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Selected Statutes of the Republic of Korea |
Act No. 991, Jan. 20, 1962
Amended by Act No. 5453, Dec. 13, 1997
Act No. 5505, Jan. 13, 1998
Act No. 5747, Feb. 5, 1999
Act No. 6627, Jan. 26, 2002
Act No. 8635, Aug. 3, 2007
Act No. 8863, Feb. 29, 2008
CHAPTER Ⅰ GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to guide and supervise trust business in connection with the issuance of secured corporate bonds and protect bondholders to facilitate investment by the general public in such bonds.
Article 2 (Definition)
The term “trust company” means a corporation that engages in trust business for secured bonds.
Article 3 (Issuance of Bonds)
In order to issue secured bonds by backing them by assets, a trust contract shall be made in advance by and between the issuer
of the bonds (hereinafter
referred to as the “trustor”) and a trust company.
Article 4 (Types of Physical Collateral)
(1) The assets acceptable as a physical collateral to secured bonds shall be limited to those listed below:
1. Chattel pledge;
2. Pledge of the right to claim evidenced by a certificate;
3. Stock pledge; and
4. Mortgage on real property and other mortgages acceptable under other
Acts or their subordinate statutes.
(2) Offering stocks as a physical collateral requires approval from the
1
Financial Services Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863,
Feb. 29, 2008>
Article 5 (Registration of Trust Business, etc.)
(1) Persons who desire to engage in trust business shall have themselves registered with the Financial Services Commission. <Amended by Act No. 8863,
Feb. 29, 2008>
(2) Persons eligible for making registration under the provision of paragraph
(1) shall be limited to the trust companies under the Financial Investment
Services and Capital Markets Act and the financial institutions under the
Banking Act. <Amended by Act No. 8635, Aug. 3, 2007>
(3) Persons who intend to have themselves registered pursuant to the provision of paragraph (1) shall file with the Financial
Services Commission
an application for registration stating the following information: <Amended
by Act No. 8863, Feb. 29, 2008>
1. Trade name;
2. Principal place of business;
3. Information about capital;
4. Information about senior executives; and
5. Information necessary for the examination of application in addition to those set forth in subparagraphs 1
through 4, as prescribed by
Ordinance of the Prime Minister.
(4) An application form under the provision of paragraph (3) shall be accompanied by the following documents:
1. The Articles of Incorporation;
2. Balance sheets for the previous year;
3. Document stating shareholders’ names and the number of stocks held by each of them; and
4. A certified copy of the corporate register.
(5) The Financial Services Commission may not deny the registration for which an application is filed in compliance with
the provision of paragraph (1), unless there is a false statement on an important information or omission
of such information in the application itself or any of its accompanying documents, and shall, upon completion of
the registration, issue to the applicant a certificate of registration with the following descriptions:
<Amended by Act No. 8863, Feb. 29, 2008>
1. Number and date of registration;
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2. Trade name and principal place of business of the company;
3. Representative’s name; and
4. Details of registration.
(6) The Financial Services Commission shall notify the applicant of its denial of the registration under the provision of
paragraph (5) forthwith, if and when the registration is denied. <Amended by Act No. 8863, Feb. 29, 2008>
[This Article Wholly Amended by Act No. 5747, Feb. 5, 1999]
Article 6 Deleted. <by Act No. 5747, Feb. 5, 1999>
Article 7 (Supervision of Business)
The trust business shall be subject to supervision of the Financial Services
Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 8 (Inspection of Business)
(1) The Financial Services Commission may, from time to time, inspect the status of the property included in the business of the trust company or require the trust company to submit a report on its business. <Amended
by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may commission the Governor of
the Financial Supervisory Service to conduct the inspection under the provision of paragraph (1), if considered
necessary to do so. In this case, the Governor of the Financial Supervisory Service may charge and collect
the inspection fee as prescribed by the Financial Services Commission. <Newly
Inserted by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 9 (Order for Change in Business and Other Matters)
The Financial Services Commission may order a trust company to suspend its business or change the method for executing its
business if it finds that
the service provided by the trust company or the status of its property is not proper for the execution of its trust
business, or may issue an order necessary for protecting the trustor and bondholders. <Amended by Act No. 5505,
Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 10 (Cancellation of Registration, etc.)
The Financial Services Commission may issue an order to suspend the business of a trust company, demand it to remove
a senior executive or director, or cancel its registration, if the company falls under one of the
following subparagraphs: <Amended by Act No. 8863, Feb. 29, 2008>
1. If the trust company violates any law, regulation, or its Articles of
Incorporation, or an order issued under this Act; or
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2. If the trust company commits an act harmful to the public interest.
[This Article Wholly Amended by Act No. 5747, Feb. 5, 1999]
Article 10-2 (Hearing)
The Financial Services Commission shall hold a hearing whenever it considers cancelling the registration of a trust
business under the provision
of Article 10. <Amended by Act No. 5747, Feb. 5, 1999; Act No. 8863, Feb. 29, 2008> [This Article Newly Inserted by Act No. 5453,
Dec. 13, 1997]
Article 11 (Overseas Offering of Bonds for Sale)
(1) A corporation who intends to offer bonds for sale by backing them with a physical collateral to investors in a foreign country
may enter into a trust contract with a foreign company subject to a prior authorization of the
Financial Services Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863,
Feb. 29, 2008>
(2) The foreign company who accepts the trust under paragraph (1) shall
appoint a representative who resides within the Republic of Korea, if it has no branch office in the Republic of Korea.
(3) A commercial company may act as the representative.
(4) When a representative is appointed pursuant to the provision of paragraph (2), his/her name and address or
the trade name and the principal
place of business of the representative shall be reported to the Financial
Services Commission forthwith. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863,
Feb. 29, 2008>
(5) The representative of a foreign trust company who resides within the
Republic of Korea shall have the equal authority as that of a director or representative officer of the foreign trust company
as far as its trust business
is concerned.
