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CORPORATE RESTRUCTURING PROMOTION ACT

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CORPORATE RESTRUCTURING PROMOTION ACT

Act No. 8572, Aug. 3, 2007

Amended by Act No. 8863, Feb. 29, 2008

CHAPTER GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to facilitate constant corporate restructuring through market functions by providing for the matters required in pro- moting expedite and smooth corporate restructuring. Article 2 (Definitions)

The definitions of the terms used in this Act shall be as follows:

1. The term "creditor financial institution" means a person who has granted credit to a certain enterprise and who falls under any of the following items:

(a) A financial institution that has obtained authorization under the Banking Act (including a person who is deemed as a financial in- stitution under Articles 5 and 59 of the same Act); (b) The Korea Development Bank under the Korea Development Bank Act;

(c) The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;

(d) The Industrial Bank of Korea under the Industrial Bank of Korea Act;

(e) A securities company under the Securities and Exchange Act; (f) An asset management company under the Indirect Investment Asset Management Business Act;

(g) An insurance company under the Insurance Business Act; (h) A trust company under the Trust Business Act; CORPORATE RESTRUCTURING PROMOTION ACT

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(i) A specialized credit finance company under the Specialized Credit Financial Business Act;

(j) A mutual savings bank under the Mutual Savings Banks Act; (k) A merchant bank under the Merchant Banks Act; (l) The Korea Asset Management Corporation under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial In- stitutions and the Establishment of the Korea Asset Management Corporation;

(m)The Deposit Insurance Corporation under the Depositor Protection Act; and

(n) Any other institution that runs a finance business under any other relevant Act, as specified by Presidential Decree;

2. The term "creditor bank" means a financial institution that systemati- cally carries on a banking business on a regular basis from among creditor financial institutions;

3. The term "principal creditor bank" means the main creditor bank of a certain enterprise (or the bank that has granted the largest amount of credit if no principal credit bank is designated). In this case, the matters concerning the appointment, replacement, etc. of such a princi- pal creditor bank shall be prescribed by the Financial Service Commission;

4. The term "enterprise" means a company which has been granted credit by creditor financial institutions and total amount of credit grant reaches or exceeds fifty billion won (hereafter referred to as the "reference amount" in this subparagraph). In this regard, a company shall also be deemed as an enterprise under this Act in cases where it has been identified as an enterprise showing signs of insolvency, but its total amount of credit granted has been reduced to an amount below the reference amount through readjustment of claims and repayment of obligations, etc.;

5. The term "enterprise showing signs of insolvency" means an enterprise identified by its principal creditor bank or the council of creditor financial institutions under Article 19 (hereinafter referred to as the "Council"), as determined by its credit risk assessment of customers, as the one which is hard to repay loans borrowed from financial institutions without additional financial aid or an external loan (excluding loans borrowed in the course of normal financial transactions);

6. The term "credit grant" means any of the following transactions, as prescribed by the Financial Service Commission:

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(a) Providing a loan;

(b) Purchasing a bill or bond;

(c) Leasing a facility or equipment;

(d) Guaranteeing payment;

(e) Making a payment in subrogation under a guarantee for such payment;

(f) Making a transaction that is likely to cause damage or losses to a financial institution if the opposite party to the transaction be- comes insolvent; and

(g) Being involved in a transaction that may bring about the conse- quences of a transaction under any provision of items (a) through (f) in fact, although a financial institution has not made such transaction directly; and

7. The term "readjustment of claims" means the adjustment made by a creditor financial institution in relation to the claims receivable by extending the due date for repayment, reducing or discharging a debtor's obligation for the principal and interest, or converting a loan into an investment, or in any other similar way.

Article 3 (Relation with Other Acts)

This Act shall take precedence over other Acts governing the matters relating to corporate restructuring, etc.

CHAPTER RESTRUCTURING OF

ENTERPRISES SHOWING

SIGNS OF INSOLVENCY

Article 4 (Demand for Submission of Audit Reports) Every creditor financial institution may demand an enterprise that de- sires to have credit granted to submit audit reports for the immediately preceding two consecutive business years as defined in the Act on Ex- ternal Audit of Stock Companies.

