[Jeon Daegyu's 7 Trials and 8 Failures] Methods to Remedy Unreported Claims in Rehabilitation Proceedings

Jeon Daegyu, Chief Judge of Seoul Bankruptcy Court

Company A, a secondary subcontractor producing automobile parts, has long supplied automobile parts to Company B, a primary subcontractor of a large corporation. However, from a certain point onward, Company B began delaying payments, and by early 2020, the unpaid amount for parts reached 1 billion KRW. The president of Company A only learned in October 2020 that Company B had filed for rehabilitation proceedings at the Seoul Bankruptcy Court and that the court had already decided to commence the rehabilitation process. What was even more shocking was that about 600 million KRW of Company A’s claims for goods supplied to Company B were rehabilitation claims, and the deadline for filing claims had already passed. For some reason, the trustee of Company B (the former president of Company B) did not list Company A’s claims for goods in the list of rehabilitation creditors.

Once rehabilitation proceedings begin, the most important thing for creditors (rehabilitation creditors) is to file their claims. When the court decides to commence rehabilitation proceedings, it sets a period during which creditors must file their claims with the court. If a creditor fails to file a claim within this period, the claim may be forfeited. Of course, if the trustee lists the claim in the list of rehabilitation creditors, the claim will not be forfeited. However, in corporate rehabilitation proceedings involving numerous creditors, the trustee may omit some creditors from the list of rehabilitation creditors for various reasons. This is especially true when a third party is appointed as the trustee. If a claim is neither listed in the rehabilitation creditor list nor filed by the creditor within the claim filing period, the claim may be forfeited. This is to expedite the process and enable the debtor’s rehabilitation.

The problem is that, in reality, creditors often find it difficult to know that rehabilitation proceedings have been initiated against their counterparties. This is because the court’s decision to commence rehabilitation proceedings is not individually notified to creditors but is instead announced on the court’s internet bulletin board. As a result, it is common for creditors to miss the claim filing period. Does this mean that all such claims are forfeited? In the earlier example, Company A’s claims were neither listed in the creditor list nor filed within the claim filing period, so they could be forfeited. Does this mean there is no remedy? It would be against the concept of justice to forfeit all claims simply because the creditor was unaware of the commencement of rehabilitation proceedings. Therefore, the Debtor Rehabilitation and Bankruptcy Act and the Supreme Court provide remedies when rehabilitation proceedings are ongoing.

One can use a subsequent supplementary claim filing. A subsequent supplementary claim filing allows a creditor to file a claim retroactively if they missed the claim filing period due to reasons beyond their control. If the creditor learns after the claim filing period that rehabilitation proceedings have been initiated against the counterparty and the creditors’ meeting for reviewing the rehabilitation plan has not yet concluded, the creditor can be remedied through a subsequent supplementary claim filing. In the above case, Company A cannot be held responsible for not knowing about the commencement of rehabilitation proceedings within the claim filing period. Therefore, Company A can file its claims for goods with the Seoul Bankruptcy Court and receive relief.

What happens if the creditor learns about the commencement of rehabilitation proceedings after the creditors’ meeting for reviewing the rehabilitation plan has ended? In principle, once this creditors’ meeting concludes, subsequent supplementary claim filings are not allowed because claims cannot be reflected in the rehabilitation plan after that point. However, the Supreme Court recognizes subsequent supplementary claim filings even after the creditors’ meeting has ended under certain conditions.

If a creditor did not know about the commencement of rehabilitation proceedings or the claim filing period due to lack of individual notification and thus failed to file a claim by the creditors’ meeting deadline, and if the trustee knew or could have easily known about the existence or assertion of such rehabilitation claims but did not list them in the rehabilitation creditor list, the creditor may file a subsequent supplementary claim even after the creditors’ meeting has ended. However, the creditor must supplement the claim filing within one month from the date they became aware of the rehabilitation proceedings. In the earlier example, Company A did not know about Company B’s rehabilitation proceedings, and the trustee, due to the long-standing business relationship, could have easily known about Company A’s claims for goods. Therefore, even after the creditors’ meeting, Company A can be remedied through a subsequent supplementary claim filing.

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