Real Estate PF Liquidity Crisis... Fair Trade Commission's Emergency Inspection of Construction Subcontracting

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The government has launched an urgent inspection of the payment status of construction subcontracting fees. This measure comes in response to the growing liquidity crisis in the construction industry triggered by recent real estate project financing (PF) issues.

On the 10th, the Fair Trade Commission and the Ministry of Land, Infrastructure and Transport announced that they will conduct an urgent inspection of the payment guarantees for subcontracting fees between primary contractors and subcontractors.

The Fair Trade Commission plans to select inspection targets focusing on construction companies whose liquidity crises could have significant ripple effects on the market. They will cooperate with the Ministry of Land, Infrastructure and Transport to obtain data on the subcontracting status of construction projects and check whether payment guarantees have been provided. Meanwhile, immediate corrective actions will be taken for sites without guarantees.

The Fair Trade Commission explained that once the target companies are confirmed, they will begin inspections including data requests within this month and aim to complete necessary measures such as determining legal violations and submitting agenda items within the first quarter.

In case subcontractors fail to receive payments due to the insolvency of primary contractors, a response manual will be prepared and distributed, along with related training. Protection systems for subcontracting fees include the direct payment system where the ordering party pays subcontracting fees directly if the primary contractor is insolvent or fails to pay, the construction payment guarantee system where financial institutions guarantee the payment amount of construction subcontracting fees, and procedures such as creditor registration during business normalization processes like workouts.

Chairman Han Ki-jung of the Fair Trade Commission stated, "It is necessary to take proactive measures to prevent damage to subcontractors before the liquidity crisis in the construction industry becomes visible," adding, "We will continuously monitor the situation in the construction industry and devise various protective measures for subcontractors."

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