ACT ON STRUCTURAL IMPROVEMENT OF AGRICULTURAL COOPERATIVES

Article 1(Purpose) #

The purpose of this Act is to prescribe matters regarding structural improvement of cooperatives established under the Agricultural Cooperatives Act, such as mergers, disposal of non-performing assets, etc., to protect their members and depositors and to prevent insolvency, thereby contributing to the sound development of cooperatives.

[This Article Wholly Amended on Mar. 29, 2011]

Article 2(Definitions) #

The terms used in this Act are defined as follows: <Amended on Mar. 23, 2013; Mar. 11, 2014; May 26, 2020>

1. "Cooperative" means a cooperative established under the Agricultural Cooperatives Act (hereinafter referred to as the "Agri-Coop Act"), which pays insurance premiums to the Fund under subparagraph 11;

2. "NACF" means the National Agricultural Cooperatives Federation established under the Agri-Coop Act;

3. "Insolvent cooperative" means any of the following:

a. A cooperative determined by the Minister of Agriculture, Food and Rural Affairs, following deliberation by the fund management committee, as a cooperative the normal management of which is clearly unlikely due to its liabilities exceeding its assets, a large scale financial accident, or non-performing loans, based on the findings from an actual examination of its management status; in such cases, liabilities and assets shall be assessed and calculated in accordance with the standards prescribed by the Minister of Agriculture, Food and Rural Affairs;

b. A cooperative whose payment of claims such as deposits, etc. under subparagraph 8 or repayment of loans from the NACF is suspended;

c. A cooperative determined by the Minister of Agriculture, Food and Rural Affairs, following deliberation by the fund management committee, as a cooperative incapable of paying claims such as deposits, etc. or repaying loans without financial support or borrowing from the NACF;

4. "Prospective insolvent cooperative" means a cooperative determined by the Minister of Agriculture, Food and Rural Affairs, following deliberation by the fund management committee, as a cooperative highly likely to become insolvent due to its poor financial structure;

5. "Business" means the business prescribed in Articles 57, 106, and 111 of the Agri-Coop Act and Article 14 of the Addenda to the Agricultural Cooperatives Act (Act No. 6018);

6. "Deposits, etc." means any of the following; provided, those received from the Government and other persons prescribed by Presidential Decree may be excluded herefrom:

a. Deposits and installment savings received by a cooperative through its credit business;

b. Deleted; <Mar. 31, 2011>

c. Money deposited in a cooperative by its customers in connection with the trading of securities and other transactions under Article 3(2) of the Financial Investment Services and Capital Markets Act;

7. "Depositors, etc." means persons who hold claims such as deposits, etc. under subparagraph 8 against a cooperative;

8. "Claims such as deposits, etc." means any of the following:

a. Principal and interest of deposits, etc. and other contractual monetary claims that depositors, etc. have against a cooperative;

b. Deleted; <Mar. 31, 2011>

9. "Insurance contingency" means any of the following:

a. Suspension of payment of claims such as deposits, etc.;

b. Revocation of authorization for the establishment of a cooperative, authorization for dissolution, or declaration of bankruptcy;

10. "Financial support" means that a management institution provides the following support to an insolvent cooperative or a prospective insolvent cooperative to help improve its financial structure at the expense of the Fund:

a. Contribution or purchase of assets;

b. Guarantee for or assumption of debts;

c. Loan of funds;

11. "Fund" means the Mutual Financial Depositor Protection Fund established and operated by the NACF under Article 11;

12. "Management institution" means the NACF that manages the Fund under Article 14;

13. "Fund management committee" means the fund management committee established in the management institution for deliberation and resolution on matters regarding the operation of the Fund under Article 15.

[This Article Wholly Amended on Mar. 29, 2011]

Article 3(Responsibilities of NACF) #

(1) The NACF shall ensure the soundness and efficiency of management by enhancing capital adequacy, maintaining appropriate liquidity, and taking other necessary measures.

(2) The NACF shall develop and supplement systems to prevent insolvency of cooperatives.

(3) In order to prevent insolvency of cooperatives, the NACF may request an insolvent cooperative or a cooperative that has yet to become insolvent but is highly likely to do so or is exposed to an increasing management risk (hereinafter referred to as "insolvent cooperative, etc.") to submit data related to the status of its business and property or may request it to take corrective measures after conducting an actual examination of its management status and obtaining approval from the Minister of Agriculture, Food and Rural Affairs. <Amended on Mar. 23, 2013; Mar. 11, 2014; Mar. 11, 2014; May 26, 2020>

(4) The Minister of Agriculture, Food and Rural Affairs shall determine and publicly notify, in advance, the standards for cooperatives subject to a request for correction under paragraph (3) and the details of the request for correction. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

[Title Amended on Mar. 11, 2014]

