Hanjin Shipping Co Ltd (“Hanjin Shipping”), applied for Court Rehabilitation to the Seoul Central District Court (Bankruptcy Division 6). On 1 September 2016 the said Court issued a decision accepting Hanjin’s application, thereby commencing the rehabilitation proceedings (“Rehabilitation”).
Rehabilitation is the procedure whereby debtor’s debts are adjusted by a Rehabilitation Plan which is admitted by the court under the “Debtor Rehabilitation and Bankruptcy Act”
Under the Rehabilitation Plan, a debtor’s debts can be reduced, payment can be delayed, and interest rate can be lowered.
Creditors should report their claims between 20 September 2016 to 4 October 2016. As part of this claims notification, supporting documents or evidence should be submitted.
Hanjin Shipping will report its debts to the court. If Hanjin Shipping does not report some of its debt and a creditor also does not report its claims against Hanjin Shipping to the court, then a creditor will lose it rights of claim under the rehabilitation procedure. Theoretically, it is possible for a creditor to check Hanjin
Shipping’s debt report and if Hanjin Shipping has reported their claim, and if so, the creditor will not be required to report the claim. However, given that Hanjin Shipping is a very big company, the creditors’ list will be very long and verifying a creditor’s claim will not be easy. We strongly recommend creditors to report their claims to the court within the required period above.
After creditors report their claim to the court, they may be updated by the court on the Rehabilitation.
As explained in “(1)”, the reporting period starts 20 September 2016, so if creditors have plans to perform setoff, they should do it between 20 September to 4 October. The claims report submitted by the creditor to the court should take into account the Setoff (if any) made by the creditor.
Upon commencement of the Rehabilitation, litigation procedures on Hanjin Shipping’s assets shall be suspended under Korean law.
We first address the possible actions that Hanjin Shipping can take in foreign countries.
In (2) it is very clear that all procedures will follow the law of the foreign courts.
In (1) the foreign court’s role will be to assist the Korean court and take some measures in accordance with the law applicable to the foreign court.
It is worth mentioning that the position of Singapore Courts is that schemes of arrangement do not have extraterritorial effect on assets located beyond the relevant jurisdiction save in accordance with applicable law and/or treaty. There is no applicable law or treaty which would allow “Rehabilitation” proceedings to have effect in Singapore.
Hanjin Shipping’s subsidiaries are independent legal entities.
If Hanjin Shipping’s rehabilitation influences its subsidiaries, the subsidiary can apply for Rehabilitation for its own business reasons, and not just because its parent company, Hanjin Shipping, has applied for Rehabilitation. In Korea, in many cases, subsidiaries entered into rehabilitation procedure together with parent company, because subsidiaries’ businesses rely on their parent company.
However, if a subsidiary’s business is healthy, it may choose not to enter into a rehabilitation procedure. However, as mentioned above, Hanjin Shipping can sell subsidiary’s share which Hanjin owns.
Yes. A secured creditor’s rights will also be dealt with through the rehabilitation procedure and it is therefore necessary for you to take all the steps as provided above, which are applicable for all creditors.
The Custodian for Hanjin Shipping is required to submit a “Rehabilitation plan” no later than 25 September 2016. Separately from the Custodian, creditors or shareholders can develop its own “Rehabilitation plan”.
The court will evaluate the Rehabilitation plan. If the court decides that the Rehabilitation plan is not reasonable, the court can dismiss/ discard the Rehabilitation procedure and can declare bankruptcy (i.e. if the value of assets of Hanjin Shipping is smaller than its debt and the plan cannot be performed). The court can also order that amendments be made to the proposed plan.
If the court approves the proposed plan, the proposed plan will then be put to the creditors will be resolved by vote of creditors or secured creditors who have voting power (not all creditor or secured creditor) in an assembly of interested persons. After the successful passing of the resolution by the creditors, the court will authorize the plan.
This article is a joint collaborative effort between Joseph Tan Jude Benny LLP (Singapore) and K&P Law Firm, our network partner in Incheon, Korea.
For further information and in particular, to find out how to file a claim against Hanjin Shipping in the Seoul Central District Court (Bankruptcy Division 6), please contact:
Taejin Kim of K&P Law Firm; firstname.lastname@example.org
Murali Pany of Joseph Tan Jude Benny LLP; email@example.com
John Sze of Joseph Tan Jude Benny LLP; firstname.lastname@example.org
Walter Ferix Silvester of Joseph Tan Jude Benny LLP; email@example.com
This update is for general information only and is it not intended to constitute legal advice. JTJB has made all reasonable efforts to ensure the information provided is accurate at the time of publication.