (2) | When the court makes the decision referred to in the provisions of paragraph (1), it shall take into account the profits of creditors, the debtor and other interested persons. |
| (3) | When the support application referred to in the provisions of paragraph (1) is contrary to the good public morals and social order of the Republic of Korea, the court shall dismiss such support application without prejudice. |
| (4) | When the court decides to alter or rescind the prohibition order referred to in the provisions of paragraph (1) 2, it shall publicly notify the operative part of such decision and deliver a written decision to the representative of the foreign bankruptcy procedures and the applicant. |
| (5) | When the prohibition order referred to in the provisions of paragraph (1) is given, the prescription of the claims to the debtor shall not expire until the date on which two months have lapsed from the day following the date on which such prohibition order loses its effect. |
| (6) | The court may, if it is deemed necessary, alter or rescind the decision referred to in the provisions of paragraph (1), at the request of an interested person or ex officio. |
| (7) | When it is deemed necessary, the court may order the cancellation of procedures that are suspended pursuant to the provisions of paragraph (1) 2, at the request of an interested person or ex officio. |
| (8) | An immediate appeal may be filed against the decision referred to in the provisions of paragraphs (1), (6) and (7). |
| (9) | The immediate appeal referred to in the provisions of paragraph (8) shall not have the effect of suspending any execution. |
| Article 637 (International Bankruptcy Custodians) |
| (1) | Where any international bankruptcy custodian is appointed, the authority to perform the debtor's business and manage and dispose of the debtor's properties shall be vested exclusively in such international bankruptcy custodian. |
| (2) | Where any international custodian intends to dispose of the debtor's properties, or remove the debtor's properties from the Republic of Korea, realize the debtor's properties, distribute dividends and perform any act that is prescribed by the court, such international custodian shall obtain permission therefor from the court. |
| (3) | The provisions of Section 1 of Chapter II of Part II and Section 1 of Chapter II of Part III shall apply mutatis mutandis to every international custodian. |
| Article 638 (Simultaneous Proceedings of Domestic Bankruptcy Procedures and International Bankruptcy Procedures) |
| (1) | Where domestic bankruptcy procedures and foreign bankruptcy procedures proceed simultaneously for the same debtor, the court may decide on, alter or revoke the support provided for in the provisions of Articles 635 and 636, which focuses on domestic bankruptcy procedures. |
| (2) | An immediate appeal may be filed against the decision referred to in the provisions of paragraph (1). |
| (3) | The immediate appeal referred to in the provisions of paragraph (2) shall not have the effect of suspending any execution. |
| Article 639 (Multiple International Bankruptcy Procedures) |
| (1) | When an application is filed for approving multiple international bankruptcy procedures for the same debtor, the court shall hold a joint hearing thereon. |
| (2) | When approval is granted for multiple international bankruptcy procedures for the same debtor, the court may decide on which are to be the main foreign bankruptcy procedures taking into account the location of the debtor's principal place of business and the scope, etc. of measures taken to protect creditors in order to ensure the efficient progress of support procedures. |
| (3) | The court may decide on or change the support, provided for in the provisions of Article 636 for the main foreign bankruptcy procedures. |
| (4) | If it is deemed necessary, the court may change the main foreign bankruptcy procedures referred to in the provisions of paragraph (2). |
| (5) | An immediate appeal may be filed against the decision referred to in the provisions of paragraphs (2) through (4). |
| (6) | The immediate appeal referred to in the provisions of paragraph (5) shall not have the effect of suspending any execution. |
| Article 640 (Authority for Custodians to Carry Out Activities Overseas) |
Any custodian and any trustee in bankruptcy of domestic bankruptcy procedures and any other person who obtains permission from the court, shall have the authority to carry out activities overseas for domestic bankruptcy procedures in any way permitted by the applicable foreign law.
