Guide to preventing forfeiture of bonds during rehabilitation procedures according to experts

When it comes to corporate management, news of a business partner's rehabilitation or bankruptcy filing is not just bad news, it is a fatal risk that can lead to a series of bankruptcies for the company. As a lawyer, I am currently helping numerous companies respond to bankruptcy crises, but I often remember the unfortunate case of a small business going bankrupt with surplus that I encountered 10 years ago when I was working as a corporate bankruptcy trustee in Uijeongbu as a painful lesson.

Even though the company was aware that its business partner had entered a corporate rehabilitation process, it failed to report its claims on time, and ultimately had to face the disastrous result of being kicked out of the market without being able to recover a single penny. It is a matter of deep regret that the worst phase of serial bankruptcies could have been avoided if the bond report had been completed within the golden time and some of the funds had been recovered within the rehabilitation process.

The first thing creditors need to keep an eye on in order to protect their rights in corporate rehabilitation procedures is the short 'claim reporting period' of about two weeks to one month, which the court designates along with the commencement decision. If the court approves a rehabilitation plan without reporting legitimate claims within this period, the claims will permanently lose effect in accordance with Article 251 of the Debtor Rehabilitation Act.

Of course, there is an exception (Article 151 of the same Act) where the claim is considered to have been reported on time if it is reflected in the list of creditors submitted by the court-appointed administrator. However, in practice, only part of the amount of the claim is often recorded or omitted altogether, and unless the creditor directly comes forward and reports the difference, there is a fatal limitation that the right will inevitably be dissolved. Even if a bond report is completed in a timely manner, it can only be reflected in the rehabilitation plan after passing a strict bond approval/denial process, so strict compliance with the deadline is a prerequisite for all responses.

Of course, in order to relieve creditors who missed the reporting period, a supplementary reporting system has been established in the future under Article 152 of the Debtor Rehabilitation Act, etc., but recovering rights through this is by no means easy. In principle, even such future supplementary reports are restricted after the 'relevant meeting for the hearing of the rehabilitation plan' is over.

However, through the Supreme Court precedent (2011G256, etc.), the legal principle was established that "if the administrator knew or could have easily known the existence of the rehabilitation claim but did not enter it in the list of rehabilitation creditors, the administrator will not be forfeited as an exception and a supplementary report can be filed later within one month from the date of becoming aware of the rehabilitation procedure," thereby broadening the scope of relief. There is also a precedent (2006Da77197) that states that relief can be obtained through a compliance action even after the rehabilitation procedure is completed.

However, the essential risk that companies must face here is that the burden of proof to prove the manager's 'intention or gross negligence (that he knew or could have easily known)' lies entirely with the creditor. It is an area of ​​judicial uncertainty that is extremely difficult in practice for creditors who have difficulty accessing internal information to explain it one by one with objective legal evidence.

In the end, in the face of a business partner's bankruptcy risk, 'vague wait-and-see' or 'arbitrary judgments based on Internet information' are prohibited, and preemptive and thorough legal response within Golden Time is the only solution. In particular, in order to overcome the latest practical trends of the competent court and the threshold of strict bond investigation procedures, it is necessary to avoid an after-the-fact response and design a systematic defense logic from the beginning of the case.

In the face of a major crisis where the survival of a company is at stake, the most reliable response would be to appoint a rehabilitation lawyer who is familiar with the relevant local practice.

Help: Attorney Seongmoon Choi of Daeryun Law Firm

[View full article]
Expert's guide to preventing bond forfeiture during rehabilitation procedures (link)