Article 4(Timely corrective measures) #

(1) The Minister of Agriculture, Food and Rural Affairs shall issue a recommendation, request, or order for managerial improvement as specified below against an insolvent cooperative, etc. or its executive officers or shall order that an action plan therefor be submitted: <Amended on Mar. 31, 2011; Mar. 23, 2013>

1. A caution or warning for the cooperative, and a caution, warning, reprimand, or wage reduction for its executive officers and employees;

2. Reduction of investment, increase of equity capital, disposal of assets held, or downsizing of stores and organizations;

3. Prohibition on the acquisition of risk assets or restriction on the receipt of deposits bearing abnormally high interest rates;

4. Suspension of the duties of an executive officer or appointment of an administrator acting on his or her behalf;

5. A full or partial business suspension (hereinafter referred to as "business suspension");

6. Merger;

7. Full or partial transfer of business (hereinafter referred to as "business transfer") or transfer of contracts related to the credit business, such as deposits and loans (hereinafter referred to as "contract transfer");

8. Other measures equivalent to those prescribed in subparagraphs 1 through 7, which are deemed necessary to improve the financial soundness of the cooperative.

(2) The Minister of Agriculture, Food and Rural Affairs shall determine and publicly notify, in advance, the standards and details necessary for taking the measures listed in paragraph (1) (hereinafter referred to as "timely corrective measures"). <Amended on Mar. 23, 2013>

(3) Where it is deemed that a cooperative that temporarily fails to meet the standards referred to in paragraph (2) is capable of satisfying such standards in a short period of time or that grounds equivalent thereto exist, the Minister of Agriculture, Food and Rural Affairs may defer the timely corrective measures for a specified period of time. <Amended on Mar. 23, 2013>

(4) In determining the standards under paragraph (2), the following measures likely to cause serious property loss to the cooperative or its members shall be taken only where the cooperative is deemed to be highly likely to undermine a sound order in credit transactions or the rights and interests of depositors, etc. given that the cooperative is insolvent and its financial status falls far short of the standards under that paragraph:

1. An order for full business suspension;

2. An order for full business transfer;

3. An order for full contract transfer;

4. Other measures equivalent to those falling under subparagraphs 1 through 3.

(5) A resolution of a cooperative on a merger under paragraph (1)6 shall require a vote of a majority of its members and the concurring vote of a majority of the members present under Article 41(2)4 of the Agri-Coop Act (including cases applied mutatis mutandis under Articles 107 and 112 of that Act). The same shall also apply where a cooperative merging with an insolvent cooperative, etc. adopts a resolution on a merger.

(6) Paragraph (5) shall apply mutatis mutandis to a cooperative that adopts a resolution on business transfer or contract transfer under paragraph (1)7 and to a cooperative that intends to acquire a business or take over a contract. In cases of cooperatives with representatives, "members of the cooperative" shall be construed as "representatives" and "voting members" as "voting representatives," respectively.

(7) Where a cooperative intends to obtain a resolution at a general meeting or a meeting of representatives or hold members' vote in connection with a merger, business transfer, or contract transfer under paragraphs (5) and (6), the management institution shall pre-notify the members or representatives of the cooperative of matters relating to a resolution or voting, such as the degree of insolvency of the cooperative and measures related to merger, business transfer or contract transfer.

(8) Notwithstanding Article 37(2) of the Agri-Coop Act, a cooperative that intends to acquire a business or transfer a contract under paragraph (6) may notify the convocation of a general meeting by not later than 3 days beforehand.

[This Article Wholly Amended on Mar. 29, 2011]

Article 5(Support for implementation of timely corrective measures) #

(1) Where the Minister of Agriculture, Food and Rural Affairs orders a merger, business transfer, or contract transfer under Article 4(1), he or she may designate another cooperative and recommend that it acquire the cooperative subject to such order or acquire its business or contract. <Amended on Mar. 23, 2013>

(2) The management institution may present, in advance, the amount, conditions, etc. of financial support to a cooperative that has received a recommendation for a merger or for business or contract acquisition under paragraph (1) on the premise of the implementation thereof.

[This Article Wholly Amended on Mar. 29, 2011]

Article 6(Administrative disposition) #

(1) Where a cooperative violates or fails to comply with a request or an order under Article 4(1), the Minister of Agriculture, Food and Rural Affairs may order the suspension of performance of duties of its executive officer after hearing the opinions of the fund management committee and may appoint an administrator to act on his or her behalf or recommend that the executive officer be dismissed by the general meeting (in the case of an executive officer elected by the board of representatives or the head of the cooperative elected by the board of directors, referring to the board of representatives). In such cases, notwithstanding Article 54(2) of the Agri-Coop Act (including cases applied mutatis mutandis under Articles 107 and 112 of that Act), a resolution shall be passed with the attendance of a majority of its members or representatives and the affirmative vote of a majority of those present. <Amended on Mar. 23, 2013>

