CORPORATE RESTRUCTURING PROMOTION ACT

Article 1(Purpose) #

The purpose of this Act is to facilitate continuous market-driven corporate restructuring by prescribing matters necessary for promoting timely and orderly corporate restructuring.

Article 2(Definitions) #

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

1. The term "creditor financial institution" means any of the following entities, which has offered credit to the relevant company:

(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 entity, trust entity, merchant bank, investment company, private equity fund and investment purpose company under the Financial Investment Services and Capital Markets Act;

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

(g) An insurance company 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 the Korea Asset Management Corporation;

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

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

(m) The Korea 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) A financial institution for resolution under the Depositor Protection Act;

(p) A private-equity fund for corporate restructuring under Article 20 of the Industrial Development Act, 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 a managing partner of such corporate restructuring association;

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

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

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

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

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

4. The term "enterprise" means an enterprise which has obtained 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 an enterprise showing signs of insolvency has reduced the total amount of credit below the reference amount through readjustment of claims, repayment of debts, etc., such enterprise shall also be deemed an enterprise;

5. The term "enterprise showing signs of insolvency" means an enterprise deemed, through the credit risk assessment for a customer enterprise, 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 having difficulty to repay debts to a financial institution without external financial support or an additional loan (excluding loans obtained in the course of conducting normal financial transactions);

6. The term "granting of credit" 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) Providing advance payments on acceptances and guarantees under a payment guarantee;

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

(g) Engaging in a transaction that actually risks bringing about the consequences of a transaction referred to in items (a) through (f), although a financial institution has not been involved in such transaction directly;

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

Article 3(Relationship with Other Acts) #

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

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

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

(2) If, as a finding of a credit risk assessment of a customer enterprise, a creditor bank, other than a principal creditor bank, deems that such enterprise is classified as an enterprise showing signs of insolvency, the creditor bank shall immediately notify the principal creditor bank of such fact.

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

(4) Upon receiving an application under paragraph (3) from an enterprise showing signs of insolvency, a principal creditor bank shall give notice for 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") in order to determine whether to commence any of the following administrative proceedings within seven days from the date of receiving such application: Provided, That this shall not apply to the determination as to whether to commence administrative proceedings under subparagraph 3:

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) Despite commencement of administrative proceedings falling under any subparagraph of paragraph (4), the relevant enterprise or creditor financial institutions may apply for rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act. In such cases, it shall be deemed that a decision to commence rehabilitation procedures interrupts any of 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 conversion into investment, enforcement of security rights, etc. or shares, the disposal of which has been 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 need not give notice under paragraph (1) or (4).

Article 5(Joint Administration by Creditor Financial Institutions) #

Upon receiving an application under Article 4 (3) from an enterprise showing signs of insolvency, if creditor financial institutions deem 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 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 bill clearing for the purpose of interruption of prescription) against the relevant enterprise from the date the meeting of the coordinating committee of creditor financial institutions is notified until the date the first meeting of the coordinating committee of creditor financial institutions is convoked.

(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 necessary to conduct a field inspection of assets and liabilities) at the first meeting of the coordinating committee of creditor financial institutions to be convoked within seven days from the date such convocation is notified, taking into consideration the scale of the relevant enterprise, 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 formulate a final plan for business normalization of the relevant enterprise under Article 8 (1) by the end of the grace period for the exercise of the rights to claims, proceedings for joint administration of the relevant enterprise by the creditor financial institutions shall be deemed 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 an enterprise showing signs of insolvency to undergo an inspection of assets and liabilities, an assessment of its ability to remain a going concern, etc. to be conducted by a specialized independent institution assigned after consultations with the enterprise, such as an accounting firm.

(2) If an enterprise showing signs of insolvency fails to comply with a request under paragraph (1) without just cause, its creditor financial institutions may discontinue or suspend the granting of credit to the relevant enterprise.

