South Korea’s Finance Minister, Choo Kyung-ho, has urged the National Assembly to reinstate the now-expired Corporate Restructuring Promotion Act. This act, initially legislated in 2001 with a sunset provision, aimed to facilitate an out-of-court debt restructuring program for insolvent companies. The law allowed such companies to initiate a debt workout program if over 75% of creditors agreed, eliminating the need for unanimous consent from all creditors.
The act had been extended five times before expiring last month. Finance Minister Choo emphasised the importance of reinstating the act during an emergency economic ministers’ meeting in Seoul, stating that the absence of the management normalisation means could hinder timely and effective restructuring for companies facing temporary crises. He also expressed concerns that the lack of such measures might lead to the insolvency of smaller affiliates.
The call for the reenactment comes at a time when companies in South Korea are grappling with managerial challenges amid uncertainties both domestically and internationally. The reimplementation of the act is seen as crucial to swiftly putting struggling firms back on a path to recovery. During the first half of the year, 724 companies in South Korea filed for bankruptcy, marking a 60.2% increase from the same period the previous year, according to government data.