According to the Supreme Court of the receipt of corporate recovery procedures, the number of 52 cases in 1996, 132 cases in 1997, 148 cases in 1998 were, whereas the number of 116 cases in 2007, 366 cases in 2008, 667 cases in 2009, 630 cases in 2010 applications were received in the whole country courts.
In addition, in the first half of 2011, World Construction, LIG Construction, Sambu Construction Company and other large construction companies ensuing recovery procedures with the application of the Consolidated Insolvency Law is pointed out that a lot of need could double-check.
Around 6 year has passed since the bankruptcy-related laws in Korea, which were scattered in the Corporate Reorganization Act, the Composition Act, the Bankruptcy Act, and the Individual Obligor's Recovery Act, etc., were integrated and enforced by the 「Act on Obligor's Recovery and Bankruptcy」.
The Consolidated Insolvency Law is comprised of 6parts and 660 provisions, according to which the current three insolvency related 234 acts are to be consolidated into one unified code and as for the corporate rehabilitation procedure which is made up of the reorganization part and the composition part, the latter is to be totally abrogated while the consumer rehabilitation procedure and international bankruptcy related regulations are to be newly added.
The Consolidated Insolvency Law has several limitations as follows; the separation of the procedure of the application, the lack of the connection of procedure each other, the non-selection of automatic stay system, the system that elects existing manager for administrator in principle, and the system that does not endow the conference of creditor with the chance of participation substantially.
In a practice, a company applying for a recovery procedure applies for a preservative measure and an injunction in almost all cases. And the court makes a decision to accept it regarding the company without exception. Hence, it is unnecessary for a court to make such a decision after an application to initiate the recovery procedure. To enable an efficient recovery procedure and to prevent the delay in procedure, it is necessary to adopt the US-type system of an Automatic stay in which an effect of a preservative measure is automatically taken upon the application for a recovery procedure.
Under The Consolidated Insolvency Law, the recovery procedure reduced the necessary event of declaring a bankruptcy in comparison to the Corporate Reorganization Act in the past. However, to regulate this in a former way can decrease a social cost occurring from maintaining a fringe firm which failed in a recovery procedure, stop the expansion and reproduction of an insolvency and be in line with a purpose of strengthening the linkage between bankruptcy procedures.
The so-called 'transformed Debtor In Possession(DIP) system', which enables a former management to continue a corporate management as an administrator of a bankrupt company, has problems that the former management responsible for the insolvent management is not the competent person for a corporate recovery and that creditors' management participation and management will be difficult.
It is desirable to improve this system by changing the principle and exception. Namely, it is necessary to appoint an administrator among the third parties who have the professional managerial capability in principle and to appoint the existing management as an administrator exceptionally in case the liability of insolvency does not lie with the former management and the creditors' meeting agrees with it.
Despite that a creditor is a very important interested party together with the court and the administrator in terms of the recovery procedure, the protection for them is still insufficient. It is necessary to supplement the system for the creditors' meeting to actively participate in the major decision-making with a voting right as is in the USA and Japan.
Also, In the US and in Europe the corporate rehabilitation procedure has long been legislated and enforced, the intensive study of which would, therefore, be very helpful to find a right solution to improve our legislative system.