(2) Where an insolvent cooperative falls under any of the following cases, the Minister of Agriculture, Food and Rural Affairs may take necessary dispositions, such as a decision for contract transfer, business suspension for a specified period of up to 6 months, revocation of authorization for establishment, etc., against the insolvent cooperative, after hearing the opinions of the fund management committee; provided, in cases falling under subparagraph 1, the Minister of Agriculture, Food and Rural Affairs shall give the insolvent cooperative an opportunity to make a vindication prior to such dispositions, as prescribed by Presidential Decree, if the grounds for non-compliance with the order are based on the resolution of the general meeting or the board of representatives' meeting under Article 4(5) and (6) or the results of voting by its members: <Amended on Mar. 23, 2013>

1. Where the cooperative fails to comply with, or becomes unable to comply with, an order issued under Article 4(1);

2. Where it is deemed impracticable for the cooperative to comply with an order issued under Article 4(1) given that its liabilities significantly exceed its assets;

3. Where it is deemed obvious that the cooperative is likely to undermine the rights and interests of depositors, etc. or credit transaction order because a sharp deterioration in its financial conditions makes it difficult to pay deposits or other claims or repay borrowings.

(3) Where the Minister of Agriculture, Food and Rural Affairs intends to revoke authorization for establishment under paragraph (2), he or she shall hold a hearing. <Amended on Mar. 23, 2013>

(4) Where the Minister of Agriculture, Food and Rural Affairs makes a decision for contract transfer under paragraph (2), he or she shall determine the scope and terms of contracts to be transferred and the cooperative to which contracts are transferred (hereinafter referred to as "transferee- cooperative") within the necessary extent and obtain prior consent thereto. <Amended on Mar. 23, 2013>

(5) The Minister of Agriculture, Food and Rural Affairs shall appoint an administrator under paragraph (1) for a cooperative whose contracts are to be transferred as determined under paragraph (2). <Amended on Mar. 23, 2013>

(6) Article 4(5) shall apply mutatis mutandis where a transferee-cooperative intends to consent to matters regarding contract transfer. In the case of a cooperative with representatives, "members of a cooperative" shall be construed as "representatives".

(7) Notwithstanding Article 4(6), the Agri-Coop Act and the articles of incorporation of the relevant insolvent cooperative, a decision for contract transfer under paragraph (2) shall not require a resolution of the general meeting (referring to the representatives' meeting in the case of a cooperative operating a representatives' meeting).

[This Article Wholly Amended on Mar. 29, 2011]

Article 6-2(Notification and registration of administrative disposition) #

When an administrative disposition commences under Article 6, the Minister of Agriculture, Food and Rural Affairs shall, without delay, notify the district court having jurisdiction over the location of the office of the relevant cooperative of the purport thereof, and entrust the registry office having jurisdiction over the location of its office with the registration thereof. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 7(Effect of decision for contract transfer) #

(1) Where a decision for contract transfer is made under Article 6(2), the rights and obligations of an insolvent cooperative under a contract related to its credit business, such as deposits and loans, included in the details of such decision, shall be succeeded by the transferee-cooperative at the time such decision is made. <Amended on Mar. 31, 2011>

(2) Where a decision for contract transfer is made under Article 6(2), the insolvent cooperative and the transferee-cooperative shall jointly make a public announcement of the gist of the decision and such contract transfer in two or more daily newspapers without delay.

(3) Where a public announcement is made under paragraph (2), the legal relationship between the creditors, debtors, guarantors in rem, other interested persons (hereinafter referred to as "creditors, etc.") and the relevant insolvent cooperative in connection with such contract transfer shall be succeeded by the transferee-cooperative in their entirety. In such cases, the creditors, etc. may set up against the transferee-cooperative on the grounds that have arisen between the creditors, etc. and the relevant insolvent cooperative prior to the public announcement under paragraph (2).

(4) A public announcement under paragraph (2) shall be deemed to satisfy the requirements for setting up a defense against the assignment of nominative claims under Article 450 of the Civil Act. In such cases, the creditors, etc. may set up against the transferee-cooperative on the grounds that have arisen between the creditors, etc. and the relevant insolvent cooperative prior to the public announcement.

(5) Where a decision for contract transfer is made under Article 6(2), the transferee-cooperative shall acquire the rights to real estate, etc. which requires registration and recordation before the transfer of property at the time of a public announcement under paragraph (2).

(6) Where a decision for contract transfer is made under Article 6(2), the Minister of Agriculture, Food and Rural Affairs shall require the relevant insolvent cooperative or transferee-cooperative to keep and manage data related to such contract transfer and make them available for creditors, etc. for perusal. In such cases, the standards and procedures necessary for keeping, management and perusal shall be determined by the Minister of Agriculture, Food and Rural Affairs. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 8(Appointment of administrator and duties) #

(1) An administrator appointed under Article 4(1)4 or 6 (1) and (5) shall have the authority to perform the duties of the relevant executive officer or to manage and dispose of assets, liabilities, etc. of an insolvent cooperative within the scope of business affairs related to the decision for contract transfer under Article 6(2), in accordance with the purpose of appointment.