Article 5 (Countermeasures against Enterprises Showing Signs of In- solvency)

(1) The principal creditor bank shall take the countermeasures under Article 7 against an enterprise showing signs of insolvency without delay. (2) If it is found as a result of the credit risk assessment of a customer CORPORATE RESTRUCTURING PROMOTION ACT

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enterprise that the enterprise falls under the category of an enterprise showing signs of insolvency, creditor banks other than its principal cred- itor bank shall demand the principal creditor bank to take the coun- termeasures under paragraph (1) against the enterprise showing signs of insolvency without delay.

Article 6 (Assessment by Specialized Independent Institutions) (1) The principal creditor bank or the Council may request an enterprise showing signs of insolvency to receive an inspection of assets and lia- bilities, an assessment of its ability to survive as a going concern, etc. conducted by a specialized independent institution retained by it under an agreement with the enterprise, such as an accounting firm. (2) If an enterprise showing signs of insolvency fails to comply with the request under paragraph (1) without any justifiable grounds, its creditor financial institutions may discontinue or suspend the grant of credit to the enterprise.

Article 7 (Administration of Enterprises Showing Signs of Insolvency) (1) The principal creditor bank shall, if it is found as a result of its as- sessment of the business plan, etc. submitted by an enterprise showing signs of insolvency that it is possible to normalize the enterprise's busi- ness, commence any of the following administrative proceedings or file an application for commencement of any of such proceedings with the competent court or take a measure to demand the enterprise to file such an application:

1. Joint administration by creditor financial institutions through the Council;

2. Joint administration by creditor banks through the creditor banks' council under Article 17 (1);

3. Administration by the principal creditor bank; and

4. Proceedings of rehabilitation under the Debtor Rehabilitation and Bankruptcy Act.

(2) The principal creditor bank shall, if it concludes that there is no possibility that an enterprise showing signs of insolvency can normalize its business or if it is unable to commence any of the administrative proceedings under subparagraphs of paragraph (1) (or if administrative proceedings have been initiated, but subsequently interrupted), take any of the following measures without delay: Provided, That the same shall CORPORATE RESTRUCTURING PROMOTION ACT

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not apply to cases where it is anticipated that the expenses required for any such measures will exceed the expected benefits for creditor fi- nancial institutions, where it is expected that the claims involved may be recovered in any other way, or where a measure under any of the fol- lowing subparagraphs has already been taken on any other grounds:

1. Requesting the enterprise to dissolve or liquidate itself; and

2. Filing an application for bankruptcy of the enterprise or demanding the enterprise to file an application for bankruptcy, if it is found that any ground exists for bankruptcy on the part of the enterprise under the Debtor Rehabilitation and Bankruptcy Act. (3) Notwithstanding the provisions of paragraphs (1) and (2), a creditor financial institution may file an application for the proceedings of rehabilitation under the Debtor Rehabilitation and Bankruptcy Act. In this case, the administrative proceedings under the provisions of para- graph (1) 1 through 3 shall be deemed to be suspended as at the time a decision to commence the proceedings of rehabilitation is made. (4) The principal creditor bank or the Council may make efforts to facil- itate the business normalization by selling to a third party stocks which are acquired or delegated with authority to dispose of via conversion into investment, security, etc., before taking any measure under para- graph (1) or (2). In this case, it is not necessary to take any measure under paragraph (1) or (2), if they are to a third party. (5) If an enterprise showing signs of insolvency falls under the proviso to paragraph (2), the principal creditor bank shall notify the public credit registry under Article 17 (2) 1 of the Use and Protection of Credit Information Act (hereinafter referred to as the "public credit registry") of the ground so that other financial institutions can be informed thereof. (6) The fact as to whether the administrative proceedings under para- graph (1) 2 or 3 have been commenced, the details of such proceedings, if commenced, and other relevant facts may be kept confidential in part or in while.

Article 8 (Joint Administration by Creditor Financial Institutions) (1) Subject to prior resolution by the Council, creditor financial insti- tutions may commence the proceedings of joint administration under Article 7 (1) 1.

(2) A person who makes a request to call a meeting of the Council for CORPORATE RESTRUCTURING PROMOTION ACT

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the commencement of proceedings of joint administration under para- graph (1) shall present materials supporting its assertion that the enterprise showing signs of insolvency meets the requirements under Article 7 (1). In this case, it may present such supporting materials by the end of the grace period for the exercise of the rights to claims under Article 9, subject to prior resolution by the Council, if it is required to conduct a field inspection of assets and liabilities under Article 6 (1) or if any other inevitable circumstances exist.

