CORPORATE RESTRUCTURING PROMOTION ACT

Article 1(Purpose) #

The purpose of this Act is to facilitate timely corporate restructuring through market functions by providing for matters necessary for promoting expedite and smooth corporate restructuring.

Article 2(Definitions) #

The terms used in this Act shall be defined as follows:

1. The term "creditor financial institution" means a person who has extended credit to the relevant company and falls under any of the following items:

(a) A bank that has obtained authorization under the Banking Act (including a person deemed a bank under Articles 5 and 59 of the same Act);

(b) The Korea Development Bank under the Korea Development Bank Act;

(c) The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;

(d) The Industrial Bank of Korea under the Industrial Bank of Korea Act;

(e) An investment trader, investment broker, collective investment business entity, trust business entity, merchant bank, investment company, private equity fund and special purpose company under the Financial Investment Services and Capital Markets Act;

(f) A special purpose company under the Asset-Backed Securitization Act;

(g) An insurer under the Insurance Business Act;

(h) A specialized credit finance company under the Specialized Credit Finance Business Act;

(i) A mutual savings bank under the Mutual Savings Banks Act;

(j) The Korea Asset Management Corporation under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;

(k) The Deposit Insurance Corporation under the Depositor Protection Act;

(l) The Korea Finance Corporation under the Korea Finance Corporation Act;

(m) The Credit Guarantee Fund under the Credit Guarantee Fund Act;

(n) The Korea Technology Credit Guarantee Fund under the Korea Technology Credit Guarantee Fund Act;

(o) The Korea Deposit Insurance Corporation under the Depositor Protection Act;

(p) A private equity fund for corporate restructuring under Article 20 of the Industrial Development Act or a corporate restructuring association registered under Article 15 of the Industrial Development Act (referring to the Industrial Development Act which has not yet been wholly amended by Act No. 9584) or a corporate restructuring company which is an executive partner of such corporate restructuring association;

(q) The Korea Trade Insurance Corporation under the Korea Trade Insurance Corporation Act;

(r) The Nonghyup Bank under the Agricultural Cooperatives Act;

(s) Other institutions prescribed by Presidential Decree that engage in finance business under the relevant Act;

2. The term "creditor bank" means a creditor financial institution that runs banking business on a systematic and regular basis;

3. The term "principal creditor bank" means a principal creditor bank of the relevant company (or a bank which has extended the largest amount of credit if no principal creditor bank exists). In such cases, matters concerning the designation, change, etc. of a principal creditor bank shall be prescribed by Presidential Decree;

4. The term "company" means a company which has received credit from a creditor financial institution and the total amount of credit reaches or exceeds 50 billion won (hereafter referred to as "reference amount" in this subparagraph). In such cases, if a company showing signs of insolvency has reduced the total amount of credit below the reference amount through readjustment of claims, repayment of debts, etc., such company shall also be deemed a company;

5. The term "company showing signs of insolvency" means a company deemed by its principal creditor bank or a coordinating committee of creditor financial institutions under Article 15 (hereinafter referred to as "coordinating committee of creditor financial institutions"), as a result of a credit risk assessment of such company, as having difficulty in repaying debts from a financial institution without additional financial support or an external loan (excluding loans received in the course of normal financial transactions);

6. The term "credit extension" means any of the following transactions prescribed by the Financial Service Commission:

(a) Providing loans;

(b) Purchasing bills or bonds;

(c) Leasing facilities or equipment;

(d) Guaranteeing payment;

(e) Making a payment in subrogation under a guarantee for such payment;

(f) Making a transaction that is likely to cause loss to a financial institution if a party to the transaction becomes insolvent;

(g) Being involved in a transaction that may cause the consequence of a transaction referred to in items (a) through (f), although a financial institution has not made such transaction directly;

7. The term "readjustment of claims" means the adjustment of claims by a creditor financial institution by extending the due date for repayment, reducing or exempting a debtor's obligation for principal and interest, or converting a loan into an investment, or by other methods similar thereto.

Article 3(Relationship with Other Acts) #

This Act shall take precedence over other Acts governing corporate restructuring, etc. (excluding the Debtor Rehabilitation and Bankruptcy Act).

Article 4(Administration of Companies Showing Signs of Insolvency) #

(1) If, as a result of a credit risk assessment of a customer company, a principal creditor bank deems that such company is classified as a company showing signs of insolvency, the principal creditor bank shall notify the relevant company of such fact and that it is possible to apply for the commencement of any of the administrative proceedings under paragraph (4).