(2) Where the Minister of Agriculture, Food and Rural Affairs issues an order for full business suspension or makes a decision for contract transfer against a cooperative under Articles 4(1)5 and 6(2) (excluding where the cooperative was issued an order for full business suspension due to temporary shortage of funds but management normalization is deemed certain), he or she may appoint an executive officer or employee of the NACF as an administrator; provided, where necessary for management normalization of the relevant cooperative or for the protection of general creditors, he or she may appoint a person other than an executive officer or employee of the NACF as an administrator. <Amended on Mar. 23, 2013>

(3) The Minister of Agriculture, Food and Rural Affairs may issue an order necessary for an administrator under paragraph (1) to perform his or her duties. <Amended on Mar. 23, 2013>

(4) The Minister of Agriculture, Food and Rural Affairs may dismiss an administrator referred to in paragraph (1) if deemed necessary. <Amended on Mar. 23, 2013>

(5) When an administrator is appointed under paragraph (1), the Minister of Agriculture, Food and Rural Affairs shall, without delay, notify the district court having jurisdiction over the location of the principal office of the relevant cooperative of the purport thereof, and entrust the registry office having jurisdiction over the location of its principal office with the registration thereof. <Amended on Mar. 23, 2013; Sep. 20, 2024>

(6) Article 11(1) of the Commercial Act and Articles 30 and 360 through 362 of the Debtor Rehabilitation and Bankruptcy Act shall apply mutatis mutandis to administrators. In such cases, "manager" in the Commercial Act shall be construed as "administrator", and "bankruptcy trustee" and "court" in the Debtor Rehabilitation and Bankruptcy Act shall be respectively construed as "administrator" and "Minister of Agriculture, Food and Rural Affairs". <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 9(Application for bankruptcy) #

Where the Minister of Agriculture, Food and Rural Affairs becomes aware of any fact that constitutes a cause for bankruptcy under Article 306 of the Debtor Rehabilitation and Bankruptcy Act with respect to a cooperative, he or she may file an application for bankruptcy, notwithstanding Article 83 of the Agri-Coop Act. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 10(Duties of liquidator or trustee in bankruptcy) #

(1) Notwithstanding Article 84 of the Agri-Coop Act, if the management institution is the largest creditor prescribed by Presidential Decree with respect to a cooperative which has been dissolved, a person appointed by the management institution from among the executive officers and employees of the NACF following a resolution by the fund management committee shall serve as a liquidator.

(2) Notwithstanding Article 355 of the Debtor Rehabilitation and Bankruptcy Act, the management institution may recommend one person from among the executive officers and employees of the NACF as a trustee in bankruptcy for a bankrupt cooperative after resolution by the fund management committee.

(3) Articles 17 through 23 of the Act on the Structural Improvement of the Financial Industry shall apply mutatis mutandis to the bankruptcy of a cooperative. In such cases, "financial institution" shall be construed as "cooperative" and "institution intervening in bankruptcy" as "management institution".

[This Article Wholly Amended on Mar. 29, 2011]

Article 11(Establishment and operation of Fund) #

(1) The Mutual Financial Depositor Protection Fund shall be established in the NACF and operated in order to guarantee the refund of claims such as deposits, etc. of depositors, etc. and to promote the sound development of cooperatives by efficiently operating the insurance system for claims such as deposits, etc. to prevent cooperatives from defaulting on payment of claims such as deposits, etc. for such reasons as bankruptcy, etc. <Amended on Mar. 31, 2011; May 26, 2020>

(2) The Fund shall be operated based on following financial resources: <Amended on Mar. 31, 2011; Mar. 11, 2014>

1. Insurance premiums paid by cooperatives;

2. Contributions from the Government;

3. Contributions from the NACF;

4. Borrowings from the Government, the Bank of Korea under the Bank of Korea Act, the NACF, NongHyup Bank, or financial institutions;

5. Funds raised by issuing Mutual Financial Depositor Protection Fund Bonds (hereinafter referred to as "Fund Bonds") under paragraph (6);

6. Funds recovered from claims such as deposits, etc. purchased by the management institution;

7. Funds recovered from financial support granted under Article 25 or 26;

8. Funds recovered from the loans made to an asset management company for an agricultural cooperative established under Article 29 in accordance with Article 31(2);

9. Earnings from the operation of the Fund and other revenues.

(3) The Fund shall be used only for the following purposes: <Amended on May 26, 2020>

1. Payment of insurance proceeds under Article 17;

2. Repayment of borrowings and Fund Bonds under paragraph (2)4;

3. Purchase of claims such as deposits, etc. under Article 19(2);

4. Financial support under Article 25 or 26;

5. Loan of funds necessary for the purchase of non-performing assets by the management company under Article 31(3);

6. Other expenses necessary for the operation and management of the Fund.

(4) Surplus funds of the Fund may be managed by the following methods:

1. Purchasing State bonds, public bonds, or other securities designated by the fund management committee;

2. Making a deposit with, or making short-term loans to, financial institutions designated by the fund management committee;

3. Other methods determined by the fund management committee.

(5) When borrowing funds under paragraph (2)4, the Government may guarantee the repayment of principal and interest thereon.