(3) The Council may, if deemed necessary for securing the rights to claims, demand the enterprise to obtain approval from the person desig- nated by the Council (hereinafter referred to as the "finance adminis- trator"), whenever it carries out its main business affairs including financial management, on and after the commencement date of the pro- ceedings of joint administration under paragraph (1), and may deprive the enterprise of the grace period for the exercise of rights to claims or discontinue the proceedings of joint administration, if the enterprise fails to comply with such a demand without justifiable grounds, or if it is discovered that the enterprise has carried out any such business af- fairs without approval from the finance administrator, notwithstanding Article 9.

(4) The qualifications, authority, accountabilities, etc. of the finance administrator shall be prescribed by Presidential Decree. Article 9 (Suspension of Exercise of Rights to Claims) (1) The principal creditor bank shall, when it calls a meeting of the Council for the commencement of the proceedings of joint administration by creditor financial institutions under Article 7 (1), notify the Governor of the Financial Supervisory Service established pursuant to the Act on the Establishment, etc. of Financial Service Commission (hereinafter referred to as the "Governor of the Financial Supervisory Service") and the creditor financial institutions concerned of the meeting. In this case, the Governor of the Financial Supervisory Service may request creditor financial institutions to suspend the exercise of their rights to claims (including the exercise of their security interests, but excluding the presentation of bills in hand for the purpose of interruption of prescription period) against the enterprise for the period beginning on the date on which a notice of the meeting of the Council is delivered and ending on CORPORATE RESTRUCTURING PROMOTION ACT

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the date on which the first meeting of the Council is held.

(2) Creditor financial institutions may set a grace period for the excercise of the rights to claims at the first meeting of the Council held within seven days from the date on which a notice for the meeting is delivered within the limit of one month from the commencement date of the grace period (or three months if it is necessary to conduct a field inspection of assets and liabilities), but may extend the period only once for one month or less.

(3) If the Council fails to set a grace period for the exercise of the rights to claims under paragraph (2), or fails to finally establish a plan for business normalization of the enterprise concerned under Article 10 (1) by the end of the grace period, it shall be deemed that the proceedings of joint administration for the enterprise concerned by the creditor fi- nancial institutions are discontinued from the following day. Article 10 (Agreement for Implementation of Plan for Business Nor- malization)

(1) The Council shall make an agreement (hereinafter referred to as an "Agreement") with an enterprise showing signs of insolvency, for whom the proceedings of joint administration under Article 8 are commenced, for the implementation of a plan for business normalization of the en- terprise (hereinafter referred to as the "business normalization plan"), subject to prior resolution within the grace period for the exercise of the rights to claims under Article 9.

(2) The Agreement under paragraph (1) shall contain the following provisions for the business normalization of the enterprise:

1. Levels of business targets of the enterprise, including sales and operating income;

2. Specific implementation plans, including plans for restructuring the enterprise through adjustment of its manpower, organization, per- sonnel expense and plans for improving its financial structure through issuance of new stocks, reduction of capital, etc. as may be necessary for attaining the target levels under subparagraph 1. In this case, the implementation period shall not exceed one year, but may be ex- tended further by a resolution of the Council;

3. Additional implementation plans that shall be further carried out CORPORATE RESTRUCTURING PROMOTION ACT

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by the enterprise, including adjustment of total personnel expenses, in the event that it fails to attain the target levels under subpara- graph 1;

4. Consent letters concerning the matters that require consent of in- terested parties, such as the labor union or shareholders of the en- terprise in connection with the matters under subparagraphs 2 and 3;

5. Plans for readjustment of claims and credit grants to be established for supporting the liquidity required for the business normalization of the enterprise;

6. Specific plans for business normalization by selling it to a third party, entrusting someone with the business management, or in any other way, if such is the case; and

7. Other matters prescribed by Presidential Decree as necessary for the normalization of the enterprise's business.

Article 11 (Monitoring of Performance of Agreement) (1) The principal creditor bank shall monitor the actual performance of Agreements on a quarterly basis.