CHAPTER Ⅱ TRUST DEED
Article 12 (Trust Contract)
The trust contract shall be made in the form of trust deed.
Article 13 (Mandatory Descriptions of Trust Deed)
The trust deed shall contain the following descriptions, and the representatives of both the trustor and
the trust company shall sign the
deed:
1. Trade names of the trustor and the trust company;
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2. Total amount of the bonds;
3. Amount of each bond;
4. Issued or minimum value of the bonds;
5. Interest rate of the bonds;
6. Method and maturity for the redemption of the bonds;
7. Method and maturity for the payment for interest;
8. Representation of the descriptions that shall be inserted in the bonds and the representation of the meaning of a coupon,
if it is the case;
9. Representation of the type of physical collateral, subject matter, priority,
amount of the claim entitled to senior priority to the collateral, and other rights to assert against any other security
interest holder concerning the subject matter; and
10. Representation of the fact that it is a bond under the provision of Article
28 (1) if it is the case, and the burden alloted to each company.
Article 14 (Mandatory Entries of Trust Deed for Partial Issuance)
(1) Where total amount of the bonds is issued in several installments, the trust deed shall contain the following descriptions
in lieu of the descriptions set forth in subparagraphs 3 through 8 of Article 13:
1. Representation that the total amount of the bonds is issued in several installments; and
2. Maximum interest rate for the bonds.
(2) If the relevant trust contract provides specifically for the amount of the bonds to be issued initially and thereafter
and the details concerning the descriptions set forth in subparagraphs 3 through 8 of Article 13, such
fact shall also be stated accordingly.
Article 15 (Additional Contract for Partial Issuance)
(1) Where total amount of the bonds is issued in several installments, the trustor shall make an agreement with the
trust company whenever issuing
the bonds, if there is no relevant provision concerning the description set forth in Article 14 (2) in the relevant trust
contract.
(2) The representatives of both the trustor and the trust company shall sign the agreement under paragraph (1).
(3) The deed of agreement under paragraph (1) shall have the same effect
as the trust contract.
(4) The provision of Article 67 (2) shall apply mutatis mutandis to the written agreement under paragraph (2).
5
(5) The amount of each bond shall be the one calculated by dividing the
total amount of the bonds evenly or by a minimum amount.
Article 16 (Preservation and Inspection of Deed)
(1) The trustor and the trust company shall keep each set of the trust deed.
(2) The head office of each party shall keep the original set of the trust deed, while each branch office of each party
shall keep a certified copy of
the deed respectively.
(3) The original set or certified copy of the trust deed under paragraph (2)
shall be made available for inspection or copying at any time during the normal business hours whenever there is a
request from a shareholder,
bondholder, or subscriber to do so.
CHAPTER Ⅲ OFFERING OF BONDS
Article 17 (Public Announcement for Public Offering)
(1) The company who publicly offers its bonds secured by a physical collateral pursuant to the relevant trust contract shall announce
the following to the
general public:
1. The descriptions set forth in subparagraphs 1 through 7 and 10 of Article
13;
2. Identification of the bonds backed by a physical collateral;
3. Identification of the relevant trust deed;
4. Summarized descriptions set forth in subparagraph 9 of Article 13 to the extent necessary for making the value
of the physical collateral known;
5. Representation of the results of the survey conducted by the trust company in relation to the value of the collateral;
6. Balance of the bonds previously offered and sold but not redeemed
completely yet;
7. Capital of the company and total amount of paid capital;
8. Value of the assets existing as of the date of the latest balance sheet;
and
9. Time and place available for subscribers' inspection or copying of the trust deed or its certified copy.
(2) Where the total amount of the bonds is issued in several installments, the following information shall also
be announced in addition to the
6
descriptions set forth in paragraph (1): Provided, That the descriptions
set forth in subparagraphs 3 through 7 of Article 13 shall be limited to those concerning the bonds issued at that time:
1. Representation that the total amount of the bonds is issued in several installments and the amount issued at that time;
2. The amount previously issued at each time, the outstanding amount,
and the interest rate and maturity for redemption of the outstanding amount;
3. Identification of the deed of agreement, if there is a deed of agreement
under Article 15 (1) involved in relation to the issuance at that time;
and
4. Time and place available for subscribers' inspection or copying of the deed of agreement set forth in subparagraph
3 or its certified copy.
(3) The announcement under paragraph (2) shall be subject to an approval of the trust company.
Article 18 (Delegation of Public Offering)
The trustor may delegate the public offering of bonds to the trust company in accordance with the relevant trust contract.
In this case, the trust
company shall have power to do any act in relation to the issuance of the bonds, redemption of the bonds and payment for interest,
except as expressly specified otherwise in the trust contract.
Article 19 (Vicarious Announcement of Public Offering)
(1) In the case set forth in Article 18, the public announcement under Article
17 shall be made by the trust company.
(2) The public announcement under paragraph (1) shall include the fact that the trust company makes the public offering
of the bonds vicariously on behalf of the trustor.
Article 20 (Trust Company's Underwriting of Bonds)
(1) The trust company may underwrite total amount of bonds in accordance with the terms and conditions of the trust contract.
(2) In the case set forth in paragraph (1), it is not necessary to make the announcement required by Articles 17 and 19.
Article 21 (Partial Issuance of Bonds)
(1) In the case as set forth in Article 20 (1), the trust company may request the trustor to issue the bonds underwritten by it
in several installments.
(2) The trust company who has power to issue the bonds in accordance with
7
the trust contract may issue the bonds as set forth in paragraph (1) by
simply notifying the trustor of its issuance.
Article 22 (Transfer of Underwritten Bonds)
(1) The trust company who plans to transfer the bonds underwritten in accordance with the provision of Article 20
(1) to others shall publicly announce such a plan.