(6) The management institution may issue Fund Bonds at the expense of the Fund. In such cases, Articles 153(5) and (6) and 154 through 157 of the Agri-Coop Act shall apply mutatis mutandis.

(7) Fund Bonds shall be deemed special purpose bonds under Article 4(3) of the Financial Investment Services and Capital Markets Act.

(8) Matters necessary for the issuance, offering, etc. of Fund Bonds shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

[Title Amended on May 26, 2020]

Article 12(Insurance relationship) #

An insurance relationship between the management institution, a cooperative, and depositors, etc. shall be established when depositors, etc. hold claims such as deposits, etc. in the cooperative.

Article 13(Payment of insurance premiums) #

(1) Cooperatives shall pay insurance premiums to the Fund, as prescribed by Presidential Decree, and a failure to make payment by the deadline shall incur overdue charges as prescribed by Presidential Decree. In such cases, the rate may vary by cooperative depending on the management and financial status of individual cooperatives and other factors. <Amended on Mar. 11, 2014>

(2) No cooperative may claim the refund of insurance premiums paid under paragraph (1).

[This Article Wholly Amended on Mar. 29, 2011]

Article 13-2(Setting target size of Fund reserves) #

(1) The management institution shall set the target size of the Fund reserves (hereafter referred to as "target size" in this Article) to ensure that the Fund reserves are maintained at an appropriate level.

(2) The target size shall be determined by a resolution of the fund management committee, in consideration of the management and financial conditions of cooperatives and other factors, to the extent that it does not hinder the efficient operation of the mutual financial depositor protection system. In such cases, the target size may be set within a certain range with upper and lower limits.

(3) The management institution shall regularly examine the appropriateness of the target size in consideration of the management conditions of cooperatives and the stability of the mutual financial system, etc., and may reset it through a resolution of the fund management committee, if necessary.

(4) Notwithstanding Article 13(1), where the Fund reserves reach the target size, the management institution shall grant a full or partial reduction of the insurance premiums that cooperatives are required to pay as prescribed by Presidential Decree, in consideration of the expected future revenues and expenditures of the Fund.

[This Article Added on Mar. 11, 2014]

Article 14(Management institution) #

(1) The Fund shall be managed by the NACF.

(2) The accounts of the Fund and the NACF shall be kept separately.

(3) Upon receipt of a request from the competent standing committee of the National Assembly, the management institution shall submit a report on the operation, etc. of the Fund.

[This Article Wholly Amended on Mar. 29, 2011]

Article 15(Fund management committee) #

(1) The management institution shall establish a fund management committee to deliberate and decide on the following matters regarding the operation of the Fund: <Amended on Mar. 23, 2013; May 26, 2020>

1. Creation, operation and management of the Fund;

2. Matters regarding payment of insurance proceeds under Article 17;

3. Matters regarding determination of, and support for, insolvent cooperatives, etc.;

4. Matters regarding borrowing of funds;

5. Matters regarding the issuance of Fund Bonds;

6. Enactment, amendment, and repeal of regulations relating to the Fund;

7. Other matters requested by the Minister of Agriculture, Food and Rural Affairs or deemed necessary by the fund management committee.

(2) The fund management committee shall be comprised of the following members, including the chairperson, and shall be chaired by the chairperson of the audit committee for cooperatives of the NACF: <Amended on Nov. 14, 2011; Mar. 23, 2013; Oct. 1, 2025>

1. Two persons commissioned by the Chairperson of the NACF from among the presidents of cooperatives; provided, the presidents of insolvent cooperatives or prospective insolvent cooperatives shall be excluded herefrom;

2. One person designated by the Chairperson of the NACF from among its executives;

3. One person designated by the Minister of Agriculture, Food and Rural Affairs from among public officials under his or her control;

4. One person designated by the Minister of Finance and Economy from among public officials under his or her control;

4-2. One person designated by the Minister of Planning and Budget from among public officials under his or her control;

5. One person designated by the Chairperson of the Financial Services Commission from among public officials under his or her jurisdiction;

6. Two persons commissioned by agriculture-related organizations (limited to non-profit corporations established under Article 32 of the Civil Act) designated by the Minister of Agriculture, Food and Rural Affairs, from among persons with extensive knowledge of and experience in the agricultural economy and cooperatives;

7. Two persons commissioned by the competent standing committee of the National Assembly, from among persons with extensive knowledge of and experience in cooperatives, finance and accounting;

8. One person commissioned by the Minister of Agriculture, Food and Rural Affairs, from among persons with extensive knowledge of and experience in finance and accounting.