(2) Every enterprise showing signs of insolvency shall, whenever the principal creditor bank demands the enterprise to submit a report or any material relating to its business affairs or property or demands any of its officers or employees to make an appearance before the bank, make a statement, etc. for the monitoring under paragraph (1), comply with such demand.

(3) The principal creditor bank shall regularly assess and examine the feasibility of continuing the joint administration of the enterprise and the possibility of business normalization of the enterprise on the basis of the results of its monitoring under paragraph (1), and shall submit a report thereon to the Council. In this case, it shall retain a specialized independent institution for assessment at least once every two years as from the commencement date of the proceedings of joint administration. Article 12 (Readjustment, etc. of Claims)

(1) Creditor financial institutions may, if deemed necessary for busi- ness normalization of an enterprise showing signs of insolvency, readjust claims or grant new credit (excluding an amendment to any term or condition of existing credit granted; hereinafter the same shall apply), CORPORATE RESTRUCTURING PROMOTION ACT

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to the enterprise subject to prior resolution by the Council. In this case, such readjustment of claims shall be performed in a fair and equitable manner, considering the priority of rights.

(2) A resolution of the Council on the readjustment of claims under para- graph (1) shall be effective only with an affirmative vote of creditor financial institutions whose secured claims amount to three-fourths or more of total amount of secured claims (referring to the claims amounting to the valid security value within the limit of the liquidating value of the relevant assets; hereinafter the same shall apply) of cred- itor financial institutions.

Article 13 (Preferential Repayment of Credit Newly Granted) The credit newly granted by creditor financial institutions under the former part of Article 12 (1) shall be entitled to repayment in preference of the claims of other creditor financial institutions, next to statutory security interests.

Article 14 (Interruption of Proceedings of Joint Administration) The Council shall pass a resolution to stay the proceedings of joint administration if any of the following events occurs:

1. If it is found as a result of the monitoring under Article 11 (1) that the enterprise has not performed any essential action under the busi- ness normalization plan without justifiable grounds or if it is deter- mined to be difficult to implement the business normalization plan; and

2. If it is determined as improper as a result of the assessment under Article 11 (3) to continue the joint administration or if there is no possibility of normalizing the enterprise's business. Article 15 (Prior Submission of Rehabilitation Plan) (1) In cases where the proceedings of joint administration by creditor financial institutions have been stayed under Article 14 and the en- terprise or its creditor financial institutions file an application for rehabilitation proceedings under Article 34 of the Debtor Rehabilitation and Bankruptcy Act, the principal creditor bank shall submit to the competent court the business normalization plan or the improved plan therefor.

(2) The business normalization plan submitted under paragraph (1) shall be deemed as a draft of the prior plan under Article 223 of the Debtor CORPORATE RESTRUCTURING PROMOTION ACT

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Rehabilitation and Bankruptcy Act.

Article 16 (Monitoring of Possibility of Business Normalization of En- terprises under Rehabilitation)

(1) The principal creditor bank shall monitor the actual performance of the rehabilitation plan for an enterprise under the rehabilitation pro- ceedings, and shall assess and examine the possibility of business nor- malization of the enterprise regularly at least annually. (2) Every enterprise under the rehabilitation proceedings shall, when- ever the principal creditor bank demands it to submit a report or material relating to its business affairs or assets or demands any of its officers or employees to make an appearance before the bank and make a state- ment for the monitoring under paragraph (1), comply with such demand. (3) The principal creditor bank shall, if it concludes that there is no possibility that an enterprise under the rehabilitation proceedings can normalize its business, file an application for closing of the rehabilitation proceedings with the competent court without delay. (4) Article 7 (2) shall apply mutatis mutandis in cases where the com- petent court makes a decision to close the rehabilitation proceedings upon an application under paragraph (3).

Article 17 (Joint Administration by Creditor Banks) (1) The principal creditor bank may, if deemed necessary to place an enterprise showing signs of insolvency under joint administration by creditor banks for restructuring, organize the creditor banks' council consisting only of the creditor banks.

(2) The provisions of Articles 19 through 25, 27 and 28 shall apply mu- tatis mutandis to the creditor banks' council under paragraph (1). In this case, the term "creditor financial institutions" shall be construed as "cred- itor banks", while the term "Council" shall be construed as the "creditor banks' council".