(2) The provisions of Article 17 shall apply mutatis mutandis to the descriptions that shall be contained in the public announcement under paragraph (1).
(3) The trust company shall, upon receiving a request from a person who is willing to purchase the bonds, make the trust
deed or its certified copy available for his/her inspection or copying during its normal business hours.
(4) The trust company shall have power to do any act in relation to redemption of the bonds and payment for interest
on behalf of the trustor, where the bonds are transferred in accordance with the provision of
paragraphs (1) through (3).
Article 23 (Third Party's Underwriting for Total Amount of Bonds)
(1) Either the trustor or the trust company may invite a third party to underwrite total amount of the bonds in
accordance with the terms and
conditions of the trust contract.
(2) Underwriting total amount of the bonds under the provision of paragraph
(1) shall be deemed to be a commercial transaction.
(3) The underwriter for total amount of bonds in accordance with the provision of paragraph (1) may request the
trustor to issue bonds in
appropriate installments.
(4) If the trust company has power to issue the bonds in accordance with the trust contract, such a request as provided
for in paragraph (1) may
be made to the trust company.
Article 24 (Mutatis Mutandis Application to Underwriting for Total
Amount of Bonds)
(1) The provisions of Articles 20 (2) and 22 (1), (2) and (4) shall apply
mutatis mutandis to the case where a third party underwrites total amount of bonds in accordance with the provision of Article 23 (1).
(2) Where a third party underwrites total amount of bonds in accordance
with Article 23 (1), the descriptions set forth in Article 17 (1) 5 may be substituted with the representation of the
results of the survey conducted
8
by the third party in relation to the value of the collateral.
Article 25 (Delivery of Certified Copy of Trust Deed)
(1) Either the trustor or the trust company shall deliver a certified copy of the trust deed to the underwriter for total
amount of bonds in accordance
with the provision of Article 23 (1).
(2) The certified copy under paragraph (1) shall be signed by the representative of either the trustor or the
trust company, and shall carry
a certification that it is true and identical with its original set.
(3) The provision of Article 22 (3) shall apply mutatis mutandis to the certified copy under paragraph (1).
Article 26 (Term for Partial Issuance of Bonds)
Where the total amount of bonds is issued in several installments, the issuance for the last installment shall be
made within five years from the
execution date of the trust deed.
Article 27 (Partial Issuance and Reduction of Total Amount of Bonds)
(1) Where the total amount of bonds is issued in several installments, the trustor may make an agreement with the trust
company to reduce the total amount of the bonds by up to the amount of issued bonds if there are any
bonds not issued yet. In this case, the trust company may not refuse to execute such an agreement without a justifiable
reason.
(2) The trustor shall compensate for the loss or damage sustained by the
trust company, if any, due to the execution of such an agreement under paragraph (1).
(3) The provisions of Articles 15 (2) and 67 shall apply mutatis mutandis
to the agreement under paragraph (1).
Article 28 (Issuance of Joint Bonds)
(1) A company may jointly issue bonds. In this case, the company shall either delegate the public offering of the bonds
to the trust company or allow
the trust company to underwrite total amount of the bonds.
(2) In the case set forth in paragraph (1), the trust company shall have power to do any act in relation to the
issuance of the bonds, redemption
of the bonds, and payment for interest.
Article 29 (Partial Underwriting for Bonds)
Where total amount of bonds is issued in several installments, the underwriting for the amount issued at each time shall be deemed to be the underwriting for total amount of the bonds.
9
Article 30 Deleted. <by Act No. 5747, Feb. 5, 1999>
CHAPTER Ⅳ BONDS
Article 31 (Mandatory Descriptions of Bonds)
Each bond issued under a trust deed shall bear the following descriptions:
1. Descriptions set forth in subparagraphs 1 through 3 and 5 through 7 of Article 13;
2. Descriptions set forth in Article 17 (1) 2 and 3;
3. Descriptions set forth in Article 17 (2) 1 and 3, if the total amount of the bonds is issued in several installments;
4. Serial number of the bond; and
5. Descriptions set forth in Article 30 (1) 3 and 4.
Article 32 (Certification of Bonds)
(1) In issuing the bonds that conform to the terms and conditions of the trust contract, the trust company shall,
upon receiving a request, certify
that the bonds are the one issued in compliance with the trust contract and deliver them to the trustor or a person designated
by the trustor.
(2) The certification under paragraph (1) shall be stated in each bond and
followed by a signature of a director or representative officer of the trust company.
Article 33 (Invalidity of Bonds)
A bond issued under a trust deed shall be invalid if there is no certification in the bond as set forth in Article 32.
Article 34 (Vicarious Issuance of Bonds)
(1) The trust company who issues bonds vicariously on behalf of the trustor shall state the fact of its vicarious issuance
in each bond and its director or representative officer shall write his/her signature on the statement.
(2) The provisions of Articles 32 and 33 shall not apply to the bonds issued in compliance with paragraph (1).
Article 35 (Rights and Duties of Vicarious Issuer of Bonds)
(1) Where the trust company issues bonds vicariously on behalf of the trustor, the trusty company shall be obliged
to put the descriptions as prescribed in the provisions of Article 479 of the Commercial Act and the
provisions pursuant to which the aforesaid Article shall become applicable
mutatis mutandis, while the request in accordance with the provision of
10
Article 480 of the Commercial Act and the provisions pursuant to which
the aforesaid Article shall become applicable mutatis mutandis shall be made to the trust company. <Amended by Act No. 5747, Feb. 5, 1999>
CHAPTER Ⅴ BOND REGISTER
Article 36 (Mandatory Entries of Bond Register)
(1) Where a company issues bonds backed by a physical collateral, the bond register shall contain the following descriptions
in addition to the descriptions set forth in each subparagraph of Article 488 of the Commercial
Act: <Amended by Act No. 5747, Feb. 5, 1999>
1. Descriptions under subparagraphs 1, 9 and 10 of Article 13;
2. Descriptions under Article 17 (1) 2 and 3;
3. The fact that there exists the delegation under the provision of Article
18 or the underwriting under the provision of Article 20 (1); and
4. The fact that there is an underwriter for the bonds under the provision of Article 23 (1), if any, and the name or trade
name of the underwriter.