(3) The term of office of the members referred to in paragraph (2)1 and 6 through 8 shall be 3 years, and they may be reappointed.

(4) Except as provided in paragraphs (1) through (3), matters necessary for the operation of the fund management committee shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

Article 16(Accounting of Fund) #

(1) The fiscal year of the Fund shall coincide with that of the Government.

(2) The budget and settlement of accounts of the Fund shall be approved by the Minister of Agriculture, Food and Rural Affairs following a resolution by the fund management committee. <Amended on Mar. 23, 2013>

(3) Deleted. <Mar. 31, 2011>

(4) Deleted. <Mar. 31, 2011>

[This Article Wholly Amended on Mar. 29, 2011]

Article 17(Payment of insurance proceeds) #

(1) Where an insurance contingency occurs with respect to a cooperative, the management institution shall pay insurance proceeds at the request of its depositors, etc., as prescribed by Presidential Decree; provided, in cases falling under subparagraph 9a of Article 2, the fund management committee shall determine whether to pay the insurance proceeds within 2 months from the date of receipt of such notice under Article 18(2).

(2) The insurance proceeds to be paid to depositors, etc. under paragraph (1) shall be the amount obtained by subtracting the sum of the debts (excluding guarantee obligations) owed by individual depositors, etc. to the relevant cooperative from the sum of their claims such as deposits, etc. as of the date of public announcement of the payment of insurance proceeds under paragraph (6) (hereinafter referred to as "date of public announcement of payment of insurance proceeds").

(3) The management institution may withhold the payment of the amount prescribed by Presidential Decree, such as guarantee obligations, etc. of depositors, etc. to the relevant cooperative.

(4) Where a cooperative newly established or surviving after a merger continues to conduct business operations of the cooperative that ceases to exist thereafter, the newly established cooperative, the surviving cooperative, and the dissolved cooperative shall be deemed to exist as independent cooperatives for one year from the date of registration of the merger, for the purposes of paragraph (1).

(5) The rights of depositors, etc. to claim insurance proceeds under paragraph (1) shall be extinguished by prescription unless it is exercised within 5 years from the commencement date of payment under paragraph (6).

(6) The management institution shall publicly announce the commencement date, period, and method of payment under paragraph (1) and other necessary matters, as prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

Article 18(Notification of insurance contingency) #

(1) In the event of an insurance contingency, a cooperative shall immediately notify the management institution of such fact.

(2) In any of the following cases, the Minister of Agriculture, Food and Rural Affairs shall immediately notify the management institution of such fact: <Amended on Mar. 23, 2013>

1. Where an order is issued to suspend the payment of claims such as deposits, etc. of a cooperative or to suspend business, business operations, or payment of debts under Articles 4(1)5 and 6(2) of this Act and 164(2) and 166(3) of the Agri-Coop Act;

2. Where the authorization for the establishment of a cooperative is revoked or the authorization for a resolution to dissolve a cooperative is granted.

[This Article Wholly Amended on Mar. 29, 2011]

Article 19(Acquisition and purchase of claims such as deposits, etc.) #

(1) Where the management institution has paid insurance proceeds under Article 17(1), it shall acquire the rights of depositors, etc. against the insolvent cooperative to the extent of such payment.

(2) In addition to the payment of insurance proceeds under Article 17(1), the management institution may purchase claims such as deposits, etc. in connection with the relevant insurance.

(3) Matters regarding the purchase of claims such as deposits, etc. under paragraph (2), estimated payments, etc. shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

Article 20(Management institution’s right to set-off by subrogation) #

The management institution may, on behalf of depositors, etc., set off their claims such as deposits, etc. (excluding those provided by depositors, etc. as collateral for another person to the relevant cooperative) against the debts (excluding guarantee obligations) owed by such depositors, etc. to the cooperative as of the date of public announcement of payment of insurance proceeds.

[This Article Wholly Amended on Mar. 29, 2011]

Article 21(Exercise of rights to claim damages) #

(1) In any of the following cases, the management institution may request that the relevant insolvent cooperative, etc. claim damages against its executive officer or employee, a person falling under any subparagraph of Article 401-2(1) of the Commercial Act, or any other third party deemed liable for insolvency, or expected insolvency, of the cooperative, etc. (hereinafter referred to as "person relevant to insolvency"):

1. Where insurance proceeds are paid under Article 17;

2. Where it is determined to provide financial support or financial support has been provided under Article 25 or 26.

(2) The request of the management institution under paragraph (1) shall be made in writing, specifying the grounds therefor, the method of filing a request, and the period for filing a request.

(3) Where the insolvent cooperative, etc. fails to comply with the request under paragraph (1), the management institution may immediately claim compensation for damages by subrogation.