(2) If, as a result of a credit risk assessment of a customer company, a creditor bank, other than a principal creditor bank, deems that such company is classified as a company showing signs of insolvency, the creditor bank shall notify the principal creditor bank of such fact, without delay.

(3) If a company has received notice pursuant to paragraph (1) that it is classified as a company showing signs of insolvency, it may submit to a principal creditor bank an application for the commencement of any of the administrative proceedings under paragraph (4), along with a business plan, etc.

(4) Upon receiving an application under paragraph (3) from a company showing signs of insolvency, a principal credit bank shall give notice of convocation of a meeting to a coordinating committee of creditor financial institutions or a coordinating committee of creditor banks under Article 13 (1) (hereinafter referred to as "coordinating committee of creditor banks") within seven days from the date of receiving such application in order to determine whether any of the following administrative proceedings is commenced: Provided, That this shall not apply to the determination as to whether the administrative proceedings under subparagraph 3 are commenced:

1. Joint administration by a coordinating committee of creditor financial institutions pursuant to Article 5;

2. Joint administration by a coordinating committee of creditor banks pursuant to Article 13;

3. Administration by a principal creditor bank pursuant to Article 14.

(5) Even if any of the administrative proceedings under paragraph (4) commences, the relevant company or creditor financial institutions may apply for rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act. In such cases, it is deemed that a decision to commence rehabilitation procedures interrupts any of the administrative proceedings under paragraph (4).

(6) A principal creditor bank or coordinating committee of creditor financial institutions may facilitate business normalization by means of selling to a third party shares acquired from the conversion into investment, enforcement of security rights, etc. or shares, the disposal of which is delegated, before notice is given pursuant to paragraph (1) or (4). In such cases, the principal creditor bank or coordinating committee of creditor financial institutions may choose not to give notice under paragraph (1) or (4).

Article 5(Joint Administration by Creditor Financial Institutions) #

Upon receiving an application under Article 4 (3) from a company showing signs of insolvency, if creditor financial institutions deem that it is possible to normalize its business based on the assessment of its business plan, etc., they may commence proceedings for joint administration, subject to a resolution by the coordinating committee of creditor financial institutions.

Article 6(Suspension of Exercise of Rights to Claims) #

(1) If a principal creditor bank calls a meeting of a coordinating committee of creditor financial institutions to commence proceedings for joint administration by the creditor financial institutions under Article 5, it shall notify the Governor of the Financial Supervisory Service established pursuant to the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Governor of the Financial Supervisory Service"). In such cases, the Governor of the Financial Supervisory Service may request creditor financial institutions to suspend the exercise of their rights to claims (including the exercise of their security rights, but excluding the presentation of bills for the purpose of interruption of prescription period) against the relevant company from the date on which the meeting of the coordinating committee of creditor financial institutions is notified until the date on which the first meeting of the coordinating committee of creditor financial institutions is held.

(2) Creditor financial institutions may set a grace period for the exercise of the rights to claims by up to one month from the commencement date of the grace period (or three months if it is necessary to conduct a field inspection of assets and liabilities) at the first meeting of the coordinating committee of creditor financial institutions to be held within seven days from the date on which such meeting is notified, taking into consideration the scale of the relevant company, the number of creditor financial institutions, etc., and may extend the period only once by up to one month.

(3) If the coordinating committee of creditor financial institutions fails to set a grace period for the exercise of the rights to claims under paragraph (2), or fails to establish a final plan for business normalization of the relevant company under Article 8 (1) by the end of the grace period, it shall be deemed that proceedings for joint administration for the relevant company by the creditor financial institutions are suspended from the date following the end of the grade period.

Article 7(Assessment by Specialized Independent Institutions) #

(1) A principal creditor bank or coordinating committee of creditor financial institutions may request a company showing signs of insolvency to undergo an inspection of assets and liabilities, an assessment of its ability to survive as a going concern, etc. to be conducted by a specialized independent institution retained by it under an agreement with the company, such as an accounting firm.

(2) If a company showing signs of insolvency fails to comply with the request under paragraph (1) without justifiable grounds, its creditor financial institutions may discontinue or suspend the extension of credit to the company.