| Article 641 (Cooperation) |
| (1) | The court shall cooperate with any foreign court and the representative of foreign bankruptcy procedures with respect to the matters falling under each of the following subparagraphs in order to ensure the smooth and fair execution of domestic bankruptcy procedures, foreign bankruptcy procedures or between multiple foreign bankruptcy procedures that are proceeding over the same debtor and other debtors related with the former: |
| 1. | The exchange of opinions; |
| 2. | The management and supervision of the debtor's business and properties; |
| 3. | The coordination of the progression of multiple procedures; |
| 4. | Other necessary matters. |
| (2) | The court may exchange information and opinions directly with any foreign court or the representative of foreign bankruptcy procedures in order for the cooperation referred to in the provisions of paragraph (1). |
| (3) | Any custodian and any trustee in bankruptcy who are in charge of domestic bankruptcy procedures may exchange information and opinions with any foreign court or the representative of foreign bankruptcy procedures under the court's supervision. |
| (4) | Any custodian and any trustee in bankruptcy in charge of domestic bankruptcy procedures may reach an agreement with any foreign court or the representative of foreign bankruptcy procedures on the coordination of bankruptcy procedures after obtaining permission therefor from the court. |
| Article 642 (General Rules Governing Dividends) |
Where domestic bankruptcy procedures, foreign bankruptcy procedures or multiple foreign bankruptcy procedures for a common debtor are in progress, any creditor who receives repayment from the foreign bankruptcy procedures or debtor's overseas properties shall not be entitled to take any dividend or any repayment from the domestic bankruptcy procedures until such time as other creditors who belong to the same group and the same ranking as the group and the ranking of the former receive the same percentage of repayment.
PART VI PENALTY PROVISIONS
| Article 643 (Offense of Fraudulent Rehabilitation) |
| (1) | Where a debtor performs any of the following acts with the aim of seeking profits for himself/herself or any other persons or causing damage to creditors, and a decision on commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures for the debtor becomes final and conclusive, the debtor shall be punished by imprisonment with labor for not more than 10 years or by a fine not exceeding 100 million won: <Amended on Dec. 30, 2014> |
| 1. | Destroying and concealing his or her properties or disposing of his or her properties in a manner detrimental to rehabilitation creditors, rehabilitation secured creditors, shareholders and equity right holders; |
| 2. | Falsely increasing the debtor's encumbrance; |
| 3. | Failing to prepare the commercial books, the preparation of which is mandatory under relevant Acts, failing to enter the current state of the debtor's properties in the commercial books, falsely entering any matter in the commercial books and destroying and concealing the commercial books; |
| 4. | Filing an application for commencement of rehabilitation procedures or commencement of simplified rehabilitation procedures with the primary aim of evading the punishment provided for in the Illegal Check Control Act. |
| (2) | Where any of the following persons performs an act falling under any subparagraph of paragraph (1) with the aim of seeking profit for himself or any other person and causing damage to creditors, and a decision on commencement of rehabilitation procedures or simplified rehabilitation procedures for the debtor becomes final and conclusive, the person shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won: <Amended on Dec. 30, 2014> |
| 1. | The legal representative of a debtor; |
| 2. | The director of a corporate debtor; |
| 3. | The manager of a debtor. |
| (3) | Where the debtor performs any of the following acts with the aim of seeking profit for himself or any other person and causing damage to creditors, and a decision to commence rehabilitation procedures for the debtor becomes final and conclusive, the debtor shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won: |
| 1. | Concealing or destroying properties or disposing of the properties in a manner detrimental to creditors; |
| 2. | Falsely increasing the debtor's encumbrance. |
| Article 644 (Offense of Fraudulent Rehabilitation Committed by Third Person) |
Where any person other than persons specified in the provisions of Article 643 commits any of the following acts and a decision to commence rehabilitation procedures for the debtor becomes final and conclusive, such person shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won: | 1. | An act specified in any subparagraph of Article 643 (1); |
| 2. | Falsely exercising any right that person does not hold as a rehabilitation creditor, a rehabilitation secured creditor, a shareholder, or an equity right holder with intent to make a profit for him or herself or any other person or to inflict harm on creditors. |
| Article 644-2 (Exceptional Provisions concerning Crime of Fraudulent Rehabilitation) |
A person who provides false information or submits false materials for the purpose of escaping from the application of Article 231-2 or 243-2 shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding fifty million won. [This Article Newly Inserted on Oct. 15, 2014]
| Article 645 (Offense of Rehabilitation Bribery) |