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

(1) A coordinating committee of creditor financial institutions shall conclude an agreement (hereinafter referred to as "agreement") with an enterprise showing signs of insolvency regarding which proceedings for joint administration under Article 5 are commenced for the implementation of a plan for business normalization of such enterprise (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 enterprise:

1. Levels of management targets of the relevant enterprise, including sales and operating profits;

2. Specific implementation plans, including plans for restructuring the relevant enterprise through adjustment of its personnel, organization, wages, etc. and plans for improving its financial structure through issuance of new stocks, reduction of capital, etc., which are 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 relevant enterprise, including adjustment of total labor costs, in cases where it fails to attain the target levels under subparagraph 1;

4. Letters of consent to matters that require consent from the stakeholders, such as the labor union, shareholders, etc. of the relevant enterprise in connection with matters under subparagraphs 2 and 3;

5. Plans for readjustment of claims and granting of credit to be formulated for supporting the liquidity required for the business normalization of the relevant enterprise;

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

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

Article 9(Monitoring Performance of Agreements) #

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

(2) Whenever a principal creditor bank requests an enterprise showing signs of insolvency to submit a report or any material relating to its business affairs or property, or requests the relevant person to appear to state his/her opinions for the monitoring under paragraph (1), such enterprise shall comply therewith.

(3) A principal creditor bank shall regularly assess and monitor the feasibility of continuing the joint administration of the relevant enterprise and the prospects for business normalization of the relevant enterprise based on the outcomes of 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 an assessment at least biannually from the commencement date of proceedings for joint administration.

Article 10(Readjustment, etc. of Claims) #

(1) If deemed necessary for business normalization of an enterprise showing signs of insolvency, creditor financial institutions may readjust claims or provide new credit (excluding an amendment to terms and conditions of existing credit; hereinafter the same shall apply) to the relevant enterprise 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 subject to an affirmative vote of creditor financial institutions, the secured claims of which amount to at least three-fourths of the total amount of claims (referring to the claims equivalent to the value of valid security .within the limit of the liquidation value of the relevant assets; hereinafter the same shall apply) secured by all creditor financial institutions.

Article 11(Preferential Repayment of Newly Granted .Credit) #

Newly granted 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, next to 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, in any of the following cases:

1. If found, as a result of the monitoring under Article 9 (1), that the relevant enterprise has failed to take any essential action under a business normalization plan without just cause, or if deemed difficult to implement the business normalization plan;

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

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

Article 13(Joint Administration by Creditor Banks) #

(1) If deemed necessary to place an enterprise 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 receipt of an application under Article 4 (3) from an enterprise showing signs of insolvency, if creditor banks deem it possible to normalize its business based on an 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 mutandis to 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 receipt of an application under Article 4 (3) from an enterprise 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) Where the administrative proceedings by a principal creditor bank under paragraph (1) commence, the provisions of Articles 8, 9, 10 (1) and 12 shall apply mutatis mutandis. 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 an enterprise showing signs of insolvency, a coordinating committee consisting of the enterprise''s creditor financial institutions shall be established.

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

(3) A principal creditor bank may convoke a meeting of a coordinating committee of financial institutions to deliberate and pass a resolution on matters under each subparagraph of Article 17 (1). If the amount of credit provided to the relevant enterprise by a creditor financial institution, other than a principal creditor bank, solely or jointly with another creditor financial institution exceeds one-fourth of the total amount of credit provided by creditor financial institutions, the creditor financial institution may request the principal creditor bank to convoke a meeting of a coordinating committee of creditor financial institutions, and upon receipt of such request, the principal creditor bank shall immediately convoke such meeting.

(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 enterprise to any person other than creditor financial institutions, or entrust such person with authority to administer such claims, after it has received notice to convoke a meeting of the coordinating committee of creditor financial institutions, the relevant creditor financial institution shall require the person, other than the creditor financial institutions, to prepare a written undertaking that he/she will comply with the provisions of this Act, and submit the written undertaking 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 stock plus 50 percent of the total number of outstanding voting stocks of the relevant enterprise, such excess portion of stocks may be sold by a resolution by the coordinating committee of creditor financial institutions without necessarily requiring such written undertaking.

(5) A principal creditor bank may request the relevant enterprise to obtain a written undertaking from any creditor other than creditor financial institutions, stating that he/she will 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 written undertaking, other than creditor financial institutions, 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 from the coordinating committee of creditor financial institutions any creditor financial institutions that have smaller claims than that predetermined by the coordinating committee (hereinafter referred to as "creditor financial institutions with small claims"). In such cases, the total amount of credit provided 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 provided 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 enterprises showing signs of insolvency;

2. Determining 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 prospects for business normalization of the relevant enterprise and taking measures accordingly;

7. Formulating plans for readjustment of claims and granting of credit;

8. Selling stocks under Article 4 (6);

9. Determining whether to exclude creditor financial institutions with small claims;

10. Other matters relating to provisions of 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 enterprise with a prior opportunity to state his/her opinions, orally or in writing.

