On September 10, the Seoul Bankruptcy Court decided to initiate the rehabilitation proceedings for TMON and WEMAKEPRICE (Wemap), which means that TMON and Wemap have entered into a process of financial reconstruction through rehabilitation due to business difficulties. In this article, LIN’s Corporate Insolvency & Bankruptcy Team explains the implications of the decision to initiate rehabilitation proceedings, the subsequent procedures, and essential considerations for creditors.

1. Meaning of the Decision to Initiate Rehabilitation Proceedings

A rehabilitation is a legal process that helps financially distressed companies rebuild their finances under the supervision of a court so that they can continue their normal business activities. The decision to commence rehabilitation means that TMON and Wemap have been given the opportunity to restructure their debts and reorganize their corporate structures under the oversight of the court to achieve financial stability.

Alongside the commencement of the rehabilitation proceedings, the Seoul Bankruptcy Court has appointed an administrator who will manage the assets and liabilities of TMON and Wemap, develop a rehabilitation plan, and seek to rebuild the companies in consultation with creditors. The appointment of the administrator is an important step to strengthen the protection of creditors' rights and ensure fairness and transparency in the proceedings.

2. Key Schedule for Rehabilitation Proceedings

Throughout the rehabilitation proceedings, it is important to take the necessary steps in compliance with the deadlines set for each phase. Key dates are as follows:

(1) Date of decision to commence rehabilitation proceedings: September 10, 2024, 3:00 p.m.
(2) Administrator: In Cheol Cho
(3) Submission period for the list of rehabilitation creditors, rehabilitation security holders, and shareholders: September 10, 2024 to October 10, 2024
(4) Reporting period for rehabilitation claims, rehabilitation security rights, and shares: October 11, 2024 to October 24, 2024, at the Seoul Bankruptcy Court’s Service Center
(5) Inspection period for rehabilitation claims and rehabilitation security rights: October 25, 2024 to November 14, 2024
(6) Submission period for the rehabilitation plan: until December 27, 2024, at the Seoul Bankruptcy Court’s Service Center

3. Actions Creditors Should Take

Throughout the rehabilitation proceedings, creditors are required to participate by filing claims, and reviewing and commenting on the rehabilitation plan in accordance with the established procedures. Key considerations for each phase are as follows:

(1) Declaration of rehabilitation claims, rehabilitation security rights, and shares: Creditors must declare their claims and security rights between October 11 and October 24, 2024, using the statutory form at the Seoul Bankruptcy Court's Service Center. Failure to file within the deadline may result in the extinguishment of your rights, so be sure to meet the deadline.

(2) Inspection of rehabilitation claims and rehabilitation security rights: The reported claims and security rights will be investigated from October 25, 2024 through November 14, 2024. During this period, the administrator will examine proofs of claim to determine which claims and security interests will be included in the rehabilitation proceedings. Creditors may file an objection if they disagree with the administrator’s findings.

(3) Reviewing and commenting on the rehabilitation plan: The administrator must formulate a plan of rehabilitation and submit it to the court by December 27, 2024, detailing debt adjustments, asset liquidation strategies, and management improvement plans, and creditors may review and comment on the plan. Creditors' consent to the plan will be a decisive factor in determining whether the rehabilitation proceedings would ultimately succeed or fail.

4. Important Notices

(1) Compliance with the Reporting Deadline: If you miss the deadline to report your rights, your rights may be excluded from the rehabilitation proceedings. In particular, if you are not included in the list of rehabilitation creditors, rehabilitation security holders, or shareholders, you must file within the deadline. Since there is no court service in this case due to the large number of creditors, unlike general cases, it is necessary for creditors to take more active measures such as actively accessing the media and court website or entrusting a law firm to keep track of the case.

(2) Prohibition on Returning Debtor's Assets: After the commencement of the rehabilitation proceedings, it is prohibited to give or return assets to the debtor. Anyone who possesses assets of or owes money to a debtor in rehabilitation must report it to the administrator.

(3) Communication with the Administrator: The administrator plays a key role in the rehabilitation proceedings and will develop the rehabilitation plan in consultation with creditors. Creditors should communicate with the administrator to ensure that their rights are protected.

5. Importance of the Rehabilitation Plan

The rehabilitation plan sets out the future business strategy and debt restructuring of TMON and Wemap, and the court’d approval of this plan is critical to the successful conclusion of the reorganization proceedings. Creditors should carefully review the plan and ensure that their rights are adequately reflected therein. Creditors' opinions on, and approval of, the plan will have a significant impact on its approval, so active participation is encouraged.

6. Completion of the Proceedings and Future Outlook

If the plan is approved, TMON and Wemap will repay their debts as outlined in the plan under court supervision, and resume normal business operations through management improvement. On the other hand, if the plan is not approved or if the rehabilitation proceedings fail, the case may transition to bankruptcy proceedings. Creditors should be aware of these possibilities and actively participate in the rehabilitation proceedings to protect their rights.

 

For further assistance or inquiries, please contact Attorney Hyo Jong Choi (+82 10 8650 2298, hjchoi@law-lin.com).
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