[IB Tomato] (IB&People) Kim Won-sang, attorney at Daeryun Law Firm
Bankruptcy is a criminal risk, and rehabilitation is about securing sales. Expanding the utility of rehabilitation with the 'Comprehensive Consideration Act' and 'Pre-ARS' Bankruptcy procedures that deal with the bankruptcy and rehabilitation of corporations are an unfamiliar and difficult area to approach. Since it is a matter that depends on the survival of the company, the actual benefits must be comprehensively considered, from the debtor's debt settlement to the creditor's losses. Practical experts advise that a quick decision is needed if a company is judged to have entered the bankruptcy stage. This is because the longer the situation is dragged out, the lower the realistic possibility of revival, and the individual representatives may also be exposed to legal risks. When a company has a certain amount of cash, it can handle issues such as tax issues, worker wages, and severance pay. This year, as institutional changes related to bankruptcy procedures continued, the scope of use of the rehabilitation system also expanded.Advised Kim Won-sang, head of Daeryun Law Firm's Rehabilitation and Bankruptcy Center, in the field of rehabilitation and bankruptcy., procedure, Learn about systems, etc.. The following is a Q&A with Attorney Kim.. -Please introduce your current work and field at Daeryun.. △Mainly responsible for corporate rehabilitation and bankruptcy.. The field may be unfamiliar, but broadly it refers to restructuring., Narrowly, it refers to corporate rehabilitation and bankruptcy as stipulated in the Debtor Rehabilitation Act.. -I am curious about the characteristics of advice in this field.. What should I pay special attention to?. △Basically, bankruptcy proceedings are a matter of how to pay off the debtor's debts.. Bankruptcy and rehabilitation are similar but different paths., Bankruptcy is the process of destroying a corporation, and rehabilitation is the process of reviving it.. There are two ways to dissolve a corporation: dissolution and liquidation and bankruptcy.. When a corporation's assets are greater than its liabilities, shareholders also receive benefits through dissolution and liquidation procedures.. Conversely, when liabilities are greater than assets, all creditors are paid and the corporation is dissolved.. Corporate rehabilitation cancels some of the debt and reimburses the remaining debt. 10It is to save the corporation by paying it back annually.. From a creditor's perspective, there may be a negative perception of rehabilitation and bankruptcy because it has the effect of extinguishing his or her claims.. In addition, there is a possibility of fraud or a criminal offense, so it is important to proceed with the procedure while establishing a good relationship with the creditor.. -What is the role of a law firm in corporate bankruptcy?. Is there a proper bankruptcy procedure?. △The role is to represent the debtor.. File an application with the court and proceed with the litigation process according to the procedure.. A company with more liabilities than assets can go bankrupt at any time.. Since a company wishing to file for bankruptcy has no choice but to write off its debts to business partners from which it was purchased, the debtor is at an advantage but the creditor is at a disadvantage.. During this process, there is a risk of being sued for criminal fraud, etc., so it is best to resolve the matter well in advance and establish a good relationship before entering into the process.. The most problematic thing when entering bankruptcy proceedings is the money that the representative took away from the company.. In Korea 1Since there are many independent shareholders, the company often identifies its shareholders as shareholders and often spends company money as it pleases.. A company going through bankruptcy proceedings is obviously going through a difficult time, so this part of the process becomes a problem.. It is also important to ensure that all creditors are paid equally.. We must be wary of the possibility of biased repayment.. -What is the nature of rehabilitation advisory?. If there is a key factor that separates success and failure. △The accounting aspect plays a big role in revival.. Sales must be good, so that surplus profits remain after deducting costs, which can be used to repay part of the debt.. For example, if the debt 100If it's 100 million won 30%Just pay it back 70%will be converted into equity capital.. 30Hundreds of millions of won 10Because it is repaid annually, the average 1in year 3It's hundreds of millions of won each.. Sales are important because operating profit, excluding various costs, must be greater than that amount.. However, since companies that enter the rehabilitation process come from a state of declining sales, it is important to determine how to expand the number of customers in the future to sustain the company.. If sales are down, you should look into whether the company can be a target for acquisition based on its strengths in intellectual property rights and patents.. Even within the rehabilitation process M&Ais possible. -How about looking at the recent trends in corporate rehabilitation and bankruptcy?. △past 2023since 2024By the second half of 2018, the number of corporate rehabilitation and bankruptcy cases had increased significantly.. Most people predicted that the future economy would be bad and made preemptive preparations.. From the most recent first half of this year, it decreased slightly compared to the end of last year.. Before that, it was difficult to extend the loan and the conditions were strict., There seems to be an expectation that these issues will be alleviated.. It is expected that this level will be maintained until the first half of next year.. -late last year ‘Comprehensive Consideration Act’was introduced. Impact on the industry and prospects for future changes. △When going through rehabilitation, both security rights and rehabilitation claims must be considered.. The security right is 100% have to pay back. On the other hand, bonds are about 30% Pay off the remaining amount 70%is an equity-to-equity conversion.. Previously, this was calculated mechanically using the relative equity method.. However, in Korea 1Since there are many personal or family companies, the CEO's share of stock is often reduced, falling below the majority.. In theory, creditors could dismiss the employee, which could lead to loss of management rights.. The Comprehensive Consideration Act allows the person running the company to secure a majority stake.. Representatives who have entered the rehabilitation process can also use the rehabilitation process effectively because they can avoid the risk of loss of management rights.. There are an increasing number of cases of establishing rehabilitation plans based on this, centering around the Seoul Rehabilitation Court.. Another rehabilitation court, As local court bankruptcy departments spread and become established, more companies will be able to take advantage of the rehabilitation process.. -Are there any institutional issues you are specifically looking into?. What is the issue or point of observation?. △At the Seoul Rehabilitation Court Pre-ARS(Autonomous Restructuring Support) The system was recently introduced. ARSis an adjustment procedure., Rather than having a company go through rehabilitation until the end of the process and get the plan approved, it is better to reach a smooth agreement with creditors and shorten the period.. With the consent of all creditors, Submit the plan in advance. When rehabilitation procedures begin, usually 7months8It takes months., In this case 2months3Can be finished in months. Pre-ARSEven without going through rehabilitation procedures, a plan can be created and approved by creditors through the rehabilitation court's mediation process so that it can be quickly approved.. It protects debtors by utilizing the adjustment process without presuming a rehabilitation process.. If a rehabilitation procedure is initiated, all creditors will know about it and there may be a sort of stigmatization effect.. This means that coordination can become ineffective.. Pre-ARSreduces the stigma effect. Debt management is not easy, so if you decide to reduce it in advance and organize it with creditors,, It can be much more advantageous than the adjustment process that takes place during the rehabilitation process.. This is a groundbreaking system, but how to implement it in practice seems to be a separate issue.. I think it can be recommended if you are considering rehabilitation due to sudden financial risk.. -What are your future plans for Daeryun?. △We would like to operate the part in the broader sense of restructuring rather than simply in the category of rehabilitation or bankruptcy.. Because it is a difficult company M&AYou may think it doesn't work, but there are places where it works.. It is not the extent to which the debtor cancels the debt. M&A The goal is to activate even the means.. Reporter Hwang Yang-taek (hyt@etomato.com) [View full article]
[IB Tomato] (IB&People) Kim Won-sang, attorney at Daeryun Law Firm (Go here)