(4) Where the insolvent cooperative, etc. files a lawsuit for claiming damages under paragraph (1), the management institution may participate in the lawsuit to assist the insolvent cooperative, etc. while the lawsuit is pending. In such cases, Articles 71 through 77 of the Civil Procedure Act shall apply mutatis mutandis.

(5) Where the management institution wins a lawsuit by exercising the rights to claim damages by subrogation under paragraph (3) or participates in a lawsuit under paragraph (4) at the request of the insolvent cooperative, etc., the expenses incurred therein shall be borne by the insolvent cooperative, etc.

(6) Where the insolvent cooperative, etc. goes bankrupt, claims for expenses not borne under paragraph (5) shall be deemed estate claims.

(7) If necessary for claiming damages, exercising the rights to claim damages by subrogation, or participating in a lawsuit under paragraphs (1) through (4), the management institution may examine the business and property status of the liquidation corporation or the bankruptcy estate of the relevant insolvent cooperative, etc.

(8) Paragraphs (1) through (6) shall apply mutatis mutandis to a cooperative surviving after a merger with an insolvent cooperative, etc. In such cases, the management institution may request the relevant cooperative to submit data necessary for filing a claim for damages against the person relevant to insolvency or for participating in a lawsuit, and the cooperative so requested shall comply unless there is a compelling reason not to do so.

[This Article Wholly Amended on Mar. 29, 2011]

Article 22(Request for provision of data) #

The Minister of Agriculture, Food and Rural Affairs may request the heads of relevant central administrative agencies, local governments, and other public institutions prescribed by Presidential Decree (hereinafter referred to as "public institutions") to provide data or information on the property of persons related to insolvency, if necessary for the management institution to claim compensation for damages or participate in a lawsuit against them; and the heads of public institutions so requested shall comply unless there is a compelling reason not to do so. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 23(Subscription to liability insurance) #

(1) The management institution may demand that a cooperative (applicable only to a cooperative that meets the standards prescribed by Presidential Decree, such as erosion of its own capital) subscribe to insurance to compensate for damage to its property caused by default on debt obligations or by any illegal act of its executive officers and employees (hereafter referred to as "insurance" in this Article). <Amended on Mar. 31, 2011>

(2) Where a cooperative fails to comply with a request for insurance purchase under paragraph (1), the management institution may conclude an insurance agreement on its behalf.

(3) Where a cooperative fails to pay insurance premiums, etc. under an insurance agreement concluded under paragraph (2), the management institution may deduct the amount from the insurance premiums already paid by the cooperative under Article 13(1). In such cases, the amount so deducted shall be deemed to be an unpaid insurance premium under Article 13(1).

(4) Matters necessary for methods and procedures for making a request for subscription to insurance or subscription on behalf of a cooperative under paragraph (1) or (2) and other matters shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

Article 24(Application for financial support) #

Any of the following persons may file an application for financial support with the management institution: <Amended on Mar. 11, 2014>

1. A person who intends to acquire an insolvent cooperative, etc. or take over its business through contract transfer or merger;

2. A person who intends to acquire a cooperative that formulates and implements a merger plan in compliance with a request for correction under Article 3(3) through a merger.

[This Article Wholly Amended on Mar. 29, 2011]

Article 25(Determination on financial support) #

(1) The management institution may provide financial support in accordance with a resolution of the fund management committee, in any of the following cases:

1. Where an application for financial support under Article 24 has been received;

2. Where it is deemed necessary to facilitate merger, business transfer, or contract transfer of an insolvent cooperative.

(2) The standards, methods, and conditions for financial support under paragraph (1) and other necessary matters shall be determined by the fund management committee.

[This Article Wholly Amended on Mar. 29, 2011]

Article 26(Support for prospective insolvent cooperative) #

(1) Where the management institution deems it necessary to improve the financial structure of a prospective insolvent cooperative for the protection of depositors, etc. and the stabilization of credit order, it may provide financial support to the prospective insolvent cooperative in accordance with a resolution of the fund management committee.

(2) The standards, methods, and conditions for financial support under paragraph (1) and other necessary matters shall be determined by the fund management committee.

[This Article Wholly Amended on Mar. 29, 2011]

Article 27(Principles of financial support) #

(1) In providing financial support, the management institution shall provide such support on the premise that any person liable for the insolvency of the cooperative eligible for support shall bear a fair share of the losses.

(2) The management institution shall provide financial support on the premise that the cooperative eligible for financial support shall make its own restructuring efforts. In such cases, support shall be provided in two or more installments; provided, this shall not apply to the vicarious payment of deposits and other cases prescribed by Presidential Decree.

(3) Matters regarding the standards, procedures, etc. for financial support under paragraphs (1) and (2) shall be prescribed by Presidential Decree.

