Restructuring Bill Stalls in Assembly

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Restructuring Bill Stalls in Assembly

Sharply differing views on the constitutionality of a proposed law designed to speed up the corporate restructuring process caused the bipartisan bill to stall at the National Assembly on Monday.

At issue was the bill's restriction on creditors' claims to recover debts once the majority of creditors decided to stay all actions.

The bill failed to pass the National Assembly's committee on legislation and judiciary affairs Monday. The lawmakers agreed to take up the bill again before the Assembly's session on Wednesday.

The bill would restrict legal actions by creditors for claims once three-quarters of the creditors decide to restructure the ailing firm's debt.

The Korean Bar Association and the Ministry of Court Administration suggested Monday that the proposed law may be unconstitutional because it may discriminate against certain creditors. They also said the stay of legal action would be an unconstitutional infringement of property rights.

But the Finance Ministry brushed aside the concern. "The bill contains a safeguard against questions of property rights," a ministry official said. He said that creditors opposed to a majority-adopted program would be able to opt out by transferring their claims to the remaining creditors.

The ministry said corporate restructuring would drag on indefinitely without the law. The official suggested the case of the shipping container maker Jindo, which creditors put into a debt restructuring program in October 1998. Creditors met more than 100 times before deciding to stop the program, and the firm is still foundering.

He also said that Kohap, an ailing petrochemical and synthetic textile maker, also illustrates the problem. The future of Kohap remains unresolved three years after it was put in a debt restructuring program.

Officials at the bar association and the Ministry of Court Administration also said the provision that allows foreign creditors to be excluded from the stay is discriminatory.

by Song Sang-hoon

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