Seoul to Force Fast Decisions On Restructure

A proposed new law on corporate restructuring will set new rules for the treatment of financially troubled companies by their creditors. At the heart of the government's proposal, yet unannounced, is a plan to legally bind creditors of troubled companies to decide quickly whether to close a company or help it go on, according to a government official Thursday.

The official, a high-ranking Financial Supervisory Commission member, said the proposal was hammered out in a meeting held earlier this week of senior Finance Ministry and financial regulatory officials and the deputy chief policy maker of the ruling Millennium Democratic Party.

The proposed law will require a three-quarter vote by creditors, weighted by outstanding liability, to let a troubled company continue operation with financial assistance. Once the decision is made, all creditors will be required to postpone claims for a period of one year, during which debt restructuring and additional capital will be provided.

Creditors objecting to the committee decision will be allowed to opt out by transferring the claims to the remaining creditors.

The basis of the provision is the government's judgment that reorganization of ailing companies is marred by conflicting positions taken by creditors. The proposed law will legally require creditor financial firms to be part of a committee of creditors under threats of monetary penalties and unlimited liability for failure to do so.

The government announced in late April its intention to introduce new measures in addition to existing bankruptcy laws. "Because there will be over 800 amendments to the existing laws," an official at the Ministry of Finance and Economy said, "it is almost impossible to finish the task this year." Amendments will be made, he said, to the three laws which separately govern bankruptcy, liquidation and private debt restructuring.

by Chung Sun-gu