(2) Where total amount of bonds is issued in several installments, the descriptions set forth in Article 17 (2) 1 and
3 shall be entered in the bond
register in addition to the descriptions set forth in paragraph (1), whenever issuing the bonds.
Article 37 (Preparation of Certified Copies)
(1) The trustor shall prepare and deliver a certified copy of the bond register to the trust company or the underwriter for total
amount of the bonds under the provision of Article 23 (1).
(2) A director or a representative officer of the trustor shall put his/her signature in the certified copy prepared
in accordance with paragraph (1) and shall certify that the copy is true and identical with its original register.
(3) The trust company shall keep the certified copy prepared in accordance with paragraph (2) and shall make it available
for a bondholder's inspection or copying at any time during its normal business hours whenever requested
by the bondholder.
Article 38 (Vicarious Preparation of Issuer's Register and Delivery of
Certified Copies)
(1) Where bonds are issued by the trust company vicariously on behalf of the trustor, the trust company shall prepare and keep the bond register
11
in its head office, and shall deliver the certified copy thereof to the trustor
and the underwriter for total amount of the bonds under the provision of
Article 23 (1).
(2) The provisions of Articles 37 (2) and (3) and 39 of this Act and Article
396 (2) of the Commercial Act 27 shall apply mutatis mutandis to the case as set forth in paragraph (1). <Amended by Act No. 5747, Feb. 5, 1999>
Article 39 (Modification of Register)
(1) Either the trustor or the trust company shall notify the other party by a document signed by its director or representative
officer of modification
whenever such modification is made in the bond register.
(2) The trust company or the trustor shall, upon receiving the document mentioned in paragraph (1), file and keep it
with the certified copy of the
bond register.
Article 40 (Process for Modification of Register)
The trustor, the trust company or the underwriter for total amount of bonds under the provision of Article 23 (1) shall notify
the company that keeps
the bond register in writing of its act that it has done to cause any modification of the bond register consequently.
CHAPTER Ⅵ ASSEMBLY OF BONDHOLDERS
Article 41 (Call for Assembly of Bondholders)
Either the trust company or the underwriter for total amount of bonds under the provision of Article 23 (1) may call
an assembly of bondholders
(hereinafter referred to as the “assembly”) at any time whenever it is considered necessary.
Article 42 (Rights to Call Meetings)
(1) Either the trustor or a bondholder who holds at least ten percent of total amount of bonds may submit to the trust
company or the underwriter
for total amount of the bonds under the provision of Article 23 (1) a document stating the purpose of a meeting and the reason
for calling the meeting to request it to hold the meeting.
(2) If the person to whom the request under paragraph (1) has been submitted fails to initiate the process necessary
for calling the meeting
12
within two weeks after receiving such request, the requesting party may
call the meeting subject to a prior authorization by the Financial Services
Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 43 (Voluntary Call for Meetings)
(1) A bondholder who holds at least ten percent of total amount of bonds shall have a right to call a meeting prescribed in
Article 78, 83, or 87.
(2) The meeting called in accordance with paragraph (1) shall be held in the trust company's principal place of
business except as provided for otherwise in the trust contract.
(3) The meeting prescribed in Article 83 or 87 may also be called by the trustor itself.
Article 44 (Mutatis Mutandis Application of Commercial Act)
The provisions of Article 363 (1) through (3) of the Commercial Act shall apply mutatis mutandis to the call for the meetings. <Amended by Act No. 5747, Feb. 5, 1999>
Article 45 (Proceedings of Meeting)
(1) A resolution by the assembly shall require the consent of a majority of the actually exercised voting rights except
as provided for otherwise in
the trust contract: Provided, That the resolutions concerning the matters set forth in Articles 55, 57 (1), 65, 74, 75, and 86 (1) shall require
the exercise of voting rights by the bondholders who hold at least one half of
total amount of the bonds among at least one half of the persons who hold their registered bonds and the persons who have deposited
their bonds in accordance with paragraph (2).
(2) The provisions of Article 368 (2) through (4) of the Commercial Act shall apply mutatis mutandis to the resolution by the assembly. <Amended by Act No. 5747, Feb. 5, 1999>
(3) A bondholder absent from the meeting may exercise his/her voting right in writing, except as provided otherwise in the trust
contract.
(4) Each bondholder has one vote for each unit of minimum amount:
Provided, That the voting right of a bondholder who holds bonds eleven times as much as the minimum amount of each bond may be restricted by the trust contract.
Article 46 (Underwriter's Rights to Attend Meetings)
The underwriter for total amount of bonds under the provision of Article
23 (1) or its representative may attend the meeting to speak or make a
13
statement in writing.
Article 47 (Representatives of Trust Company's Rights to Attend Meetings)
The representative of the trust company may attend the meeting to speak or make a statement in writing, unless the
meeting is the one called for
the matters set forth in Article 78 (2).
Article 48 (Notice of Call for Meetings)
(1) The person who calls a meeting shall notify the persons named in Articles
46 and 47 or their representatives of the call.
(2) The provisions of Article 363 (1) and (2) of the Commercial Act shall apply mutatis mutandis to the notice under paragraph (1). <Amended by Act
No. 5747, Feb. 5, 1999>
Article 49 (Right to Demand to Attend Meeting)
The person who calls a meeting may demand the trustor to dispatch its representative to attend the meeting by sending a notice to it, if considered necessary.