[This Article Wholly Amended on Mar. 29, 2011]

Article 28(Conclusion of agreement on implementation of management normalization) #

(1) Where the management institution intends to provide financial support to a cooperative, it shall conclude an agreement on the implementation of management normalization (hereafter in this Article referred to as "agreement") with the cooperative; provided, in the case of a cooperative prescribed by Presidential Decree, such as a cooperative other than an insolvent cooperative, etc., it may choose not to conclude an agreement on matters other than those referred to in paragraph (2)3.

(2) The agreement shall include the following matters for the normalization of the management of the relevant cooperative:

1. The target level for financial soundness standards prescribed by Presidential Decree, such as the net capital ratio;

2. The target level for profitability standards prescribed by Presidential Decree, such as return on assets;

3. Matters regarding plans for the stable operation of support funds, such as deposits with the NACF, and the repayment thereof;

4. The target level for asset soundness prescribed by Presidential Decree, such as the ratio of non-performing loans;

5. Other matters prescribed by Presidential Decree as necessary for normalizing the management of the relevant cooperative.

(3) The management institution shall disclose the details of the agreement to the public through electronic media and other means; provided, this shall not apply to matters prescribed by Presidential Decree, which may have a significant impact on the management of the relevant cooperative.

(4) Upon receipt of a request from the competent standing committee of the National Assembly, the management institution shall submit a report on the performance in the implementation of the agreement.

(5) Where an executive officer or employee of a cooperative provided with financial support falls under any of the following cases, the Minister of Agriculture, Food and Rural Affairs or the head of the management institution may demand that the cooperative dismiss the executive officer or suspend his or her performance of duties or take disciplinary action against the employee: <Amended on Mar. 23, 2013>

1. Where he or she violates this Act or any order or instruction issued under this Act;

2. Where he or she fails to implement the terms and conditions of the agreement;

3. Where he or she files a false report or makes a false statement.

[This Article Wholly Amended on Mar. 29, 2011]

CHARGE IV ASSET MANAGEMENT COMPANY FOR AGRICULTURAL COOPERATIVES

Article 33(Supervision) #

(1) The Minister of Agriculture, Food and Rural Affairs shall supervise business affairs of the management institution and the management company, and may issue orders necessary therefor. <Amended on Mar. 23, 2013>

(2) Where the Minister of Agriculture, Food and Rural Affairs deems it necessary for supervision under paragraph (1), he or she may require that the management institution and the management company report matters regarding their business affairs, accounting, and property or may require that public officials under his or her control inspect the status of their business affairs, books, documents, facilities, and other necessary articles. <Amended on Mar. 23, 2013>

(3) Where the Minister of Agriculture, Food and Rural Affairs deems it necessary for supervision under paragraph (1), he or she may request the Governor of the Financial Supervisory Service under Article 24 of the Act on the Establishment of Financial Services Commission to inspect the management institution and the management company. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 34(Entrustment of authority) #

The Minister of Agriculture, Food and Rural Affairs may entrust part of his or her authority under this Act to the Chairperson of the NACF or the head of the management institution, as prescribed by Presidential Decree. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]

Article 35(Penalty provisions) #

(1) Any of the following persons shall be punished by imprisonment with labor for up to one year or by a fine not exceeding 10 million won:

1. An executive officer (excluding a non-standing director), administrator, or liquidator of a cooperative who fails to comply with an order to improve management or to submit an action plan under Article 4(1);

2. A person who refuses, interferes with, or evades an examination under Article 21(7);

3. A person who fails to submit data or submits false data, in violation of the latter part of Article 21(8).

(2) Where a person referred to in any subparagraph of paragraph (1) commits a violation under paragraph (1) in connection with the business affairs of the cooperative, not only shall such offender be punished accordingly, but the cooperative also shall be punished by a fine under that paragraph; provided, this shall not apply where the cooperative has not been negligent in exercising reasonable care and supervision concerning the relevant business affairs to prevent such violation.

[This Article Wholly Amended on Mar. 29, 2011]

Article 36(Administrative fines) #

(1) A cooperative falling under any of the following cases shall be subject to an administrative fine not exceeding 20 million won:

1. Where it fails to make a public announcement under Article 7(2);

2. Where it fails to perform keeping and management duties or fails to make them available for perusal under Article 7(6);

3. Where it fails to notify the management institution of an insurance contingency under Article 18(1).

(2) Where the president, a standing director, an administrator, or a liquidator of a cooperative violates Article 7(2) or (6), he or she shall be subject to an administrative fine not exceeding 10 million won.

(3) Where the president, a standing director, or an administrator of a cooperative violates Article 18(1), he or she shall be subject to an administrative fine not exceeding 2 million won.

(4) Administrative fines under paragraphs (1) through (3) shall be imposed and collected by the Minister of Agriculture, Food and Rural Affairs, as prescribed by Presidential Decree. <Amended on Mar. 23, 2013>

[This Article Wholly Amended on Mar. 29, 2011]