Setting Insolvency Rules- a course of understanding and persuasion

Forum for Asian Insolvency Law Reform IIISeoul, Nov. 10-11, 2003

Prof. Soogeun OHEwha Womans University

Statutory Structure of the Korean Insolvency Regime

• Corporate Rehabilitation Act(1962)• Composition Act(1962)• Bankruptcy Act(1962)• Corporate Restructuring Promotion

Act(2001)

Insolvency Law Reforms

• 1998 : Economic Test• 1999 : Almost automatic

commencement• 2001 : Workout supplements• 2000-2004 : Consolidation and

overall renewal

Policy Issues

• Single track or multiple tracks?• DIP or trustee?• Automatic stay or decision at

commencement?• Balance among tracks?• Automatic discharge or fidelity

test?

Formation of the Draft Bill

• General provisions• Rehabilitation procedure• Bankruptcy procedure• Personal rehabilitation procedure• Cross-border insolvency procedure• Penalties

Major Actors in Reforms

• Drafters• Econocrats• Judges and practicing lawyers• International financial institutions• Interest groups

Econocrats

• Positive aspects– Strong support for the reform– Aggressive attitude toward goals

• Negative aspects– Preference for a mechanical process

to limit discretionary decisions by judges and creditors

– Preference for rapid enactment rather than near flawless drafting

Judges and Attorneys

• Positive aspects– Committed to cooperation in drafting– Effort to narrow the gap between

letters on statutes and practices• Negative aspects

– Less sensitive to the demand of the society

– Demand for comparative legislative examples rather than own persuasive logics

International Financial Institutions

• Positive aspects– Strong inducement to law reform– Providing information

• Negative aspects– Misunderstanding of true reason for

the inefficient insolvency regime– Hardware-oriented approach

Interested Groups

• Positive aspects– Participation in consensus-building– Telling real story in business practice

• Negative aspects– Misunderstanding about insolvency

mechanisms– Unbalanced voice among interested

groups

Political and Technical Process

• Political process– Consensus-building on unfamiliar

concepts– New power structure

• Technical process– Procedural completeness – Compatibility with other judicial

process

Understanding and Persuasion

• Understanding– Interests of related parties– Possible options

• Persuasion– Continuous teaching sessions on

insolvency mechanisms– Negotiations with interested groups

Thank you very much.