| (1) | Where a custodial committee member, inspection commissioner, simplified inspection commissioner, rehabilitation commissioner, protective custodian, custodian (including an international bankruptcy custodian provided for in the provisions of Article 637), adviser, custodian, or representative of any protective custodian or rehabilitation commissioner gives or accepts, solicits or promises any bribe in connection with the performance of his or her duties, he or she shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won. The same shall apply to cases where the person falling under any of the following subparagraphs gives, accepts, solicits or promises any bribe in connection with the resolution of an assembly of related persons: <Amended on Dec. 30, 2014> |
| 1. | A rehabilitation creditor, rehabilitation secured creditor, shareholder, and an equity right holder; |
| 2. | A proxy commissioner or an agent of the person referred to in the provisions of subparagraph 1; |
| 3. | An officer or an employee of the person referred to in the provisions of subparagraph 1. |
| (2) | Where any custodian (including any international bankruptcy custodian provided for in the provisions of Article 637), protective custodian, inspection commissioner, simplified inspection commissioner or rehabilitation commissioner is a corporation, if any officer or any employee who performs the duties of the custodian, protective custodian, inspection commissioner, simplified inspection commissioner or the rehabilitation commissioner gives, accepts, solicits or promises any bribe in connection with the performance of such duties, such officer and such employee shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won. The same shall apply to cases where the custodian, protective custodian or inspection commissioner or simplified inspection commissioner is a corporation, any officer or employee thereof, the custodian, protective custodian, inspection commissioner or simplified inspection commissioner to give, accept, solicit or promise any bribe in connection with their duties. <Amended on Dec. 30, 2014> |
| (3) | In cases falling under paragraphs (1) and (2), any bribe that is given or accepted by any corporation or any third person with knowledge of such fact shall be confiscated. |
| Article 646 (Offense of Rehabilitation Bribery) |
Any person who promises, gives or expresses the intention of giving the bribe provided for in the provisions of Article 645 (1) or (2) shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won.
| Article 647 (Offense of Violating Prohibition on Management Participation) |
Any person who is appointed as a director or the chief executive officer of the debtor after the termination of rehabilitation procedures or the termination of simplified rehabilitation procedures in violation of the provisions of Article 284 shall be punished by imprisonment with labor for not more than three years or by a fine not exceeding 30 million won. <Amended by Dec. 30, 2014>
| Article 648 (Offense of Performing Act without Permission) |
| (1) | Where any custodian, trustee in bankruptcy (including any international bankruptcy custodian provided for in the provisions of Article 637) or any protective custodian performs an act the performance of which requires the court's permission, without obtaining such permission, the actor shall be punished by imprisonment with labor for not more than three years or by a fine not exceeding 30 million. |
| (2) | Where any custodian or any protective custodian makes a false report to the court or fails to make the accounting report provided for in the provisions of Article 84 (1) without justifiable grounds thereof, he or she shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding ten million won. |
| Article 649 (Offense of Refusing to Make Reports and Refusing Inspection) |
Any of the following persons shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding ten million won: <Amended on Oct. 15, 2014; Dec. 30, 2014>
| 1. | A custodian or trustee in bankruptcy who refuses, evades or impedes submitting materials provided for in the provisions of Article 22 (3) or submits false materials without justifiable grounds thereof; |
| 2. | A debtor who refuses, evades or impedes submitting materials provided for in the provisions of Article 34 (3) without justifiable grounds thereof; |
| 3. | A person who refuses, evades or impedes making the report provided for in the provisions of Article 79 (1) (including cases where Article 79 (1) applies mutatis mutandis in accordance with Article 88 and the latter part of Article 293-7 (1)) or who makes a false report without justifiable grounds thereof; |
| 4. | A debtor who refuses, evades, or impedes the inspection provided for in the provisions of Article 79 (1) (including cases where Article 79 (1) applies mutatis mutandis in accordance with Article 88 and the latter part of Article 293-7 (1)) without justifiable grounds thereof; |
| 4-2. | A person who refuses, evades or impedes the provision of information or the submission of materials under Article 231-2 (3) without justifiable grounds thereof, or provides false information or submits false materials; |
| 4-3. | A person who refuses, evades or impedes the provision of information or the submission of materials under Article 243-2 (3) without justifiable grounds thereof, or provides false information or submits false materials; |