Article 8(Agreement for Implementation of Plans for Business Normalization) #

(1) A coordinating committee of creditor financial institutions shall make an agreement (hereinafter referred to as "agreement") with a company showing signs of insolvency, for whom proceedings for joint administration under Article 5 are commenced, for the implementation of a plan for business normalization of such company (hereinafter referred to as "business normalization plan"), subject to a resolution within the grace period for the exercise of the rights to claims under Article 6.

(2) The agreement shall contain the following matters for the business normalization of the relevant company:

1. Levels of management targets of the company, including sales and operating income;

2. Specific implementation plans, including plans for restructuring the company through adjustment of its personnel, organization, wages and plans for improving its financial structure through issuance of new stocks, reduction of capital, etc. as may be necessary for attaining the target levels under subparagraph 1. In such cases, a period for implementation shall not exceed one year, but may be extended further subject to a resolution by the coordinating committee of creditor financial institutions;

3. Additional implementation plans that shall be further carried out by the company, including adjustment of total personnel expenses, in the event that it fails to attain the target levels under subparagraph 1;

4. Letters of consent to the matters that require the consent of interested parties, such as the labor union or shareholders of the company in connection with the matters under subparagraphs 2 and 3;

5. Plans for readjustment of claims and extension of credit to be established for supporting the liquidity required for the business normalization of the company;

6. Specific plans for business normalization by selling the company to a third party, entrusting someone with the business management, if such is the case;

7. Other matters prescribed by Presidential Decree as necessary for the normalization of the company's business.

Article 9(Monitoring of Performance of Agreement) #

(1) A principal creditor bank shall monitor the actual performance of agreements on a quarterly basis.

(2) Whenever a principal creditor bank requests a company showing signs of insolvency to submit a report or any material relating to its business affairs or property, or requests any of its executives or employees to appear to state their opinions for the monitoring under paragraph (1), such company shall comply therewith.

(3) A principal creditor bank shall regularly assess and monitor the feasibility of continuing the joint administration of the relevant company and the possibility of business normalization of the relevant company based on the outcomes from its monitoring under paragraph (1), and shall submit a report thereon to the coordinating committee of creditor financial institutions. In such cases, it shall entrust a specialized independent institution with the assessment at least once every two years from the commencement date of proceedings for joint administration.

Article 10(Readjustment, etc. of Claims) #

(1) If deemed necessary for business normalization of a company showing signs of insolvency, creditor financial institutions may readjust claims or extend new credit (excluding an amendment to terms and conditions of existing credit; hereinafter the same shall apply), to the company subject to a resolution by the coordinating committee of creditor financial institutions. In such cases, such readjustment of claims shall be performed in a fair and equitable manner, considering the priority of rights.

(2) A resolution by the coordinating committee of creditor financial institutions on the readjustment of claims under paragraph (1) shall take effect only with an affirmative vote of creditor financial institutions, the secured claims of which amount to three-fourths or more of the total amount of claims (referring to the claims amounting to the valid security value within the limit of the liquidating value of the relevant assets; hereinafter the same shall apply) secured by all creditor financial institutions.

Article 11(Preferential Repayment of Newly Extended Credit) #

Newly extended credit by creditor financial institutions pursuant to the former part of Article 10 (1) shall be entitled to repayment in preference to the claims of other creditor financial institutions, excluding statutory security rights.

Article 12(Suspension of Proceedings for Joint Administration) #

A coordinating committee of creditor financial institutions may suspend proceedings for joint administration upon a resolution passed by the said committee if any of the following events occurs:

1. If it is found, as a result of the monitoring under Article 9 (1), that the relevant company has failed to perform any essential action under the business normalization plan without justifiable grounds, or if it is deemed difficult to implement the business normalization plan;

2. If it is deemed inappropriate, as a result of the assessment under Article 9 (3), to continue the joint administration or if it is impossible to normalize the relevant company's business;

3. If the relevant company requests the suspension of proceedings for joint administration.

Article 13(Joint Administration by Creditor Banks) #

(1) If deemed necessary to place a company showing signs of insolvency under joint administration by creditor banks for restructuring, the creditor banks may organize a coordinating committee consisting of only the creditor banks.

(2) Upon receiving an application under Article 4 (3) from a company showing signs of insolvency, if creditor banks deems it possible to normalize its business based on the assessment of its business plan, etc., they may commence proceedings for joint administration, subject to a resolution by the coordinating committee of creditor banks.

(3) The provisions of Articles 15 through 21, 23 and 24 shall apply mutatis mutandisto a coordinating committee of creditor banks. In such cases, the term "creditor financial institutions" shall be construed as "creditor banks", while the term "coordinating committee of creditor financial institutions" shall be construed as "coordinating committee of creditor banks."