(3) In cases where the principal creditor bank commences administra- tion by the creditor banks' council under paragraph (1), the provisions of Articles 6, 7 (4) and 8 through 15 shall apply mutatis mutandis. In this case, the term "creditor financial institutions" shall be construed as "creditor banks", while the term "Council" shall be construed as the "cred- itor banks' council".

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Article 18 (Adminstration by Principal Creditor Bank) (1) The principal creditor bank may independently commence the ad- ministrative proceedings against an enterprise showing signs of insol- vency for the business normalization of the enterprise pursuant to Ar- ticle 7 (1) 3.

(2) The provisions of Articles 10, 11, 12 (1) and 14 shall apply mutatis mutandis in cases where the administrative proceedings by the principal creditor bank under paragraph (1) commence. In this case, the term "Council" shall be construed as the "principal creditor bank", while the term "joint administration" shall be construed as "administration by the principal creditor bank".

CHAPTER COUNCIL OF CREDITOR

FINANCIAL INSTITUTIONS

Article 19 (Council of Creditor Financial Institutions) (1) For efficient restructuring of an enterprise showing signs of insol- vency, creditor financial institutions of the enterprise shall establish a Council.

(2) The principal creditor bank shall have the power to convene and operate the Council.

(3) The principal creditor bank may call a meeting of the Council to delib- erate on and adopt a resolution on the matters under subparagraphs of Article 21 (1). Any creditor financial institution other than the prin- cipal creditor bank may, if the amount of credit granted to the enterprise by the creditor financial institution solely or jointly with another credit financial institution exceeds one-fourth of the total amount of credit granted by creditor financial institutions, request the principal creditor bank to call a meeting of the Council, and the principal creditor bank shall, upon receiving such a request, call such meeting without delay. (4) In cases where a creditor financial institution intends to sell all its financial assets (including stocks converted into investment in accor- dance with the relevant business normalization plan) against the en- terprise to any person other than creditor financial institutions or entrust such person with power to administer such financial assets after a notice to call a meeting of the Council is issued, the creditor financial insti- CORPORATE RESTRUCTURING PROMOTION ACT

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tution shall require the person to prepare a letter of undertaking, stating that he/she shall comply with the provisions of this Act, and submit the letter to the Council: Provided, That in cases where the aggregate of the number of stocks held by the creditor financial institution after conversion into investment exceeds one share plus 50/100 of total number of outstanding voting stocks of the enterprise, such excess portion of stocks may be sold by resolution of the Council without necessarily re- quiring such letter of undertaking.

(5) The principal creditor bank may request the enterprise to obtain a letter of undertaking from any creditor other than creditor financial institutions, stating that he/she shall comply with the provisions of this Act and submit it to the Council. Such creditor who submits the letter of undertaking shall be deemed as a creditor financial institution under this Act.

Article 20 (Exclusion of Creditor Financial Institutions with Small Claims) The Council may, if deemed necessary for efficient restructuring, exclude creditor financial institutions whose amount of credit granted to an enterprise does not exceed the ratio predetermined by the Council within the limit of 5/100 of total amount of credit granted by creditor financial institutions (hereinafter referred to as "creditor financial institutions with small claims") from the Council. In this case, the creditor financial institutions with small claims so excluded shall not be deemed as creditor financial institutions for such purpose.

Article 21 (Business Affairs of Council)

(1) The Council shall be responsible for deliberation and passing reso- lutions on the following matters:

1. Identifying enterprises showing signs of insolvency;

2. Making decisions as to whether to commence or continue proceedings of joint administration by creditor financial institutions;

3. Determining and extending the grace period for the exercise of the rights to claims;

4. Making Agreements;

5. Monitoring the actual performance of Agreements and taking coun- termeasures accordingly;

6. Monitoring and assessing the possibility of business normalization of an enterprise and taking countermeasures accordingly; CORPORATE RESTRUCTURING PROMOTION ACT

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7. Establishing plans for readjustment of claims and credit grants;

8. Selling stocks under Article 7 (4);

9. Making decisions to exclude creditor financial institutions with small claims; and

10. Other matters relating to those under the provisions of subpara- graphs 1 through 9.

(2) The Council shall, whenever it conducts a deliberation or adopts a resolution under paragraph (1), provide the operator of the enterprise concerned an opportunity to make a statement on his/her case in ad- vance, orally or in writing.