Article 50 (Rights to Request Declaration of Invalidity of Resolution)
(1) The trustor, the trust company, or each bondholder has a right to request the competent court to declare the invalidity
of a resolution, if the process
for calling the meeting or its way of resolution breaches the provisions of this Act and the terms or conditions of the trust
contract.
(2) The request under paragraph (1) shall be made within one month after
the relevant resolution is made.
(3) The bondholder who files a complaint to seek for the declaration under paragraph (1) shall deposit his/her bonds, and
shall offer adequate security
if requested by the person who called the meeting to do so.
Article 51 (Agenda for Resolution)
The agenda for resolution by the assembly shall be limited to those specified in the trust contract in addition to those prescribed by this Act.
Article 52 (Preparation and Inspection of Minutes of Meetings)
(1) The person who calls a meeting shall prepare the minutes of meeting.
(2) If any person other than the trust company prepares the minutes of meeting, such a person shall keep the original and
deliver its certified copy to the trust company.
(3) The trust company shall keep the original minutes of meeting at its head office and a certified copy at each of its branch
offices.
(4) The trust company shall, upon receiving a request from the trustor or
14
a bondholder, make the minutes of meeting mentioned in paragraph (3)
available for inspection or copying at any time during its normal business hours.
Article 53 (Liability for Expenses)
The person who calls a meeting shall be liable for all expenses incurred for the meeting except the case where the meeting
is called by the trust
company or the underwriter for total amount of bonds under the provision of Article 23 (1).
Article 54 (Executor of Resolution)
The trust company shall be responsible for executing the resolutions by the assembly: Provided, That a person shall be appointed by the assembly to execute a resolution if the resolution in its nature is not the
one that
can be executed by the trust company.
Article 55 (Delegation of Resolution)
(1) Unless there is a provision otherwise in the trust contract, the assembly may appoint one or more representatives to delegate
them to make a decision
on its agenda.
(2) Each representative shall be appointed from among the underwriter for total amount of bonds under the provision
of Article 23 (1) and persons
who hold at least ten percent of total amount of the bonds.
(3) Where there are many representatives, the agenda over which the representatives have power to resolve shall
be resolved by the consent of
a majority of the representatives except as otherwise resolved by the assembly.
Article 56 (Announcement of Representative's Inauguration and
Authority of Representative)
(1) The representative's inauguration shall be publicly announced immediately and notified to the
trustor, the trust company and the
underwriter for total amount of bonds under the provision of Article 23 (1).
(2) A representative who falls under the proviso of Article 54 may execute the matters within his authority or delegate
another person to execute them
on his/her behalf.
Article 57 (Removal of Representative and Change in Authority)
(1) The assembly may remove its representative or change his/her authority at any time.
(2) In the case set forth in paragraph (1), the assembly shall publicly
15
announce its resolution and notify the trustor and the underwriter for total
amount of bonds under the provision of Article 23 (1) of its resolution.
Article 58 (Resolution by Assembly at the Time of Partial Issuance of Bonds)
(1) Where total amount of bonds is issued in several installments, the item in which only the holders of bonds issued
in a certain installment have interest and that does not cause any loss or damage to the holders of bonds
issued in any installment other than the specific installment shall be resolved by the assembly of the holders
of the bonds issued in the specific installment.
(2) Where it is anticipated that a resolution by the assembly is likely to cause a loss or damage to the holders of bonds
issued in a certain installment, the resolution shall be made only by the assembly of the holders of the bonds
issued in the specific installment.
(3) The provisions concerning assembly shall apply mutatis mutandis to the assembly of the bondholders under paragraph (1).
CHAPTER Ⅶ EFFECT OF TRUST CONTRACTS
Article 59 (Trust Company's Duties)
The trust company shall perform its duty in good faith with fairness and integrity, and shall manage its trust business
with a reasonable care of
a good fiduciary for the trustor and bondholders.
Article 60 (Vesting of Ownership of Physical Collateral)
(1) The ownership of the physical collateral under the trust contract shall vest in the trust company for the whole
of the bonds stated in the trust deed.
(2) The trust company shall keep safe and exercise the security interest for all bondholders.
Article 61 (Bondholders' Benefit)
Each bondholder shall be entitled to the benefit from the collateral equally in proportion of the amount of the bonds held by him/her.
Article 62 (Effect of Physical Collateral)
The physical collateral under the trust contract shall become effective even before the bonds backed by it become effective.
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Article 63 (Inapplicability of Certain Provisions of Civil Act and
The provisions of Article 336 of the Civil Act and Article 59 of the Commercial
Act shall not apply to the security interest under the trust contract. <Amended by Act No. 5747, Feb. 5, 1999>
Article 64 (Addition of Collateral)
The trust company may add another collateral by an agreement with the trustor.
Article 65 (Replacement of Collateral)
The trust company may replace the collateral with another property by an agreement with the trustor subject to a resolution of the assembly.
Article 66 (Effect of Agreement for Addition or Replacement)
The agreements under Articles 64 and 65 shall have the same effect as that of the trust contract.
Article 67 (Announcement of Agreement for Addition or Replacement)
(1) The agreements under Articles 64 and 65 shall be made in the form of a document signed by the representatives of
both the trustor and the
trust company, and the trustor and the trust company shall publicly announce the agreements immediately: Provided, That a notice shall be
given individually to each of known bondholders and the underwriter for total amount of the bonds under Article 23 (1).
(2) The provisions of Articles 16 and 25 shall apply mutatis mutandis to
the deed of agreement under paragraph (1).
Article 68 (Extent of Enforcement of Security Interest)
The security interest under the trust contract may be enforceable only for all bondholders.
Article 69 (Redemption of Bond and Payment for Interest)
(1) If the bonds that shall be redeemed by the trustor in installments on a regular basis are overdue for two months,
or if the payment for interest
by the trustor is overdue for three months, the trust company may send a peremptory notice to the trustor, subject to
the resolution by the assembly,
demanding to make the redemption or payment within a certain period of time stating and reminding that the acceleration
clause will be enforced for the total amount of the bonds if the trustor fails to redeem the bonds
or pay the interest within the specific period of time.