(4) If creditor banks commence the joint administration under paragraph (2), the provisions of Articles 4 (6), and 6 through 12 shall apply mutatis mutandis. In such cases, the term "creditor financial institutions" shall be construed as "creditor banks", while the term "coordinating committee of creditor financial institutions" shall be construed as "coordinating committee of creditor banks."

Article 14(Administration by Principal Creditor Bank) #

(1) Upon receiving an application under Article 4 (3) from a company showing signs of insolvency, if a principal creditor bank deems it possible to normalize its business based on the assessment of its business plan, etc., it may independently commence the administrative proceedings.

(2)The provisions of Articles 8, 9, 10 (1) and 12 shall apply mutatis mutandiswhere the administrative proceedings by a principal creditor bank under paragraph (1) commence. In such cases, the term "coordinating committee of creditor financial institutions" shall be construed as "principal creditor bank", while the term "joint administration" shall be construed as "administration by the principal creditor bank."

Article 15(Coordinating Committee of Creditor Financial Institutions) #

(1) For efficient restructuring of a company showing signs of insolvency, a coordinating committee consisting of the company's creditor financial institutions shall be established.

(2) A principal creditor bank shall have the authority to convene and operate a coordinating committee of creditor financial institutions.

(3) A principal creditor bank may call a meeting of its coordinating committee of creditor financial institutions to deliberate and pass a resolution on the matters under Article 17 (1). If the amount of credit extended to the company by a creditor financial institution, other than a principal creditor bank, solely or jointly with another credit financial institution exceeds one-fourth of the total amount of credit extended by creditor financial institutions, the creditor financial institution may request the principal creditor bank to call a meeting of the coordinating committee of creditor financial institutions, and upon receiving such request, the principal creditor bank shall call a meeting without delay.

(4) If a creditor financial institution intends to sell all of its claims (including stocks converted into investment in accordance with the relevant business normalization plan) against the relevant company to any person, other than creditor financial institutions, or entrust such person with authority to administer such claims after it has been given notice to call a meeting of the coordinating committee of creditor financial institutions, the creditor financial institution shall require the person to prepare a letter of commitment, stating that he/she shall comply with the provisions of this Act, and submit the letter of commitment to the coordinating committee of creditor financial institutions: Provided, That if the number of stocks held by the creditor financial institution after conversion into investment exceeds one share plus 50 percent of the total number of outstanding voting shares of the relevant company, such excess portion of shares may be sold by a resolution by the coordinating committee of creditor financial institutions without necessarily requiring such letter of commitment.

(5) A principal creditor bank may request the relevant company to obtain a letter of commitment from any creditor, other than creditor financial institutions, stating that he/she shall comply with the provisions of this Act, and submit it to the coordinating committee of creditor financial institutions, and any creditor who has submitted a letter of commitment shall be deemed a creditor financial institution under this Act.

Article 16(Exclusion of Creditor Financial Institutions with Small Claims) #

(1) If deemed necessary for efficient restructuring, a coordinating committee of creditor financial institutions may exclude creditor financial institutions that have an amount of claims at a lower rate than that predetermined by the coordinating committee (hereinafter referred to as "creditor financial institutions with small claims") from the coordinating committee of creditor financial institutions. In such cases, the total amount of credit extended by creditor financial institutions with small claims excluded from the coordinating committee of creditor financial institutions shall not exceed five percent of the total amount of credit extended by all creditor financial institutions.

(2) Creditor financial institutions with small claims excluded from the coordinating committee of creditor financial institutions pursuant to paragraph (1) shall not be deemed creditor financial institutions.

(3) Notwithstanding the provisions of paragraph (1), the coordinating committee shall not exclude a creditor financial institution with small claims which intends to join the coordinating committee of creditor financial institutions.