(3) The Council may, if deemed necessary for efficient restructuring of an enterprise showing signs of insolvency, delegate its power to carry out business affairs under subparagraphs of paragraph (1) in whole or in part to the steering committee composed of representatives of the creditor financial institutions, which are members of the Council, or the principal creditor bank, subject to its prior resolution. Article 22 (Resolution Method, etc. of Council)

(1) The Council shall adopt resolutions by the affirmative vote of creditor financial institutions whose amount of credit granted reaches or exceeds three-fourths of the total amount of credit granted by all creditor fi- nancial institutions (including the claims converted into investment in accordance with the relevant business normalization plan; hereinafter the same shall apply): Provided, That the Council may adopt any other resolution method specifying the scope of a specific case by its resolution. (2) Each creditor financial institution shall perform its obligations under the resolution adopted in accordance with paragraph (1). (3) Other matters necessary for the operation of the Council shall be determined by the Council as prescribed by Presidential Decree. Article 23 (Reporting, etc. on Amount of Credit Grant) (1) Each creditor financial institution shall, upon receiving a notice of a meeting of the Council for commencing the proceedings of joint admin- istration under Article 8, file a report with the principal creditor bank on the amount of credit that it has granted to the enterprise concerned as of the day immediately before the date on which such notice is issued, within five days from the date of such notice.

(2) Each creditor financial institution shall exercise its voting right at CORPORATE RESTRUCTURING PROMOTION ACT

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the Council in proportion to the amount of credit grant reported under paragraph (1): Provided, That it may exercise the voting right based on the latest amount of credit grant notified by the public credit registry to the principal creditor bank during the period set for reporting under paragraph (1).

(3) A resolution adopted by the Council under the proviso to paragraph (2) shall be effective only in cases where the amount of credit grant reported by each creditor financial institution that voted for such a resolution sat- isfies the requirements for resolution under Article 22 (1). (4) The Council may, if there is any dispute in regard to whether the amount of credit grant reported by a creditor financial institution ac- tually exists, place a restriction on the exercise of the voting right of such a financial institution until its existence is finally confirmed. (5) The creditor financial institution whose voting right becomes subject to the restriction under paragraph (4) may exercise its voting right on and after the day on which it is finally confirmed that its amount of credit grant exists, but it may not contest the resolutions adopted by the Council until then. In this case, the period for demanding to pur- chase its claims under Article 24 (1) shall be counted from the day on which the existence of its amount of credit grant is finally confirmed. (6) A person who files a report on its amount of credit grant after the end of the period set for reporting under paragraph (1) may exercise its voting right on or after the day on which its amount of credit grant is finally confirmed, but it may not contest the resolutions adopted by the Council until then.

Article 24 (Dissenting Creditor's Right to Demand to Purchase Claims) (1) A creditor financial institution that dissents from a resolution adopted by the Council under Article 22 (1) concerning any of the following mat- ters (hereinafter referred to as a "dissenting creditor") may demand the Council to purchase its claims within seven days from the day on which such a resolution is adopted by the Council. In this case, the persons who have a right to demand to purchase its claims shall be limited to those who were not present at the meeting of the Council or who were present at the meeting but expressed their dissent in writing, and a person who fails to demand the purchase of its claims within the pre- scribed period of time shall be deemed to have consented to the relevant CORPORATE RESTRUCTURING PROMOTION ACT

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resolution of the Council:

1. Commencement of proceedings of joint administration by creditor financial institutions under Article 8 (1); and

2. Readjustment of claims or new credit grant under Article 12. (2) The Council shall, upon receiving a demand under paragraph (1), no- tify the dissenting creditor of the purchase price of the claims and terms and conditions within one month from the date of such a demand, and shall require creditor financial institutions that consented to the res- olution among its members to purchase them within the period for the performance of business normalization.