(2) The acceleration clause shall become enforceable against the trustor
17
if it fails to make such redemption or payment within the specific period
of time as set forth in paragraph (1).
(4) The peremptory notice under paragraph (1) shall be made in writing.
Article 70 (Public Announcement and Notice of Acceleration)
If and when the acceleration clause is enforced against the trustor in accordance with the provisions of Article
69, the trust company shall publicly
announce the acceleration immediately: Provided, That a notice shall be given individually to each of known bondholders and the underwriter for total amount of the
bonds under the provision of Article 23 (1).
Article 71 (Enforcement of Security Interest)
(1) If there remain bonds not redeemed after the lapse of the maturity or if the trustor dissolves without completing
its redemption of the bonds, the
trust company shall enforce its security interest immediately subject to a prior resolution by the assembly.
(2) The provision of Article 338 (2) of the Civil Act shall not be applicable
to the chattel pledge under the trust contract. <Amended by Act No. 5747, Feb.
5, 1999>
Article 72 (Judicial Execution)
(1) The trust company may initiate judicial execution over the collateral for all bondholders with the original judgment
or order by which the authority for execution is granted by the competent court, or apply or delegate judicial
sale in accordance with the Civil Execution Act. <Amended by Act No. 5747, Feb.
5, 1999; Act No. 6627, Jan. 26, 2002>
(2) In the case set forth in paragraph (1), the right to contest against the bondholders may be also asserted against the trust company.
Article 73 (Right to Redemption of Bonds)
The trust company shall have full power to do any act necessary for having the bonds redeemed for all bondholders, if there is
no provision to the contrary
in the trust contract.
Article 74 (Suspension of Payment, Discharge of Liability, or Settlement)
The trust company shall have a right to suspend the payment for all bonds, discharge the liability arising from nonperformance or default, or settle a dispute, subject to the resolution by the assembly.
Article 75 (Litigation)
The trust company shall have a right to execute litigation for all bondholders, or conduct any act in connection with the bankruptcy proceedings, subject
18
to the resolution by the assembly.
Article 76 (Public Announcement and Notice of Measures Taken)
The trust company shall, upon closing any action set forth in the provisions of Article 71, 74 or 75, publicly announce its
closing immediately: Provided,
That a notice shall be given individually to each of the known bondholders and the underwriter for total amount of the bonds
under the provision of
Article 23 (1).
Article 77 (Delivery of Repaid Money)
(1) The trust company shall deliver to each bondholder the money received as repayment for bondholders immediately in proportion
of the amount of
bonds held by each bondholder.
(2) The provisions of Article 685 of the Civil Act shall apply mutatis mutandis
to the case where the trust company has spent the money set forth in paragraph (1) for its own interest.
(3) The trust company shall deposit the money set forth in paragraph (2)
for a bondholder, if it is impossible to locate the bondholder, or if the bondholder refuses, or is unable, to receive
the money.
(4) The trust company may delegate the underwriter for total amount of
bonds under the provision of Article 23 (1) to do acts under paragraphs
(1) and (3), if considered necessary.
Article 78 (Appointment of Special Representative)
(1) If the trust company neglects its duty to do an act for all bondholders, the Financial Services Commission may, upon receiving a request from the assembly, appoint a special representative to perform the duty instead.
<Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(2) The provision of paragraph (1) shall also apply to the case where it
is necessary to do an act within or without judicial proceedings for all bondholders, if there is a conflict of
interest between the bondholders and the trust company.
Article 79 (Representation of All Bondholders)
It is not necessary to name each bondholder individually in case where an act is done within or without judicial proceedings
on behalf of all bondholders
in accordance with this Act.
Article 80 (Request for Remuneration)
(1) The trust company may request the trustor to pay adequate remuneration for providing the trust service.
19
(2) The provisions of Article 686 (2) and (3) of the Civil Act shall apply
mutatis mutandis to the trust contract, except as provided for otherwise in the trust contract.
Article 81 (Reimbursement of Expenses)
(1) The trustor shall reimburse the trust company for all expenses paid by the trust company for providing the trust
service, pay the interest for
the period of time from the date when the trust company paid the expenses to the date when the expenses are reimbursed
completely, and also compensate all damages, if any, sustained by the trust company without
its own fault.
(2) The trust company may request the trustor to pay in advance the expenses required for providing its trust service.
(3) The provisions of paragraphs (1) and (2) shall apply mutatis mutandis
to the underwriter for total amount of bonds under the provision of Article
23 (1).
Article 82 (Receipt of Preferential Repayment)
(1) The physical collateral under the trust contract shall be also effective for the claims that the trust company might have
in the future in accordance
with the provision of Article 81 (1).
(2) The trust company shall have a right to have its own claims under paragraph (1) satisfied from the collateral prior
to any bondholder.
Article 83 (Deposit Money)
(1) The Financial Services Commission may, upon receiving a request from the trustor or the assembly, require the trust company
to deposit an adequate
amount of money, if the physical collateral is extinguished or its value is reduced due to the trust company's
intentional or negligent conduct. In this case, it shall be deemed that the trustor owns a pledge right over the
deposit money. <Amended by Act No. 505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(2) The pledge right under paragraph (1) shall become a physical collateral under the trust contract.
Article 84 (Inspection of Collateral)
(1) The trustor, the representative appointed in accordance with the provision of Article 55 (1), or a bondholder
who holds at least ten percent
of total amount of the bonds may inspect the status of the collateral in the custody of the trust company at any time.
(2) A person who holds a bearer bond shall not be allowed to conduct the
20
inspection under paragraph (1), unless and until he/she deposits his/her
bond with the trust company.