Article 17(Business Affairs of Coordinating Committee of Creditor Financial Institutions) #

(1) A coordinating committee of creditor financial institutions shall deliberate and pass resolutions on the following matters:

1. Identifying companies showing signs of insolvency;

2. Making decisions as to whether to commence or continue proceedings for joint administration by creditor financial institutions;

3. Determining and extending a grace period for the exercise of the rights to claims;

4. Entering into agreements;

5. Monitoring the actual performance of agreements and taking measures accordingly;

6. Monitoring and assessing the possibility of business normalization of the relevant company and taking measures accordingly;

7. Establishing plans for readjustment of claims and extension of credit;

8. Selling stocks under Article 4 (6);

9. Making decisions to exclude creditor financial institutions with small claims from the coordinating committee of creditor financial institutions;

10. Other matters relating to those under subparagraphs 1 through 9.

(2) Whenever a coordinating committee of creditor financial institutions holds a deliberation or adopts a resolution under paragraph (1), it shall provide the operator of the relevant company with a prior opportunity to state his/her opinions, orally or in writing.

(3) If deemed necessary for efficient restructuring of a company showing signs of insolvency, a coordinating committee of creditor financial institutions may fully or partially delegate its authority to carry out business affairs under paragraph (1) to a steering committee comprised of representatives of the creditor financial institutions, which are members of the coordinating committee of creditor financial institutions, or a principal creditor bank, subject to its prior resolution thereon.

Article 18(Methods, etc. of Passing Resolutions by Coordinating Committee of Creditor Financial Institutions) #

(1) A coordinating committee of creditor financial institutions shall pass a resolution by the affirmative vote of creditor financial institutions whose amount of credit extended reaches or exceeds three-fourths of the total amount of credit extended by all creditor financial institutions (including the claims converted into investment in accordance with the relevant business normalization plan; hereinafter the same shall apply): Provided, That the coordinating committee of creditor financial institutions may determine any other methods of passing resolutions, specifying the scope of a specific case, subject to its prior resolution thereon.

(2) Creditor financial institutions shall conscientiously perform its obligations under the resolution passed under paragraph (1).

(3) Other matters necessary for the operation of a coordinating committee of creditor financial institutions shall be determined by the coordinating committee of creditor financial institutions, as prescribed by Presidential Decree.

Article 19(Reporting, etc. on Amount of Credit Extended) #

(1) A creditor financial institution shall report to a principal creditor bank on the amount of credit that it has extended to the relevant company as of the day immediately before the date on which it has received notice of a meeting of a coordinating committee of creditor financial institutions for commencing proceedings for joint administration under Article 5, within five days from the date of such notice.

(2) A　creditor financial institution shall exercise its voting right at a meeting of the coordinating committee of creditor financial institutions in proportion to the amount of credit reported under paragraph (1): Provided, That it may exercise the voting right based on the amount of credit most recently notified by the public credit registry under Article 25 of the Use and Protection of Credit Information Act to the principal creditor bank during the period for reporting under paragraph (1).

(3) A resolution adopted by the coordinating committee of creditor financial institutions pursuant to the proviso to paragraph (2) shall be effective only if the amount of credit reported by each creditor financial institution that voted for such resolution satisfies the requirements for resolution under Article 18 (1).

(4) If any dispute arises as to whether the amount of credit reported by a creditor financial institution actually exists, the coordinating committee of creditor financial institutions may place a restriction on the exercise of the voting right of such creditor financial institution until its existence is finally confirmed.

(5) A creditor financial institution whose voting right becomes subject to restriction under paragraph (4) may exercise its voting right on or after the date on which it is finally confirmed that the amount of credit reported exists, but it may not contest the resolutions adopted by the coordinating committee of creditor financial institutions until then. In such cases, the period for requiring the purchase of its claims under Article 20 (1) shall be counted from the date on which the existence of the amount of credit reported is finally confirmed.

(6) A person who reports the amount of credit extended after the end of the period for reporting under paragraph (1) may exercise his/her voting right on or after the date on which the amount of credit reported is finally confirmed, but it may not contest the resolutions adopted by the coordinating committee of creditor financial institutions until then.

Article 20(Dissenting Creditor's Right to Demand Purchase of Claims) #

(1) A creditor financial institution that dissents from a resolution adopted by a coordinating committee of creditor financial institutions under Article 18 (1) concerning any of the following matters (hereinafter referred to as "dissenting creditor") may demand a creditor financial institution that consents to the resolution (hereinafter referred to as "consenting creditor") to purchase its claims within seven days from the date on which such resolution is adopted by the coordinating committee of creditor financial institutions in writing, stating the type and number of claims. In such cases, a creditor financial institution entitled to a right to demand the purchase of its claims shall be limited to a creditor financial institution that was not present at a meeting of the coordinating committee of creditor financial institutions or that was present at a meeting but expressed their dissent in writing, and a creditor financial institution that fails to demand the purchase of its claims within the prescribed period shall be deemed to have consented to the relevant resolution of the coordinating committee of creditor financial institutions:

