As you may be aware, one of South Korea's largest
shipowners, Hanjin Shipping Co Ltd ("Hanjin"), has
applied for court rehabilitation in Korea. On 1 September 2016 the
Seoul Central District Court (Bankruptcy Division 6) issued a
decision accepting that application and commencing rehabilitation
Based on our experience in dealing with recent rehabilitations
involving the Korean shipping industry and working closely with
Korean lawyers, we set out below a few guidance points.
What is a Korean Court Rehabilitation?
Korean Court Rehabilitation is a process analogous to Chapter 11
in the USA, where the purpose is to rehabilitate the insolvent
debtor company by restructuring its debts owed to creditors.
The debts are restructured according to the rehabilitation plan
approved by the creditors and the rehabilitation court of Korea in
accordance with the Debtor Rehabilitation Bankruptcy Act of Korea
("DRBA"). The aim is therefore to protect Hanjin
whilst it trades out of its debt.
What will happen in the Rehabilitation?
(1) Current status
Hanjin applied for rehabilitation proceedings on 31 August 2016.
The court's decision is usually delivered in two to four
weeks, but, unusually, the court approved and issued the order
("Order") the following day.
Mr Tae-Su Seok has been appointed as the receiver and he will
now conduct Hanjin's business and the rehabilitation process
under the supervision of the court.
(2) Registration of claims in the court against Hanjin
(A) Submission of list of creditors and claims by receiver
The receiver will prepare and submit a list of known general
rehabilitation creditors, secured rehabilitation creditors, and
other interested parties of Hanjin (e.g. shareholders, etc.) and
(B) Registration of claims by creditors
All creditors of Hanjin must register their claims with the
receiver between 20 September 2016 and 4 October 2016.
Claims need to be registered and sent to, Seoul Central District
Court, Bankruptcy Department (Bankruptcy Registration Centre, 1st
Floor, Annex 3 Building, Seoul Court Complex, South Korea).
(3) Adjudication of claims
The court has specified that the receiver will adjudicate all
claims, whether secured or not, between 5 October 2016 and 18
October 2016. It is during this period that the receiver will
investigate the claims registered by the creditors and submit his
statement to the court on the same, i.e whether such claim is
accepted or denied.
The receiver is currently scheduled to report his decisions to
the court on 11 November 2016.
(4) Submission of the draft rehabilitation plan
Those creditors who registered their claims during the
registration period, will have to draft and submit their proposed
rehabilitation plan to the court on or before 25 November 2016.
Please note that the order suggests that any creditor, whose
claim value exceeds half of Hanjin's total debt, needs to
submit the plan by 18 October 2016.
Additional information to be aware of
If you miss the deadline to file your claim or do not comply
with the necessary formalities then you may lose your right to
claim against Hanjin.
Existing contracts and legal relationships with Hanjin are not
automatically terminated by the commencement of the rehabilitation
proceedings. It may be that parties have other rights that
can be exercised and a lawyer should be consulted to ensure you
understand your position.
Upon commencement of the rehabilitation proceeding, Hanjin are
only likely to be permitted to pay any debts with Court approval,
including debts incurred after the commencement of the
Our experience of the previous rehabilitation proceedings of,
inter alia, Pan Ocean and Korea Line Corporation, suggest that
Hanjin's rehabilitation plan will result in a considerable
reduction in the debt actually repaid to the creditors. i.e. only a
certain percentage of debts will be repaid and over a period of
months or years with the remainder be repaid by way of equity in
the debtor company.
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