Article 85 (Inapplicability of Provision of Civil Act)
The provision of Article 324 (3) of the Civil Act shall not be applicable to the pledge right under the trust contract. <Amended by Act No. 5747, Feb. 5, 1999>
CHAPTER Ⅷ SUCCESSION AND TERMINATION OF TRUST SERVICE
Article 86 (Resignation from Trustee)
(1) The trust company may resign from its position of trustee, in accordance with the terms and conditions of the trust contract
or if there is consent of the trustor and the assembly, after nominating its successor who will
succeed to its trust service: Provided, That it may resign with a prior authorization of the Financial Services Commission, if there is an inevitable reason
or cause. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(2) The provision of Article 11 (1) shall apply mutatis mutandis to the case where the successor of the trust service is a foreign company.
Article 87 (Removal of Trustee)
The Financial Services Commission may, upon receiving a request from the trustor or the assembly, remove the trust company,
if the trust company breaches its fiduciary duty, if it is found that it is not competent for providing
the trust service, or if there is any other justifiable reason. <Amended by Act
No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 88 (Appointment of Successor)
The Financial Services Commission shall appoint a new trust company to let it succeed to the trust service, if the trust
company currently in service
resigns or is removed in accordance with the proviso of Articles 86 (1) and
87, if its registration is cancelled, or if it is dissolved. <Amended by Act No.
5505, Jan. 13, 1998; Act No. 5747, Feb. 5, 1999; Act No. 8863, Feb. 29, 2008>
Article 89 (Formal Requirements for Succession)
(1) The succession to the trust business under the provision of Article 86 shall become effective when the representatives
of the trustor, the previous
trust company, and the new trust company prepare and sign the agreement.
21
(2) The trustor and the trust companies, previous and new, shall, upon
signing the agreement under the provision of paragraph (1), report the agreement in writing to the Financial Services
Commission immediately.
<Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(3) The succession under the provision of paragraph (2) shall become
effective when a written order of the Financial Services Commission is delivered to the new trust company. <Amended by Act No. 5505, Jan. 13, 1998; Act
No. 8863, Feb. 29, 2008>
Article 90 (Public Announcement of Succession)
The succession to the trust business shall be publicly announced immediately by the trustor and the trust
companies, previous and new,
in the case set forth in Article 86, and by the trustor and new trust company in the case set forth in Article 88: Provided, That a notice shall be given
individually to each of known bondholders and the underwriter for total amount of bonds under the provision of Article 23
(1).
Article 91 (Successor's Services)
(1) New trust company nominated in accordance with the provisions of Article 86 or appointed in accordance with the
provisions of Article 88 shall provide its service in compliance with the terms and conditions as agreed
by its predecessor.
(2) The rights vested in and duties imposed on the previous trust company for bondholders and the trustor shall be transferred
to new trust company
retroactively as of the time when the previous trust company resigned or was removed, its registration was cancelled, or
it was dissolved: Provided, That the foregoing shall not apply to the liability arising from the breach
of the contract or a tortious or illegal conduct on the part of the previous trust company. <Amended by Act No. 5747, Feb. 5, 1999>
Article 92 (Unauthorized Disposition)
It shall be deemed that new trust company is deprived of its possession of a pledged property, if another person has taken
the possession in bad faith as a consequence of the previous trust company's unauthorized
disposition.
Article 93 (Transfer Procedures)
(1) A director, representative officer, or trustee in bankruptcy of the previous trust company shall transfer
to new trust company all articles
kept in its custody for the trustor or bondholders and documents related
22
to the trust service immediately, and shall take all other measures necessary
for transferring the trust service to new trust company.
(2) Upon completion of the transfer under the provision of paragraph (1), the trustor and the trust companies, previous
and new, shall report jointly
their completion of the transfer in writing to the Financial Services
Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
(3) The report under the provision of paragraph (2) shall be accompanied by the list of articles transferred.
Article 94 (Supervision)
The Financial Services Commission shall be responsible for the supervision over the administrative affairs related to the succession. <Amended by Act No.
5505, Jan. 13, 1998; Act No. 8863, Feb. 29, 2008>
Article 95 (Public Announcement of Termination)
The trust company shall, upon termination of its trust service, prepare and publicly announce the final settlement statements.
CHAPTER Ⅸ REGISTRATION
Article 96 (Starting Point of Registration Period)
As to the matters that the trust company shall register and for which an
authorization of the Financial Services Commission or registration with the Financial Services Commission is required,
the registration period shall
begin on the date when the letter of authorization or certificate of registration is delivered. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5747, Feb. 5, 1999; Act No.
8863, Feb. 29, 2008>
Article 97 (Registration of Suspension of Business, Cancellation of
Registration, etc.)
The Registrar's Office shall, upon receiving a request from the Financial
Services Commission, register the suspension of business or cancellation of registration decided by the Financial
Services Commission under Article
9 or 10. <Amended by Act No. 8863, Feb. 29, 2008>
[This Article Wholly Amended by Act No. 5747, Feb. 5, 1999] Article 98 and 99 Deleted. <by Act No. 5747, Feb. 5, 1999> Article 100 (Registered Right Holders)
As to the registration of the creation of the security interest under the trust contract, the trust company shall be the registered right holder.
23
Article 101 (Mandatory Descriptions of Application for Registration of
Security Interest)
(1) The amount of bonds that shall be described in accordance with the provisions of Article 140 of the Registration of Real
Estate Act may be shown
only in total amount of the bonds in filing an application for registration of the creation of the security interest under
the trust contract.
(2) Where total amount of bonds is issued in several installments among
the cases set forth in paragraph (1), the application shall state only total amount of the bonds, the representation
that the total amount of bonds is issued in several installments, and the maximum interest rate,
notwithstanding the provision of Article 140 of the Registration of Real
Estate Act.
