Judge Cites Speed In Clearing Cases

Seoul District Court's bankruptcy division is using stricter criteria but is clearing cases expeditiously, many times within two years of granting protection, a judge said in an interview with the JoongAng Ilbo. Son Ji-ho is one of six judges of the district court's bankruptcy division that became independent from the civil courts in February 2000.

JAI: What goes into a decision to grant receivership?

Son: The bankruptcy court is applying more and stricter criteria when determining whether to grant court receivership to a company. Even after receivership starts, the court is paying more attention to whether the company is following its restructuring plan and performing as promised in the plan. The company has to report every month to the court and the court's inspection committee on progress.

JAI: It takes almost a year to determine whether to grant court receivership. Can't the process be simplified?

Son: It takes around 10 months at most to decided on receivership for a large company, but it is getting shorter. The current reorganization law allows a maximum of 10 years for a company to satisfy its liabilities. Most companies end up being shut down or ending the receivership successfully in three to four years.

Twelve companies ended receivership last year. In half those cases, the final decision was made in two years from beginning of receivership.

JAI: Do you agree with combining the three bankruptcy laws?

Son: There has been criticism over the composition law because major shareholders of a company can keep management control without paying their debts, which disadvantages creditors. But there are companies that can survive with a little bit of financial support, which is a reason for the composition law to exist. Large companies can not apply for composition, and now only a handful of companies are under the composition procedure.

JAI: What changes occurred after the bankruptcy division was separated from the civil court?

Son: The bankruptcy division created an inspection committee that watches over companies' restructuring process, and a pool of trustees, over 1,000 candidates, who manage a company under court receivership. The division also encourages mergers and acquisitions for companies in receivership.

by Limb Jae-un