1. Commencement of proceedings for joint administration by creditor financial institutions under Article 5;

2. Readjustment of claims or extending new credit under Article 10.

(2) A consenting creditor shall jointly and severally purchase the claims demanded pursuant to paragraph (1) within six months from the date of such demand: Provided, That if the coordinating committee of creditor financial institutions has reached agreement with a dissenting creditor financial institution that demands the purchase of its claims pursuant to paragraph (1), it may request any of the following persons to purchase them:

1. The Korea Asset Management Corporation under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;

2. The Korea Deposit Insurance Corporation and a financial resolution institution under the Depositor Protection Act;

3. Any other institutions intending to purchase the relevant claims.

(3) The purchase price of claims under paragraph (2) and terms and conditions thereof shall be stipulated by an agreement between a consenting creditor and a dissenting creditor who demands the purchase of its claims. In such cases, if several consenting creditors exist, the coordinating committee of creditor financial institutions may negotiate with a dissenting creditor financial institution that demands the purchase of its claims under the authority delegated by such consenting creditors.

(4) If a consenting creditor financial institution (including the coordinating committee of creditor financial institutions that has received delegation pursuant to the latter part of paragraph (3); hereafter the same shall apply in this Article) and a dissenting creditor financial institution that has demanded the purchase of its claims fails to reach an agreement under paragraph (3), they may request the mediation committee for creditor financial institutions under Article 22 (1) (hereinafter referred to as "mediation committee) to adjust the purchase price of claims and terms and conditions thereof. In such cases, the mediation committee shall fairly determine the purchase price, considering the price calculated by a professional accountant appointed under agreement between the consenting creditor financial institution and the dissenting creditor financial institution that has demanded the purchase of its claims in consideration of the value and property status of the relevant company, the possibility for such agreement to be performed, or other circumstances.

Article 21(Liability for Loss) #

(1) A creditor financial institution that falls under any of the following subparagraphs shall be jointly and severally liable for loss sustained by any other creditor financial institution within the limit of the loss actually sustained thereby:

1. If the creditor financial institution (excluding the creditor financial institution that demands the purchase of its claims pursuant to Article 20 (1)) fails to implement a resolution by the coordinating committee of creditor financial institutions;

2. If the creditor financial institution fails to submit a letter of commitment under the main sentence of Article 15 (4) to the coordinating committee of creditor financial institutions when it sold its claims to any person, other than creditor financial institutions, or entrusted such person with authority to administer the claims in accordance with the main sentence of the same paragraph.

(2) A creditor financial institution that has been held liable for loss under paragraph (1) may pay its penalty to the coordinating committee of creditor financial institutions for all other creditor financial institutions. In such cases, it shall be discharged from liability for loss under paragraph (1).

(3) The amount of penalties under paragraph (2) and the distribution of such penalties received shall be determined by the coordinating committee of creditor financial institutions, and any dispute arising from such penalties shall be settled by mediation by the mediation committee.

Article 22(Mediation Committee for Creditor Financial Institutions) #

(1) A mediation committee for creditor financial institutions shall be established for the purposes of efficient reorganization of a company showing signs of insolvency, mediation of different opinions between creditor financial institutions, etc.

(2) A mediation committee shall be comprised of seven members appointed, as prescribed by Presidential Decree, from among those falling under any of the following subpararaphs (excluding those who work for the Government, a financial supervisory agency, a creditor financial institution, or a company showing signs of insolvency): <Amended by Act No. 10866, Jul, 21, 2011>

1. A person who has gained at least ten years' career experience working for a financial institution or in a finance-related area;

2. A person who is qualified as a lawyer or a certified public accountant;

3. A holder of a master's degree or higher degree in a finance-related area, who has gained at least ten years' career experience working for a research institute, a university or a college as a researcher, an assistant professor, or in any higher position and has expertise in corporate restructuring;

4. A person who has gained at least ten years' career experience working in the field of corporate restructuring.

(3) The term of office for the chairperson and each member of a mediation committee shall be one year, and may be renewed consecutively, and the chairperson shall be elected by mutual vote from among the members.