| 5. | A debtor who refuses to comply with a request for a report, inspection or correction or makes a false report without justifiable grounds thereof. |
| Article 650 (Offense of Fraudulent Bankruptcy) |
| (1) | Where a debtor commits any of the following offenses, regardless of whether it is committed before or after the declaration of his or her bankruptcy, with the aim of pursuing his or her own or any other person's interests or causing damage to a creditor, and his or her bankruptcy is declared final and conclusive by the court, he or she shall be punished by imprisonment with labor for not more than ten years, or by a fine not exceeding 100 million won: <Amended on May 28, 2013> |
| 1. | Concealing or damaging any property belonging to the bankruptcy estate, or disposing of any such property in a manner detrimental to any of the creditors; |
| 2. | Falsely increasing encumbrance of the bankruptcy estate; |
| 3. | Failing to prepare commercial books as prescribed by the provisions of any Act, failing to make entry into the commercial books to the extent necessary to enable proper understanding of the current status of his or her property, entering false facts in the commercial book, or concealing or damaging such commercial books; |
| 4. | Forging, concealing, or damaging the books closed by a court official of Grade V, etc. under Article 481. |
| (2) | Where the trustee, administrator of trust property, legal representative of the trustee, manager of the trustee, or director of a corporate trustee commits any offense falling under any of the subparagraphs of paragraph (1), regardless of whether it is committed before or after the declaration of bankruptcy, with the aim of pursuing his or her or any other person's interests, or causing damage to creditors, and the bankruptcy regarding limited-liability trust property is declared final and conclusive, he or she shall be punished by imprisonment with labor for not more than ten years or by a fine not exceeding 100 million won. <Newly Inserted on May 28, 2013> |
| Article 651 (Offense of Negligent Bankruptcy) |
| (1) | Where a debtor commits any of the following offenses, regardless of whether it is committed before or after he or she is declared bankrupt, and his or her bankruptcy is declared final and conclusive by the court, he or she shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won: <Amended on May 28, 2013> |
| 1. | Purchasing goods on credit and then disposing of them on clearly disadvantageous terms and conditions, with the aim of delaying the declaration of his or her bankruptcy; |
| 2. | Offering any security or extinguishing any debt for the purpose of conferring special benefits to any particular creditor, despite being aware of the existence of facts leading to bankruptcy, which does not constitute the debtor’s obligation, or the manner and timing of which also do not constitute his or her obligation; |
| 3. | Failing to prepare commercial books as prescribed by the provisions of any Act, failing to make entry into the commercial books to the extent necessary to enable proper understanding, entering false facts in the commercial books, or concealing or damaging such commercial books; |
| 4. | Forging, concealing, or damaging any books closed by a court official of Grade V, etc. pursuant to the provisions of Article 481. |
| (2) | Where a trustee, administrator of trust property, legal representative of the trustee, manager of the trustee, director of a corporate trustee commits any offense falling under any of the subparagraphs of paragraph (1), regardless of whether it is committed before or after the declaration of bankruptcy, and bankruptcy regarding the limited-liability trust property is declared final, he or she shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won. <Newly Inserted on May 28, 2013> |
| Article 652 (Offense of Fraudulent Bankruptcy and Negligence Bankruptcy by Person in Certain Position) |
When any of the following persons conducts an offense provided for in the provisions of Articles 650 and 651 and the debtor's bankruptcy is declared final and conclusive, he or she shall be governed by the precedent under Articles 650 and 651. The same shall apply to the inheritor and his or her legal representative and manager in cases of bankruptcy regarding inherited estate: | 1. | The legal representative of a debtor; |
| 2. | The director of a corporate debtor; |
| 3. | The manager of a debtor. |
| Article 653 (Offense of Non-Compliance with Order for Arrest) |
Where a person who has been issued with the order for arrest under Articles 319, 320, 322, and 578-6, knowingly escapes with the aim of delaying the bankruptcy procedure or evading the execution of such arrest, he or she shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding 10 million won.?<Amended on May 28, 2013>
| Article 654 (Offense of Fraudulent Bankruptcy by Third Person) |
Where a person who is neither a debtor nor a person specified in any subparagraph of Article 652 commits an act specified in any subparagraph of Article 650 with intent to make a profit for himself or herself or for any other person or to inflict harm on creditors or falsely exercises a right as a bankruptcy creditor for a benefit of his or her own or any other person, irrespective of whether such act is committed before or after the bankruptcy is declared, and the bankruptcy of a debtor is declared final and conclusive, the person who commits such act shall be punished by imprisonment with labor for not more than 10 years or by a fine not exceeding 100 million won.