(3) The Council may request the Korea Asset Management Corporation under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of the Korea Asset Man- agement Corporation, the Deposit Insurance Corporation or a re-organizing financial institution under the Depositor Protection Act, or any other institution designated by the Council to purchase the claims of dissenting creditors, or request the relevant enterprise to redeem them. (4) The purchase or redemption price of claims under paragraph (2) or (3) and terms and conditions thereof shall be stipulated by an agree- ment between the Council and the dissenting creditor. In this case, if it is difficult to fix the price for purchase or redemption of claims, a ten- tative price may be paid first, and the difference between the price agreed upon and the tentative price may be settled subsequently. (5) If the parties fail to reach an agreement under paragraph (4), the Mediation Committee under Article 26 (1) shall determine the purchase or redemption price of claims and terms and conditions thereof. In this case, the Mediation Committee shall consider the price calculated by a professional accountant appointed under an agreement between the Council and the dissenting creditor by assessing the value of the enter- prise showing signs of insolvency and the capability of performing the relevant Agreement, the financial situation of the purchasing institution, etc.

Article 25 (Liability for Damages)

(1) Creditor financial institutions that fall under any of the following subparagraphs shall be jointly liable for damages sustained by other fi- nancial institutions within the limit of the damage actually sustained CORPORATE RESTRUCTURING PROMOTION ACT

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thereby:

1. If the creditor financial institutions were present at a meeting of the Council and consented to a resolution at that meeting, but have not performed their obligations under the resolution; and

2. If the creditor financial institutions did not submit a letter of under- taking under the main sentence of Article 19 (4) to the Council when they sold their claims to any person other than creditor financial institutions or entrust such a person with power to administer the claims in accordance with the main sentence of the same paragraph. (2) A creditor financial institution that has been held liable for damages under paragraph (1) may pay its penalty to the Council for all other creditor financial institutions. In this case, it shall be discharged from liability for damage under paragraph (1).

(3) The amount of penalty under paragraph (2) and the distribution of such penalty received shall be determined by the Council, and any dispute arising from such penalty shall be settled by mediation by the Mediation Committee under Article 26.

Article 26 (Mediation Committee for Creditor Financial Institutions) (1) The mediation committee for creditor financial institutions (here- inafter referred to as the "Mediation Committee") shall be established for the purposes of efficient reorganization of an enterprise showing signs of insolvency, mediation of differences between creditor financial insti- tutions, etc.

(2) The Mediation Committee shall be composed of seven members ap- pointed as prescribed by Presidential Decree among those falling under any of the following subparagraphs (excluding those who work for the Government, a financial supervisory agency, a creditor financial insti- tution, or an enterprise showing signs of insolvency):

1. A person who has career experience working for a financial institution or in a finance-related area for at least ten years;

2. A person who holds a license as a lawyer or a certified public accountant;

3. A holder of a master's degree or higher degree in a finance-related area, who has career experience working for a research institute, a university or a college for at least ten years as a researcher, a full-time lecturer, or with any higher position and has expertise in corporate restructuring; and

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4. A person who has career experience working in the field of corporate restructuring for at least three years.

(3) The term of office of the chairperson and each member of the Me- diation Committee shall be one year, but this may be extended con- secutively, and the chairperson shall be elected from among and by the members.

(4) The Mediation Committee shall carry out the following business affairs:

1. Mediating differences unsettled by free negotiations between creditor financial institutions (excluding differences in any resolution of the Council) concerning any of the matters specified by Presidential De- cree;

2. Mediating disputes concerning the purchase or redemption price of claims and the terms and conditions thereof under Article 24 (5);

3. Mediating disputes concerning the amount of penalty and the dis- tribution of such penalty received under Article 25 (3);

4. Making judgments on whether resolutions of the Council have been violated or making decisions on the implementation of such resolu- tions;

5. Establishing and amending regulations relating to the operation of the Mediation Committee; and

6. Other matters concerning the operation of the Mediation Committee as prescribed by Presidential Decree.

(5) The Mediation Committee shall independently carry out the business affairs under its control.

(6) The Mediation Committee shall adopt resolutions by affirmative vote of two-thirds or more of its incumbent members.

(7) Other matters necessary for the organization, operation, etc. of the Mediation Committee shall be prescribed by Presidential Decree. Article 27 (Application, etc. for Mediation)

(1) Any creditor financial institution that has any objection to a matter deliberated by the Council may file an application for mediation with the Mediation Committee in writing, describing the grounds for the application.

(2) Each creditor financial institution that files an application for me- diation under paragraph (1) shall demonstrate that it has made every CORPORATE RESTRUCTURING PROMOTION ACT

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effort to reach agreement through free negotiations. Article 28 (Mediation Procedure, etc.)