Article 102 Deleted. <by Act No. 5747, Feb. 5, 1999>
CHAPTER Ⅹ PENAL PROVISIONS
Article 103 (Penal Provisions)
Any person who engages in the trust business in violation of the provisions of Article 5 shall be punished by a fine not exceeding ten million won. <Amended by Act No. 5505, Jan. 13, 1998>
Article 104 (Penal Provision)
(1) Any employee, officer, director, trustee in bankruptcy, or special representative under Article 78 of the
company, or a representative of a
foreign company, who is responsible for execution of the business of the company, shall be punished by a fine not exceeding
five million won, if he/she falls under any of the following subparagraphs: <Amended by Act No. 5505, Jan.
13, 1998; Act No. 8863, Feb. 29, 2008>
1. Deleted; <by Act No. 5747, Feb. 5, 1999>
2. If it violates an order of the Financial Services Commission under this
Act;
3. through 12. Deleted. <by Act No. 5505, Jan. 13, 1998>
Article 105 (Fines for Negligence)
(1) An employee, officer, director, trustee in bankruptcy, or special representative under Article 78 of a company,
or a representative of a foreign
company, who is responsible for business administration of the company, shall be fined for negligence not exceeding five
million won, if he/she falls
24
under any of the following subparagraphs: <Amended by Act No. 8863, Feb. 29, 2008>
1. If he/she interferes with the inspection by the Financial Services
Commission;
2. If he/she violates the provision of Article 11 (1) or 86 (2);
3. If he/she fails to state any of mandatory descriptions in the bonds in compliance with this Act or makes a wrong statement
thereof;
4. If he/she issues the bonds without following the procedure prescribed in the provisions of Article 32, in case where the
trustor issues the bonds;
5. If he/she fails to keep safe or exercise the security interest in compliance
with the provision of Article 60 (2);
6. If he/she violates the provision of Article 77 (1) or (3);
7. If he/she interferes with the inspection under the provision of Article
84 (1);
8. If he/she neglects the transfer of the business affairs under the provision of Article 93 (1);
9. If he/she breaches his/her duty to follow or violates a resolution made by the assembly of the bondholders; or
10. If he/she makes a false report to the assembly of the bondholders or
the representative thereof, or conceals a true fact.
(2) An employee, officer, director, trustee in bankruptcy, underwriter for total amount of bonds under the provision
of Article 23 (1), representative
under Article 55, or special representative under Article 78 of a company, or a representative of a foreign company, who
is responsible for execution of the business of the company, shall be punished by a fine for negligence
not exceeding one million won, if he/she falls under any of the following subparagraphs:
1. If he/she neglects his/her duty to make a report, public announcement,
or notice under this Act or makes a wrong public announcement or notice;
2. If he/she breaches his/her duty to deliver a document in compliance with this Act or makes a wrong statement;
3. If he/she breaches his/her duty to make documents available for inspection or copying in compliance with this
Act without a justifiable reason; or
4. If he/she breaches his/her duty to keep a document in compliance with this Act or state a mandatory description in such
a document, or states a wrong description therein.
25
(3) The fine for negligence under the provisions of paragraphs (1) and (2)
shall be imposed and collected by the Financial Services Commission, as prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
(4) A person who becomes subject to the disposition of the fine for negligence under paragraph (3) may file an objection with
the person having an authority to dispose within twenty days after the notice of the disposition
is served.
(5) Upon receiving an objection filed in accordance with paragraph (4) by a person upon whom the fine for negligence was
imposed under paragraph
(3), the person having an authority to dispose shall notify the competent court thereof without delay, and the competent
court, upon receiving such a notice, shall examine the case and render its decision pursuant to the
Non-Contentious Case Litigation Procedure Act.
(6) The fine for negligence, which has not been paid without filing an objection within the period of time as
prescribed in paragraph (4), shall
be collected in accordance with the practice for the disposition of delinquent national taxes.
[This Article Wholly Amended by Act No. 5505, Jan. 13, 1998]
Article 106 Deleted. <by Act No. 5505, Jan. 13, 1998>
ADDENDA
(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2) (Repealed Act or Decree) The Secured Bond Trust Act (Decree No. 533 of 1920) enforced in Korea under colonial rule shall be repealed.
ADDENDA <Act No. 5453, Dec. 13, 1997>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1998. <Proviso Omitted.>
Article 2 Omitted.
ADDENDA <Act No. 5505, Jan. 13, 1998>
(1) (Enforcement Date) This Act shall enter into force on April 1, 1998.
<Proviso Omitted.>
(2) (Transitional Measures Concerning Dispositions, etc.) The authorizations
26
and other actions of administrative organs, etc. made under the previous
provisions in force at the time when this Act enters into force or the reports and other actions already made to or
against the administrative organs in
accordance with such previous provisions shall be deemed to be the authorizations and actions of, to, or against
the administrative organs made under this Act.
(3) Omitted.
(4) (Transitional Measures Concerning Penal Provisions) The previous penal provisions shall apply to the offenses committed
in violation of the provisions
of Article 103, 104 or 105 of the Secured Bond Trust Act in force before this
Act enters into force. (5) Omitted.
ADDENDA <Act No. 5747, Feb. 5, 1999>
(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2) (Transitional Measures Concerning Trust Companies) It shall be deemed that any persons who engage in the trust
business with an authorization of the Minister of Finance and Economy at the time when this Act enters into
force have completed their registration with the Financial Supervisory
Commission in accordance with the provisions of Article 5 as amended.
ADDENDA <Act No. 6627, Jan. 26, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force on July 1, 2002.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 8635, Aug. 3, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force on the date one and half year after its
promulgation. <Proviso Omitted.>
Articles 2 through 44 Omitted.
ADDENDA <Act No. 8863, Feb. 29, 2008>
Article 1 (Enforcement Date)
27
This Act shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
28
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