| Article 655 (Offense of Bankruptcy Bribery) |
| (1) | Where any trustee in bankruptcy (including any international bankruptcy custodian provided for in the provisions of Article 637) or any member of the audit committee gives, accepts, solicits, or promises any bribe in connection with his or her duties, he or she shall be punished by imprisonment with labor for not more than five years or by a fine not exceeding 50 million won. The same shall apply where any of the following persons gives, accepts, solicits, or promises any bribe in connection with the resolution of a meeting of creditors: |
| 1. | A bankruptcy creditor; |
| 2. | An agent of the bankruptcy creditor; |
| 3. | A director of the bankruptcy creditor. |
| (2) | In cases falling under paragraph (1), the bribe that is given or accepted by the offender or any third person being aware of the fact shall be confiscated. When the confiscation thereof is not possible, the value thereof shall be collected in lieu of such confiscation. |
| Article 656 (Offense of Bankruptcy Bribery) |
Anyone who promises or gives any bribe, or expresses an intention to give any bribe to any of the following persons shall be punished by imprisonment with labor for not more than three years or by a fine not exceeding 30 million won:
| 1. | A trustee in bankruptcy (including any international trustee in bankruptcy provided for in the provisions of Article 637); |
| 2. | A member of the audit committee; |
| 3. | A bankruptcy creditor; |
| 4. | An agent of the bankruptcy creditor; |
| 5. | A director of the bankruptcy creditor. |
| Article 657 (Offense of Using Results of Property Inquiry for Other Purposes) |
Any person who uses the results of the property inquiry provided for in the provisions of Article 29 (1) for any purpose other than that of inspecting the debtor's properties for rehabilitation procedures, bankruptcy procedures, or individual rehabilitation procedures shall be punished by imprisonment with labor for not more than two years or by a fine not exceeding 20 million won.
| Article 658 (Offense of Violation of Duty to Give Explanation) |
Where a person who has a duty to give explanation pursuant to the provisions of Articles 321 and 578-7 fails to give such explanation, or gives false explanation without any justifiable reason, he or she shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding ten million won.?<Amended on May 28, 2013>
| Article 659 (Overseas Offense) |
| (1) | The provisions of Articles 645 and 655 shall also apply to any person who commits an offense provided for in the corresponding provisions in any country other than the Republic of Korea. |
| Article 660 (Administrative Fines) |
| (1) | Where the head of any public institution, financial institution, or organization, etc. who receives any inquiry pursuant to the provisions of Article 29 (1) refuses to submit materials without justifiable grounds therefor or submits false materials, he or she shall be punished by an administrative fine not exceeding five million. |
| (2) | Where any of the following persons commits an act of violating any order given by the court pursuant to the provisions of Article 258 (1) or (2), he or she shall be punished by an administrative fine not exceeding five million won: |
| 1. | A debtor, director, or manager of any newly incorporated company; |
| 2. | A rehabilitation creditor, rehabilitation secured creditor, shareholder, equity right holder, and person who bears any obligations or furnishes any security for rehabilitation. |
| (3) | A person who commits an act of collection on an individual debtor who has the immunity provided for in the provisions of Article 251, 556 or 625 based on immune claims by means of compulsory execution, provisional seizure, or preliminary injunction, despite being aware of his or her immunity, shall be punished by an administrative fine not exceeding five million won. |
ADDENDA <Act No. 7428, Mar. 31, 2005>
Article 1 (Enforcement Date)
This Act shall enter into force beginning on the date on which one year lapses after its promulgation.
