[Invest&Law] Graduation from Rehabilitation Procedure Maintaining Management Rights, First Case for Small Business Emerges

Seoul Rehabilitation Court Applies 'Comprehensive Consideration Method' for the First Time
Small-Scale Company Maintains Management Rights After Early Graduation from Rehabilitation Proceedings

The first case of a small-scale company maintaining management rights while graduating early from rehabilitation proceedings has emerged. On the 24th, the 16th Division of the Seoul Rehabilitation Court (Chief Judge Won Yong-il) decided to terminate the rehabilitation proceedings early for Company A, which operates an online-based advertising and marketing business. Company A applied for rehabilitation proceedings in October 2024 due to deteriorating profitability caused by the prolonged economic recession following COVID-19 and low-price bidding competition.

Ryu Kwang-jin, CEO of TMON, is attending a hearing held at the Seoul Rehabilitation Court in Seocho-gu, Seoul on the 2nd. The court plans to review the reasons for the rehabilitation applications of TMON and WEMAKEPRICE, their debt status, and funding plans. Photo by Jo Yong-jun jun21@

At the time of the rehabilitation application, the representative of Company A held 93.3% of the issued shares. However, according to previous practical customs, there was a high possibility of losing management rights as the shareholding ratio would fall below 50% after the approval of the rehabilitation plan. Accordingly, the Seoul Rehabilitation Court applied the 'comprehensive consideration method' on a trial basis instead of the existing 'relative share ratio method.'

The rehabilitation plan was designed to convert the remaining claim amount, excluding the cash repayment portion, into equity, and then maintain the representative's shareholding above 50% through subsequent stock consolidation. This plan was approved by creditors at the stakeholders' meeting on February 13 and was also sanctioned by the court.

The court terminated the rehabilitation proceedings early within six months of the application, based on Company A having fully repaid the first-year rehabilitation claims and maintaining contracts with major clients and continuing sales after the commencement of the rehabilitation proceedings. The Seoul Rehabilitation Court stated, "This will set a precedent allowing small-scale companies to use rehabilitation proceedings without the risk of losing management rights and without missing the golden time for restructuring."

Reporter An Jaemyung, Legal Newspaper

※This article is based on content supplied by Law Times.

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