CONTENTS
- 1. Corporation A, Which Came to the Corporate Rehabilitation and Bankruptcy Attorney
- - The Difference Between Corporate Rehabilitation and Bankruptcy
- 2. Corporate Simplified Rehabilitation Law Firm, Providing Assistance to Obtain Approval of the Rehabilitation Plan
- - Advance Organization Before the Rehabilitation Application
- - Preparing and Submitting the Rehabilitation Application
- - Assistance with Preparing the Rehabilitation Plan
- 3. Corporate Rehabilitation and Bankruptcy Assistance Outcome, Approval of Corporate Simplified Rehabilitation
1. Corporation A, Which Came to the Corporate Rehabilitation and Bankruptcy Attorney
This is the story of Corporation A, which came to the corporate simplified rehabilitation specialist attorney.
Corporation A (hereinafter the client), which operates an electronic component manufacturing business, was a small and medium-sized enterprise with more than 15 years of operating history that mainly supplied communications equipment and semiconductor module manufacturers.
As the collapse of the global supply chain due to COVID-19 coincided with the suspension of deliveries by its main clients, it began to experience a rapid liquidity crisis from late 2023.
In particular, at the time when the financial institution loan procured for facility investment reached maturity, the recovery of trade receivables was delayed, and as a result the payment of wages and the settlement of supply prices were postponed one after another, and the client even received notices of contract termination from some clients.
To confirm the possibility of corporate rehabilitation, the client sought out a corporate rehabilitation and bankruptcy specialist attorney and visited Daeryun LLC.
A Daeryun attorney with experience in numerous corporate rehabilitation and bankruptcy cases immediately undertook the consultation and reviewed the possibility of corporate rehabilitation through the simplified rehabilitation procedure.
The Difference Between Corporate Rehabilitation and Bankruptcy
When a company faces a serious financial crisis, two of the principal legal mechanisms available to it are 🔗corporate rehabilitation and 🔗corporate bankruptcy.
Both procedures fall under the insolvency law framework, but their purposes and procedures differ significantly.
▶What is corporate rehabilitation?
Rehabilitation proceedings are a system that helps a company in business difficulty get back on its feet without going bankrupt.
The court adjusts the legal relationships with interested parties such as creditors and shareholders, reducing or rescheduling the debt so that the company may continue its operations.
An important point is that the main purpose of rehabilitation is to continue the business by restructuring the debt.
Once rehabilitation proceedings commence, compulsory execution by individual creditors is suspended, and a custodian appointed by the court or the existing representative continues to operate the company under the court's supervision.
▶What is corporate bankruptcy?
Corporate bankruptcy is a procedure declared by the court when a company effectively can no longer continue its business and cannot repay all of its debts.
Its purpose is to dispose of and liquidate all of the corporation's assets into cash, distribute them fairly among creditors, and wind up the company.
It is chosen when continuing the business is difficult, and a company with no prospect of rehabilitation is wound up through liquidation.
▶Rehabilitation and bankruptcy, how do they differ?
Category | Corporate rehabilitation | Corporate bankruptcy |
Purpose | Debt restructuring + continuation of business | Liquidation of assets + winding up of the corporation |
Applicable to | Companies with a temporary liquidity shortage but a prospect of rehabilitation | Insolvent companies unable to repay all of their debts |
After commencement of proceedings | Operations continue under the court's supervision | Disposal and liquidation of the corporation's assets |
Protection of creditors | Repayment under the rehabilitation plan | Fair distribution through a bankruptcy trustee |
Role of the representative | May perform duties under the court's supervision | Representative's authority is extinguished, and the corporation enters dissolution proceedings |
Compulsory execution | Protected by a suspension order or comprehensive prohibition order | Creditor execution is suspended and transferred to the bankruptcy estate |
▶Which companies are eligible for corporate rehabilitation?
-Where there are sales but a short-term shortage of funds
-Where there are business partners and assets and a prospect of recovery
-Where the business itself is sound but the debt has temporarily increased
In such cases, rather than bankruptcy, corporate rehabilitation, and in particular simplified corporate rehabilitation, which involves a simpler procedure, may be actively considered.
2. Corporate Simplified Rehabilitation Law Firm, Providing Assistance to Obtain Approval of the Rehabilitation Plan
The corporate simplified rehabilitation law firm established a step-by-step strategy for the decision approving the rehabilitation of the client company.
Advance Organization Before the Rehabilitation Application
The attorney specializing in corporate simplified rehabilitation first comprehensively analyzed the corporation's management status, asset and liability structure, and profit-and-loss trends.
The attorney then precisely determined the list of creditors and the amounts of the claims to organize the creditor list, and also examined whether there were any disputes with creditors.
In particular, because a considerable portion of the liabilities consisted of debts such as trade accounts payable to client businesses, the attorney examined in detail the priority of each debt, the existence of security interests, and other matters to prepare the basic materials for drawing up the rehabilitation plan.
Preparing and Submitting the Rehabilitation Application
The rehabilitation and bankruptcy attorney submitted the application to commence simplified corporate rehabilitation proceedings, thoroughly preparing the company's financial statements and recent cash flow statement, business status, and major contractual relationships.
Assistance with Preparing the Rehabilitation Plan
The most crucial stage is the preparation of the rehabilitation plan.
The Daeryun rehabilitation and bankruptcy attorney made the adjustment of financial-institution debt, which accounts for the largest portion of the rehabilitation procedure, the top priority and prepared a plan that included a partial reduction of the debt principal and an installment repayment plan.
The attorney also attached a conditional agreement to maintain continuous supply contracts with business partners, demonstrating that stable business operations would be possible even after rehabilitation.
3. Corporate Rehabilitation and Bankruptcy Assistance Outcome, Approval of Corporate Simplified Rehabilitation
As a result of the assistance of the corporate rehabilitation and bankruptcy law firm, the client company was able to obtain a court decision to commence simplified corporate rehabilitation proceedings.
Many companies mistakenly believe that bankruptcy is the only option when faced with a crisis of insolvency.
However, as with the client in the above case, if business viability and the possibility of rehabilitation exist, a company can be legally protected and make a fresh leap forward through corporate rehabilitation proceedings.
Daeryun LLC comprehensively analyzes a company's financial structure, creditor relations, and business continuity to establish a tailored rehabilitation strategy.
If you need a consultation regarding corporate rehabilitation and bankruptcy, please come to Daeryun LLC, where urgent legal consultation is available 24 hours.
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