Article 2 (Repeal of Statutes)
A case of reorganization for which an application is filed for commencing
Article 4 (Transitional Measure concerning Penalty Provisions)
The application of the penalty provisions to any act that is performed before this Act enters into force shall be governed by the former provisions and when the commission of any individual offense across the time committed before and after this Act enters into force, such offense shall be deemed committed before this Act enters into force.
Article 5 Omitted.
Article 6 (Relationship to Other Statutes and Regulations)
ADDENDUM <Act No. 7892, Mar. 24, 2006>
This Act shall enter into force on April 1, 2006.
ADDENDA <Act No. 7894, Mar. 24, 2006>
| (1) | (Enforcement Date) This Act shall enter into force on the date of its promulgation. |
ADDENDA <Act No. 7895, Mar. 24, 2006>
| (1) | (Enforcement Date) This Act shall enter into force on the date of its promulgation. |
ADDENDA <Act No. 8138, Dec. 30, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2007. (Proviso Omitted.)
Articles 2 through 6 Omitted.
ADDENDA <Act No. 8635, Aug. 3, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force one year and six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 44 Omitted.
ADDENDA <Act No. 8814, Dec. 27, 2007>
| (1) | (Enforcement Date) This Act shall enter into force on the date of its promulgation. |
ADDENDA <Act No. 8829, Dec. 31, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2008.
Articles 2 through 12 Omitted.
ADDENDA <Act No. 8863, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
ADDENDA <Act No. 9804, Oct. 21, 2009>
| (1) | (Enforcement Date) This Act shall enter into force on the date of its promulgation. |
| (2) | (Transitional Measures) The previous provisions shall apply to the cases of the borrowing of funds performed by the custodian for the debtor's work and property after commencement of rehabilitation procedure prior to this Act enters into force, the borrowing of funds and procurement of materials performed by the debtor or preservation custodian with permission from the court before commencement of claim or rehabilitation procedure after an application is filed therefor, and other claims that arise due to activities inevitably required to continue the debtor's business. |
ADDENDA <Act No. 9924, Jan. 1, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2010.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 9935, Jan. 22, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 and 3 Omitted.
ADDENDA <Act No. 10219, Mar. 31, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2011.
Articles 2 through 12 Omitted.
ADDENDA <Act No. 10281, May 14, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 Omitted.
ADDENDA <Act No. 10303, May 17, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 10 Omitted.
ADDENDA <Act No. 10366, Jun. 10, 2010>
Article 1 (Enforcement Date)
This Act shall enter into force two years after the date of its promulgation.
Articles 2 through 4 Omitted.
ADDENDA <Act No. 10682, May 19, 2011>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 and 3 Omitted.
ADDENDA <Act No. 11828, May 28, 2013>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 (Applicability)
This Act shall apply beginning with a rehabilitation or bankruptcy cases filed for the first time after this Act enters into force.
ADDENDA <Act No. 12153, Jan. 1, 2014>
Articles 1 (Enforcement Date)
This Act shall apply on January 1, 2014. (Proviso omitted)
Articles 2 through 19 Omitted.
ADDENDA <Act No. 12591, May 20, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 through 4 Omitted.
ADDENDA <Act No. 12595, May 20, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Transitional Measures)
With respect to an application for commencement of rehabilitation procedures, petition for bankruptcy, or application for commencement of individual rehabilitation procedures which has been filed before this Act enters into force, the previous provisions shall apply.
ADDENDUM <Act No. 12783, Oct. 15, 2014>
This Act shall enter into force three months after the date of its promulgation.
ADDENDA <Act No. 12892, Dec. 30, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability concerning Public Notification of Rehabilitation Procedures and Holding of Explanatory Meeting for Interested Persons)
With respect to the public notification of the matters under the amended provisions of Article 51 (1) 5 and the holding of an explanatory meeting under the amended provisions of Article 98-2, this Act shall apply, beginning with the rehabilitation procedures commenced for the first time after this Act enters into force. Article 3 (Applicability concerning Wage Claimants)
The amended provisions of Article 415-2 shall apply, beginning with the claim for wage, disaster compensation, retirement allowance, etc. which arises from labor relations for the first time after this Act enters into force. Article 4 (Transitional Measures concerning Conduct and Discontinuation of Rehabilitation Procedures and Continuation and Public Notification of Distribution Procedures)
Notwithstanding the amended provisions of Article 50, Article 92, Article 98, Article 99, Article 182 (2), Article 193 (3), Article 220, Article 221, Article 223 (1), (4) and (6), Article 285, Article 286 (2) and the subparagraph 2 of Article 511, the previous provisions thereof shall apply to the conduct of rehabilitation procedures such as holding of the first assembly of related persons, the discontinuation of rehabilitation and the continuation and public notification of the distribution procedures, with respect to cases in which rehabilitation procedures is in progress at the time this Act enters into force. Article 5 Omitted.
