[Jeondaegyu's 7 Jeon 8 Gi] The Reason It Became a Rehabilitation Court, Neither Bankruptcy nor Insolvency

Jeon Dae-gyu, Chief Judge of Seoul Bankruptcy Court

Shakespeare's "Romeo and Juliet" is a work that deals with the love story of unfortunate lovers. It is a common theme about the love between members of feuding families. At the ball, Romeo falls in love with Juliet at first sight. As they promise their love, Juliet laments the fact that Romeo is the son of the enemy family. Then Romeo says, "What’s in a name? That which we call a rose by any other name would smell as sweet." This is a famous line expressing passionate courtship. Romeo tells his beloved that a name does not matter.

However, in modern society, whether for individuals or companies, a name is important. For individuals, it can influence fate and image, and for companies, it can affect sales and business performance. Recently, the number of people changing their names has been increasing. It is also common to see companies changing their corporate names. Examples include "Starbucks Coffee" dropping "Coffee" and "Dunkin Donuts" dropping "Donuts." There are various reasons for changing a name (or corporate name). Individuals mainly do so because their names are unpleasant or things are not going well, while companies, aside from some superstitious reasons, mostly do it to expand their business areas.

In 2017, the Seoul Rehabilitation Court was established as a court responsible for cases that help resolve financial difficulties of companies or individuals. Generally, the inability to repay debts or insolvency is called bankruptcy or insolvency. What should a court specializing in bankruptcy or insolvency cases be named? Initially, the Seoul Bankruptcy Court was considered. The United States, which leads the modern insolvency law trend, also calls it the bankruptcy court. However, there was criticism that the term "bankruptcy" gives a negative image to those who visit the court, implying it is a court that makes people go bankrupt.

The next option considered was the Seoul Insolvency Court. Insolvency has a milder meaning than bankruptcy, and since the court’s nature involves handling cases related to bankrupt individuals or companies, it was problematic to give it a name unrelated to that. Therefore, it was reviewed as a strong alternative. However, insolvency still could not shed its negative image. Thus, the final choice was the Seoul Rehabilitation Court. The name was chosen to mean that the court does not cause bankruptcy (insolvency) but rehabilitates individuals or companies in difficulty so they can make a fresh start. The Seoul Rehabilitation Court is positive in that it conveys a good image and a message of hope to the parties involved. However, there is also criticism that since the Seoul Rehabilitation Court handles not only rehabilitation cases but also bankruptcy cases, it gives an image that it does not cover bankruptcy cases.

There was a similar concern when enacting the "Debtor Rehabilitation and Bankruptcy Act (Debtor Rehabilitation Act)." The Debtor Rehabilitation Act broadly includes rehabilitation procedures, bankruptcy procedures, and individual rehabilitation procedures. Since bankruptcy procedures are the principle from a historical and theoretical perspective, it would be consistent to place bankruptcy procedures first when organizing the Debtor Rehabilitation Act. In the U.S., bankruptcy procedures precede rehabilitation procedures, and in Japan, based on the Bankruptcy Act, the laws related to rehabilitation procedures (Civil Rehabilitation Act and Corporate Reorganization Act) apply the Bankruptcy Act. Therefore, there was a concern about whether bankruptcy procedures should be placed first when enacting the Debtor Rehabilitation Act. However, it was ultimately decided to stipulate rehabilitation procedures before bankruptcy procedures.

The reason was to send a signal to the market that the Debtor Rehabilitation Act is a law to rehabilitate individuals or companies, not to bankrupt them. The Debtor Rehabilitation Act is organized in the order of rehabilitation procedures, bankruptcy procedures, and individual rehabilitation procedures. China’s "Enterprise Bankruptcy Law" also stipulates rehabilitation procedures before bankruptcy procedures for the same reason. However, emphasizing the signal resulted in a law that is complex and difficult to understand in terms of structure and comprehension. Because exceptions are stipulated first and principles later, provisions overlap and systematic legislation was not achieved. As Romeo said, a name may not matter between lovers in love. But the importance of the image and signal that a name conveys cannot be ignored. A name carries its own meaning and external determination. Naming the court the Rehabilitation Court expresses the will to rebuild individuals or companies in difficulty. This is why expectations for the Rehabilitation Court are high.

This content was produced with the assistance of AI translation services.