Seoul City Collects Delinquent Taxes from Hanbo Steel After 23 Years

Hanbo Steel Bankrupt in 1997... Corporate Liquidation Process Completed in 2009
Provided Long-Term Bonds as Tax Collateral to Bank Trustee Instead of Paying Overdue Taxes
Investigator's Tracking and Efforts Led to Recovery of Bank-Held Bonds and Revenue Certificates

Hanbo Steel Trust Securities Copy

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced on the 6th that, thanks to the persistent efforts of an investigator from the 38th Tax Collection Division, it successfully collected 617 million KRW in overdue taxes from the defunct steel company ‘Hanbo Steel,’ which went bankrupt 24 years ago in 1997 and has since disappeared into history, after 23 years.

According to Seoul City, when Hanbo Steel was unable to pay the taxes (special collection of resident tax) imposed by Gangnam District Office in 1998, it entered into a securities trust contract under the Corporate Restructuring Act to provide collateral for local tax debt repayment. In this contract, Hanbo Steel was the consignor, Bank A was the trustee, and Gangnam District Office was the beneficiary. The bank issued a beneficiary certificate and bonds, which were submitted to Gangnam District Office, and a collection deferment was granted until the end of 2018. Although Hanbo Steel was finally liquidated in 2009, the overdue taxes had not been collected until recently.

A Seoul City official said, “This is a special case of tax collection achieved through the persistent tracking and efforts of an investigator from the 38th Tax Collection Division during a time when on-site visits to delinquent taxpayers were reduced due to the ongoing COVID-19 situation, and non-face-to-face tax collection activities included a simultaneous investigation of delinquent taxpayers’ financial assets at major domestic financial institutions.”

The investigator in charge at the 38th Tax Collection Division confirmed from Bank A’s investigation of the delinquent taxpayer’s financial assets that there were no general financial account balances under Hanbo Steel’s name, but discovered that subordinated bonds had been issued. The investigator requested the bank officials to pay the bond amount as overdue taxes to Seoul City. However, the bank notified that since the bonds had a separately designated beneficiary, they could not be handed over to Seoul City without presenting the beneficiary certificate. The investigator also inquired at Gangnam District Office about whether they held the beneficiary certificate received from the delinquent taxpayer, but this could not be confirmed.

Subsequently, the investigator learned that administrative agencies generally keep beneficiary certificates received under trust contracts in the treasury bank. Assuming that Gangnam District Office had deposited the beneficiary certificate submitted by the delinquent corporation in 1998 at the bank branch serving as its treasury, the investigator requested the branch and eventually found the ‘beneficiary certificate’ issued by the bank. Seoul City presented the found beneficiary certificate to the bank, received the bond redemption amount of 617 million KRW, and successfully applied it to the overdue taxes on the 1st of this month.

Hanbo Steel was established in 1957 and had risen to rank among the top 10 conglomerates in South Korea by 1997. However, it could not withstand astronomical borrowings and went bankrupt. After the bankruptcy, the court approved the corporate restructuring plan in October 1997, and the liquidation process was fully completed in 2009, 12 years later, marking its disappearance into history.

Lee Byung-wook, head of Seoul City’s 38th Tax Collection Division, said, “This case is an exemplary collection case that shows that passion and perseverance of the investigator in charge are most important in tax collection work. Seoul City will continue to discover and implement tax collection methods suitable for the COVID-19 situation and will not neglect efforts to collect overdue taxes.”

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