Seoul Bankruptcy Court will be established and replace the Bankruptcy Division of the Seoul Central District Court as of March 1, 2017.
The Seoul Bankruptcy Court will be the first and the only bankruptcy court in Korea until other bankruptcy courts are established in areas other than Seoul. Until then, local district courts will continue to oversee bankruptcy cases in areas other than Seoul.
There have been increasingly more bankruptcy and rehabilitation cases in Korea in recent years. The number of corporate bankruptcy cases filed in the Bankruptcy Division of the Seoul Central District Court (which will be replaced by Seoul Bankruptcy Court on March 1, 2017) increased from 222 in 2013 to 307 in 2015. The number of corporate rehabilitation cases filed in the aforesaid Bankruptcy Division increased from 296 in 2013 to 404 in 2015.
The existing Debtor Rehabilitation and Bankruptcy Act provides that a company with debt of KRW 50 billion or more, and 300 or more creditors may file for bankruptcy / rehabilitation with the Bankruptcy Division of the Seoul Central District even if the company is not located in the Seoul area. From March 1, 2017, Seoul Bankruptcy Court will take over such major bankruptcy / rehabilitation cases, and is likely to provide more effective, specialized and consistent guidance in bankruptcy proceedings.
We do not expect a radical change in the bankruptcy practice in Korea, but there will be incremental changes, some notable, in bankruptcy proceedings in response to the introduction of Seoul Bankruptcy Court for now, and eventually bankruptcy courts in areas other than Seoul.
The Korean financial authorities are currently discussing the introduction of a prepackaged bankruptcy plan ("PPP") that combines the strengths of workout and rehabilitation procedures. Once the details and introduction schedule of PPP crystallizes, bankruptcy courts are expected to play a more prominent role through indirectly taking part in workout procedures.
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