(4) A mediation committee shall carry out the following business affairs:

1. Mediating different opinions unsettled by free negotiations between creditor financial institutions (excluding differences in any resolution by the coordinating committee of creditor financial institutions) concerning any of the matters prescribed by Presidential Decree;

2. Mediating disputes concerning the purchase price of claims and the terms and conditions thereof under Article 20 (4);

3. Mediating disputes concerning the amount of penalties and the distribution of such penalties received under Article 21 (3);

4. Making decisions as to whether a resolution by the coordinating committee of creditor financial institutions has been violated or making decisions on the implementation of such resolution;

5. Establishing and amending regulations relating to the operation of the mediation committee;

6. Other affairs concerning the operation of the mediation committee, as prescribed by Presidential Decree.

(5) A mediation committee shall independently carry out the business affairs under its control.

(6) A mediation committee shall adopt resolutions by concurrent vote of two-thirds or more of its incumbent members.

(7) Other matters necessary for the organization, operation, etc. of a mediation committee shall be prescribed by Presidential Decree.

Article 23(Application, etc. for Mediation) #

(1) Any creditor financial institution that objects to a matter deliberated on by a coordinating committee of creditor financial institutions may file an application for mediation with a mediation committee in writing, describing the grounds for the application.

(2) Each creditor financial institution that files an application for mediation under paragraph (1) shall demonstrate that it has endeavored to reach agreement through free negotiations.

(3) If creditor financial institutions fail to reach an agreement on the establishment of plans for readjustment of claims and extension of credit under Article 17 (1) 7 through free negotiations, a company showing signs of insolvency may request a principal creditor bank to file an application for mediation pursuant to paragraph (1). In such cases, the principal creditor bank shall comply therewith unless any extenuating circumstance exists.

Article 24(Mediation Procedure, etc.) #

(1) A mediation committee shall notify the relevant creditor financial institution and the relevant coordinating committee of creditor financial institutions of the result of the mediation conducted by it in response to an application for mediation under Article 23.

(2) Any mediation by a mediation committee shall have the same effect as that of a resolution by a coordinating committee of creditor financial institutions: Provided, That any creditor financial institution dissatisfied with the result of such mediation may file an application for amendment thereof with the competent court.

Article 25(Special Exceptions to Restrictions, etc. on Investment and Asset Management) #

(1) None of the following provisions shall apply where a creditor financial institution converts its claims into investment or readjusts its claims according to a resolution by the coordinating committee of creditor financial institutions for corporate restructuring under this Act:

1. Articles 37 and subparagraph 1 of 38 of the Banking Act;

2. Articles 106, 108 and 109 of the Insurance Business Act;

3. Article 344 of the Financial Investment Services and Capital Markets Act;

4. Article 24 of the Act on the Structural Improvement of the Financial Industry;

5. Article 19 of the Financial Holding Companies Act;

6. Other provisions of Acts and subordinate statutes governing the restrictions, etc. on investment and asset management, as prescribed by Presidential Decree.

(2) If a creditor financial institution converts its claims into investment in accordance with paragraph (1), a company showing signs of insolvency may issue its stocks at a price below par value only upon a resolution adopted at a general meeting of its shareholders under Article 434 of the Commercial Act, without necessarily obtaining authorization from the competent court, notwithstanding Article 417 of the same Act. In such cases, the stocks shall be issued within one month from the date on which such resolution is adopted at a general meeting of shareholders, except as resolved otherwise by such general meeting of shareholders.

(3) Paragraph (1) shall be applicable until the lapse of two years after the administrative proceedings under Article 4 (4) are completed or suspended, and the aforesaid period may be extended with approval from the Financial Services Commission.

Article 26(Corrective Measures against Creditor Financial Institutions) #

(1) If a creditor financial institution has performed any of the following acts, the Financial Services Commission may order the creditor financial institution to take corrective measures within a given period:

1. If it fails to give notice, in violation of Article 4 (1) or (4);

2. If it violates Article 9 (3);

3. If it sells any of its claims to any person, other than creditor financial institutions or entrusts such person with authority to administer such claims, in violation of the main sentence of Article 15 (4).

(2) If a creditor financial institution that has received an order to take corrective measures pursuant to paragraph (1) fails to comply with such order without justifiable grounds within the given period, the Financial Services Commission may demand or order the creditor financial institution to take the following measures:

1. Caution, warning, reprimand, or salary reduction against the creditor financial institution or its executives and employees;

2. Suspension of service by its executives or appointment of an administrator who shall act on behalf of an executive;

3. Partial suspension of its business;

4. Other measures similar to those under subparagraphs 1 through 3 as deemed necessary for the correction of violations.