Chuncheon Office Assistance Case | Daeryun Assists a Corporate Client and Achieves a ‘Declaration of Bankruptcy’

The client operated a company that assembled and installed ship parts and steel structures.

Having previously worked at a related company, the client thought it would be feasible to run the business directly and, after resigning, went into business personally.

However, once the business actually began, the client learned that the companies receiving deliveries avoided new suppliers out of stability concerns.

In addition, due to COVID-19, the company experienced a sharp decline in sales and lost the ability to repay its debts to business partners and financial institutions.

No longer able to raise funds and with all of its workers having resigned, the client resolved to file a bankruptcy petition.

🔗Corporate bankruptcy refers to the process in which a company (corporation) whose operations have become difficult due to excessive debt and that has reached a state of insolvency, after a declaration of bankruptcy through bankruptcy proceedings, determines creditors' rights through an investigation of claims under the court's supervision, then liquidates the company's (corporation's) assets and distributes the proceeds according to the priority of rights and the amount of the claims.

■ Eligibility to file for corporate bankruptcy (company bankruptcy)
- A company in a state of insolvency, such as suspension of payments or dishonor of a current account, due to excessive debt

- A company at high risk of insolvency because its liabilities exceed its assets

- A company at risk of having its rehabilitation proceedings discontinued while corporate rehabilitation proceedings are underway

- A company unable to carry out its rehabilitation plan even though the plan has been approved

- A company that has become unable to fully repay its debts during liquidation

■ Corporate bankruptcy (company bankruptcy) procedure

The price of raw materials for steel products rose rapidly, and because the client's company was a newly established business, it was difficult to secure price competitiveness.

It was argued that, in response, the client tried to operate the business by reducing fixed costs, such as by adjusting the employees' working days, but this only resulted in a decline in the employees' productivity, and profits gradually decreased.

The existing technical staff began to leave the company as their salaries decreased due to the reduction in working days, and, given the nature of the manufacturing industry, the company could not continue to hire employees who demanded high wages.

It was therefore emphasized that production naturally remained low, and that while overall sales were sluggish, the burden of raw material costs and labor costs increased.

It was argued that the client company had reached financial collapse and could not continue the business, as it had lost the ability to repay not only the employees' wages and severance pay but also its debts to business partners and financial institutions.

If you intend to file a corporate bankruptcy petition, you must present clear materials showing that the eligibility requirements for bankruptcy are met.

In addition, because there is even a process of examining the representative of the company in bankruptcy, it is advisable to receive an attorney's assistance and have them attend with you.

If you need help in this regard, please request a 🔗legal consultation from Daeryun Law Firm (LLC).