(1) The Mediation Committee shall notify the relevant creditor financial institution and the Council of the result of the mediation conducted by it in connection with an application for mediation under Article 27. (2) Any mediation by the Mediation Committee shall be as effective as a resolution by the Council: Provided, That any creditor financial insti- tution may, if dissatisfied with the result of such mediation, file an application for amendment therof with the competent court. CHAPTER SPECIAL EXCEPTIONS

FOR PROMOTION OF COR-

PORATE RESTRUCTURING

Article 29 (Special Exceptions to Restriction, etc. on Investment and Asset Management)

(1) The following provisions shall not apply to a creditor financial in- stitution, when it converts its claims into investment or readjusts its claims according to a resolution of the Council for corporate restructuring under this Act:

1. Article 37 and subparagraph 1 of Article 38 of the Banking Act;

2. Articles 106, 108 and 109 of the Insurance Business Act;

3. Article 17 of the Merchant Banks Act;

4. Article 24 of the Act on the Structural Improvement of the Financial Industry;

5. Article 19 of the Financial Holding Companies Act; and

6. Other provisions of the Acts and their subordinate statutes gov- erning the restrictions, etc. on investment and asset management as prescribed by Presidential Decree.

(2) In cases where a creditor financial institution converts its claims into investment in accordance with paragraph (1), the enterprise showing signs of insolvency may issue its stocks at a price below par value only with a resolution of a general meeting of its shareholders under Article 434 of the Commercial Act, without necessarily obtaining authorization from the competent court, notwithstanding Article 417 of the same Act. In this case, the stocks shall be issued within one month from the date CORPORATE RESTRUCTURING PROMOTION ACT

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on which such resolution is adopted at a general meeting of shareholders, except as resolved otherwise by such general meeting of shareholders. (3) Paragraph (1) shall be applicable until the lapse of two years after the administrative proceedings under Article 7 (1) are concluded or discontinued, and the afore-said period may be extended with approval of the Financial Service Commission. CHAPTER CORRECTIVE MEASURES

Article 30 (Corrective Measures against Creditor Financial Institutions) (1) The Financial Service Commission may, if a creditor financial institution has committed any of the following acts, demand it to rectify such act within a given period:

1. If it has failed to commence the administrative proceedings without justifiable grounds, in violation of Article 7;

2. If it has violated Article 11 (3) or 16 (1) or (3); and

3. If it sold its claims or entrusted someone with power to administer such claims in violation of the main sentence of Article 19 (4). (2) If a creditor financial institution fails to comply with the demand for rectification under paragraph (1) without justifiable grounds within the given period, the Financial Service Commission may demand or order the creditor financial institution to take the following measures:

1. Caution, warning, censure, or salary reduction against the creditor financial institution or its officers and employees;

2. Suspension of service of its officers or appointment of an adminis- trator who shall act as an officer;

3. Partial suspension of its business; and

4. Other measures similar to those under subparagraphs 1 through 3 as deemed necessary for the rectification of violations. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force three months after the date of its promul- gation.

Article 2 (Effective Period)

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(1) This Act shall be effective until December 31, 2010. (2) This Act shall remain applicable until the administrative proceedings under Article 7 (1) are completed or discontinued, in cases where the principal creditor bank issues a notice for a meeting of the Council within the effective period of this Act.

Article 3 (Applicable Examples)

(1) Article 13 shall apply to the cases of credit granted on or after the enforcement date of this Act.

(2) Articles 23 through 25 shall apply to the resolutions adopted by the Council on or after the enforcement date of this Act. (3) Paragraphs (1) and (2) shall not apply to the administrative pro- ceedings under Article 4 of Addenda.

Article 4 (Transitional Measures concerning Ongoing Administrative Proceedings)

The administrative proceedings in progress pursuant to Article 2 (3) of Addenda of the Corporate Restructuring Promotion Act (Act No. 6504) enforceable at the time when this Act enters into force shall be governed by this Act effective on the date this Act enters into force. In this case, resolutions, suspension of the exercise of the rights to claims, execution of any Agreement for performance of the relevant business normalization plan, re-adjustment of claims, and other acts adopted or performed by a principal creditor bank or the Council before the date this Act enters into force shall be deemed as acts performed by the principal creditor bank or the Council pursuant to this Act.

Article 5 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 through 5 Omitted.