(3) If deemed necessary for efficient restructuring of an enterprise 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 to a principal creditor bank, subject to its 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 which have the amount of credit in excess of three-fourths of the total amount of credit provided 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 resolution thereon.

(2) Creditor financial institutions shall conscientiously perform their obligations under a 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 18-2(Lawsuits for Revoking Resolutions by Coordinating Committee of Creditor Financial Institutions) #

(1) If a procedure for calling meetings of a coordinating committee of creditor financial institutions or its method of passing a resolution has violated this Act, the relevant creditor financial institution or enterprise showing signs of insolvency may file a lawsuit with a court within 14 days from the date when a resolution has been passed by the coordinating committee of creditor financial institutions.

(2) The provisions of Articles 186 through 188, 190 (main sentence), 191 and 379 of the Civil Act shall apply mutatis mutandis to a lawsuit under paragraph (1).

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

(1) A creditor financial institution shall report to a principal creditor bank on the amount of credit provided to the relevant enterprise as of the day immediately before the date it has been notified of a meeting of a coordinating committee of creditor financial institutions to commence 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 rights 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 rights 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 meets 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 rights of such creditor financial institution until its existence is finally confirmed.

(5) A creditor financial institution whose voting rights become subject to restriction under paragraph (4) may exercise its voting rights on or after the date it is finally confirmed that the amount of credit exists, but it may not contest any resolution adopted by the coordinating committee of creditor financial institutions until then. In such cases, a 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 is finally confirmed.

(6) A person who reports the amount of credit granted after the end of a period for reporting under paragraph (1) may exercise his/her voting rights on or after the date the amount of credit is finally confirmed, but it may not contest any resolution 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 request 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 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 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 its dissent in writing, and a creditor financial institution that fails to demand the purchase of its claims within a 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 newly granting 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 the 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 creditors consent, 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 delegated 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 fail to reach 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 outcome 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 assets of the relevant enterprise, the performability of such agreement, or other circumstances.

Article 21(Liability, etc. for Loss) #

(1) Any of the following creditor financial institutions shall be jointly and severally liable for loss sustained by any other creditor financial institution within the limit of a 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 comply with a resolution by the coordinating committee of creditor financial institutions;

2. If the creditor financial institution fails to submit a written undertaking in accordance with 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 under the main sentence of the same paragraph.

(2) A creditor financial institution liable for any loss under paragraph (1) may pay its penalty to the coordinating committee of creditor financial institutions for the benefit of all other creditor financial institutions. In such cases, it shall be discharged from liability for any 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 an enterprise showing signs of insolvency, mediation of disparate opinions between creditor financial institutions, etc.

(2) A mediation committee shall be comprised of seven members appointed, as prescribed by Presidential Decree, from among the following persons (excluding those who work for the Government, a financial supervisory agency, a creditor financial institution, or an enterprise showing signs of insolvency):

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 three 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 and among the members.

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

1. Mediating disparate opinions unresolved by free negotiations between creditor financial institutions (excluding disparate opinions in any resolution by the coordinating committee of creditor financial institutions) concerning any 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. Determining whether a resolution by the coordinating committee of creditor financial institutions has been complied with or violated;

5. Formulating 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 conduct the business affairs under its control.

(6) A mediation committee shall adopt resolutions by concurrent vote of at least two-thirds 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 such 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 agreement on the formulation of plans for readjustment of claims and granting of credit under Article 17 (1) 7 through free negotiations, an enterprise 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, except in extenuating circumstances.

Article 24(Mediation Procedures, etc.) #

(1) A mediation committee shall immediately notify the relevant creditor financial institution and the relevant coordinating committee of creditor financial institutions of the result of the mediation 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) 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, none of the following subparagraphs shall apply:

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 imposing 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), an enterprise 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, and need not obtain authorization from the competent court, notwithstanding the provisions of Article 417 of the same Act. In such cases, the stocks shall be issued within one month from the date such resolution is adopted at a general meeting of shareholders, unless otherwise resolved by such general meeting of shareholders.

(3) Paragraph (1) shall be applicable until the elapse 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 without just cause, in violation of Article 4 (1) or (4);

2. If it violates Article 9 (3);

3. If it sells retained claims or entrusts authority to administer such claims, in violation of the main sentence of Article 15 (4).

(2) If a creditor financial institution upon receipt of an order to take corrective measures pursuant to paragraph (1) fails to comply with such order without just cause within a given period, the Financial Services Commission may request 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. Suspension of some of its business;

4. Other measures corresponding to those under subparagraphs 1 through 3, which are deemed necessary for the correction of violations.