ADDENDA <Act No. 14177, May 29, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation: Provided, That the amended provisions of Article 3 shall enter into force six months after the date of its promulgation. Article 2 (Applicability to Jurisdiction of Courts)
The amended provisions of Article 3 (4) shall apply to rehabilitation cases and bankruptcy cases filed after the amended provisions enter into force. Article 3 (Applicability to Matters to Be Determined Concurrently with Decision on Commencement of Rehabilitation Procedures, Claims Which Become Rehabilitation Claims, Prior Submission of Rehabilitation Proposals, Resolutions in Writing, and Authorization or Non-Authorization of Rehabilitation Plans When They Have Undergone Written Resolutions)
The amended provisions of Articles 50 (1) 1, 2 and 4, 179 (1) 8-2, 223 (1), (3), (4), (5) and (8), 240 (2), and 242-2 shall apply starting from rehabilitation cases and simplified rehabilitation cases filed after this Act enters into force. Article 4 (Transitional Measures concerning Incompetents)
Persons under adult guardianship or limited guardianship prescribed in the amended provisions of Article 16 (4) 1 shall be considered to include persons for whom the declaration of incompetency or quasi-incompetency remains effective pursuant to Article 2 of Addenda of the Civil Act (Act No. 10429).
ADDENDA <Act No. 14472, Dec. 27, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force on March 1, 2017.
Article 2 (Transitional Measures concerning District Courts)
Every district court or principal district court having jurisdiction over an area in which no rehabilitation court is established at the time this Act enters into force shall be considered as a rehabilitation court under this Act, and the head of such district court, as the head of a rehabilitation court under this Act until a rehabilitation court is established.
ADDENDA <Act No. 14476, Dec. 27, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 5 Omitted.
ADDENDA <Act No. 15158, Dec. 12, 2017>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation: Provided, That the amended provisions of Article 611 (5) shall enter into force six months after the date of promulgation. Article 2 (Applicability)
| (1) | The amended provisions of Article 611 (5) shall apply, beginning with an individual rehabilitation case filed for the first time after the amended provisions enter into force: Provide, That where a debtor for whom a decision to authorize the repayment plan was made before the amended provisions enter into force has been implementing the repayment plan for at least three years according to the draft repayment plan as of the date the amended provisions enter into force, the court may decide to grant immunity to him/her, at the request of the party or ex officio, after hearing the opinions of interested persons. |
| (2) | The amended provisions of Article 617-2 shall also apply to individual rehabilitation cases filed before this Act enters into force. |
ADDENDA <Act No. 16568, Aug. 27, 2019>
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation.
Articles 2 through 16 Omitted.
ADDENDA <Act No. 16652, Nov. 26, 2019>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 and 3 Omitted.
ADDENDA <Act No. 16920, Feb. 4, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Applicability to Methods of Reimbursement in Cases of Insufficient Bankruptcy Estate)
The amended provision of Article 477 (3) shall apply, beginning with a bankruptcy estate comprised by declaration of bankruptcy case decided after this Act enters into force.
ADDENDUM <Act No. 17088, Mar. 24, 2020>
This Act shall enter into force on the date of its promulgation.
ADDENDA <Act No. 17364, Jun. 9, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Applicability)
The amended provisions of subparagraph 1 of Article 579 shall begin to apply to cases where decisions are made on whether to commence individual rehabilitation procedures under Article 596 (1) after this Act enters into force.
ADDENDA <Act No. 17769, Dec. 29, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2021. (Proviso Omitted.)
Articles 2 through 17 Omitted.