Most Read Contributor in South Korea, February 2017
I. The Bankruptcy Court's commencement of rehabilitation
proceedings and announcement of timetable
On September 1, 2016, the 6th Bankruptcy Division of the Seoul
Central District Court (presiding judge Jung-Man Kim and judges
Tae-Kyu Shim and Seung-Hwan Cha) (the "Bankruptcy
Court") issued an order to commence the
rehabilitation proceedings of Hanjin Shipping Co., Ltd.
("Hanjin"). The Bankruptcy Court
appointed Mr. Tae-Soo Seok, one of Hanjin's two representative
directors, as a receiver in charge of managing Hanjin's
business and assets, requiring him to submit by September 19 a list
of creditors (including claim amounts) of secured and/or unsecured
rehabilitation claims. If any creditor believes that there is a
mistake, omission or discrepancy in such creditors list, the
relevant creditor is to report its secured and/or unsecured
rehabilitation claims to the Bankruptcy Court by October 4. Also,
the Bankruptcy Court decided to hold the "interested parties
meeting"(where the cause of the rehabilitation proceedings,
the results of the investigator's reviews and the results of
examination over the reported claims will be reported) at PM 2:00
on November 11. The Bankruptcy Court also ordered the receiver to
submit a draft rehabilitation plan by November 25.
II. Seizure of Hanjin's vessels and reactions by the Korean
government and Hanjin
According to news reports, as of September 4, 79 out of a
totalof128 vessels operated by Hanjin are seized, arrested or
otherwise inoperable due to issues such as loading or unloading
troubles. Accordingly, the losses to cargo owners are growing, and
a number of cross-border lawsuits are expected to be lodged.
As the negative repercussions of Hanjin's rehabilitation
proceedings continue to mount, the Korean government is formulating
a task force to handle this matter and Hanjin has started filing
for cross-border recognition of the Korean rehabilitation
proceedings in order to prevent its vessels from being seized or
arrested in other jurisdictions. For example, Hanjin appears to
have filed for a recognition order under Chapter 15 of the United
States Bankruptcy Court on September 2 and is expected to make
similar filings in other jurisdictions such as Canada, Germany and
III. Cautionary notes for creditors
Claims based on facts that existed prior to the commencement of
rehabilitation proceedings are mainly categorized as rehabilitation
claims, and, in principle, any claim that is not specified in the
creditors list or later reported to the bankruptcy court will be
excluded from the rehabilitation plan, which will make such claim
unenforceable against Hanjin. Therefore, creditors of Hanjin
wishing to receive payment on their claims through the current
rehabilitation proceedings need to check the creditors list and, if
necessary, report their claims to the Bankruptcy Court.
Creditors with both claims and liabilities against Hanjin may be
allowed to conduct a setoff in certain cases—such claims need
to have arisen prior to the commencement of the rehabilitation
proceedings and the setoff needs to be conducted prior to
expiration of the claim report period. Since such setoffs are
subject to certain restrictions, they require careful legal
Also, creditors wishing to take legal actions in other
jurisdictions should check whether there is any relevant
cross-border recognition or similar court order in place to avoid
wasting time and money. Such cross-border recognition or similar
order issued by a court of the relevant jurisdiction would prohibit
the creditors from taking compulsory enforcement measures against
Hanjin or its assets in that jurisdiction.
Finally, if creditors that have supply or other executory
contracts with Hanjin wish to unilaterally terminate such
contracts, they should carefully check in advance whether such
termination would be permissible; otherwise, they may become liable
to pay damages to Hanjin for unlawful termination.
Originally published in Insolvency Legal Update
The content of this article is intended to provide a general
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The Malaysian Aviation Commission, an independent adviser to the Malaysian Ministry of Transport, recently established the Malaysian Aviation Consumer Protection Code 2015 to protect
passengers' rights in Malaysia.
The Hanjin Shipping collapse initially impacted Shippers and Consignees.
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