[1] The meaning of "suspension of payment" under Article 78 (1) of the Company Reorganization Act

[2] Whether an application for the selection of an enterprise subject to the so-called deferment agreement or a decision to be an enterprise subject to the said agreement constitutes "suspension of payment, etc." under Article 78 (1) 4 of the Company Reorganization Act (negative)

[1] Article 78 (1) 4 of the Company Reorganization Act provides that "any gratuitous act performed by the company within six months prior to the suspension of payment, etc. or six months prior thereto, and any other commercial act that shall be simultaneously performed by the company may be denied for the company's property after the commencement of reorganization proceedings," and Article 78 (1) 2 of the Company Reorganization Act provides that "application for suspension of payment, bankruptcy, commencement of composition, or commencement of reorganization proceedings" shall be "suspension of payment, etc." and the suspension of payment refers to the act that explicitly and explicitly expresses that the debtor is unable to perform his/her obligation generally and continuously due to lack of self-sufficiency, and the lack of self-sufficiency refers to the act that has no credit rating for the debtor to obtain a delayed repayment, or a loan sufficient for repayment.

[2] The so-called insolvency grace agreement is concluded between financial institutions, such as banks, merchant banks, banking institutions, insurance companies, securities companies, etc., for the purpose of preventing the largeization of non-performing loans and enhancing the soundness of financial assets by taking early joint payments by creditor financial institutions for the purpose of promoting the normalization of enterprises with insolvency signs and efficiently arranging non-performing loans on April 21, 1997, and concluded an agreement between financial institutions (the name of the formal agreement is "the agreement between financial institutions for the promotion of the normalization of insolvent enterprises and the efficient liquidation of non-performing loans" "the agreement between financial institutions for the efficient liquidation of non-performing loans") which was implemented from April 21, 1997, and if it is judged that it is possible to normalize the enterprise with insolvency signs after assessing the possibility of normalization for the enterprise with insolvency, it shall continue to provide support as stipulated in the agreement, and if it is judged that it is impossible to independently perform the procedure by the method of liquidation of non-performing loans, it shall temporarily commence the procedure of legal management, banking management, third party acceptance or liquidation, etc.

[1] Articles 78 (1) 2 and 78 (1) 4 of the Company Reorganization Act / [2] Articles 78 (1) 2 and 78 (1) 4 of the Company Reorganization Act

Comprehensive Finance Co., Ltd. (Law Firm Sejong Chang, Attorneys Kim Hyun-hwan et al., Counsel for the plaintiff-appellant)

USP Co., Ltd. (Law Firm Sejong, Attorney O Jong-soo, Counsel for the defendant-appellant)

Seoul High Court Decision 99Na57807 delivered on October 25, 2000

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

1. Factual basis

The facts admitted by the court below in full view of the adopted evidence are as follows:

A. On March 14, 1997, U.S. Liquidation Co., Ltd. (hereinafter referred to as the "U.S. Liquidation Co., Ltd.") issued a promissory note of KRW 3,341,250,000 at its face value (hereinafter referred to as the "former Promissory Notes") to secure the obligation to pay purchase price of stocks to the non-party comprehensive financial company against the non-party bankrupt who is the chairperson of the Daegu Agricultural Group, to which the Reorganization Co., Ltd. belongs (hereinafter referred to as the "Bankruptcy Co., Ltd.").

B. On May 17, 1997, the reorganization company requested the principal bank to select a company subject to a grace agreement, and the principal bank selected the reorganization company as a company subject to a grace agreement on May 19 of the same year.

C. On October 11, 1997, the reorganization company issued, on behalf of the bankrupt, two copies of each Promissory Notes with face value of KRW 1,741,250,000 at face value and KRW 1.6 billion on March 30, 1998 on behalf of the former Promissory Notes, and on March 30, 1998 on behalf of the bankrupt, the Promissory Notes with face value of KRW 1.6 billion at face value have been approved, and the rest of the Promissory Notes (hereinafter “new Promissory Notes”) has not been approved on March 18, 199.

D. Upon the commencement of the company reorganization procedure for the reorganization company on September 11, 1998, the bankrupt reported a total of KRW 1,938,035,102 on October 14, 1998, which was within the date of reporting the reorganization claim, as a reorganization claim, but the defendant denied the above claim on November 3, 1998 on the ground of Article 78(1)4 of the Company Reorganization Act on the date of investigating the reorganization claim.

2. Both claims and key issues;

With respect to the plaintiff's claim against the defendant to confirm the above reported claim as a reorganization claim, the defendant accepted the application for the selection of the company subject to the defaulted deferment agreement of the reorganization company, and the reorganization company is selected as the company subject to the defaulted deferment agreement, the defendant exercised the avoidance power based on the above provision regarding the old bill and the issuance of new bill, which constitute the gratuitous act of the reorganization company or the act of payment to be simultaneously conducted within the six months prior thereto, based on the above provision. Therefore, in this case, it becomes one of the issues of this case whether the reorganization company's application for the selection of the principal bank as the company subject to the defaulted deferment agreement or the decision of the principal bank to select the reorganization company as the company subject to the dishonor deferment agreement under Article 78 (1) 4 of the Company Reorganization Act is one of the issues of this case.

3. The judgment of the court below

The court below decided that the agreement between financial institutions for the purpose of preventing the largeization of non-performing loans and enhancing the soundness of financial assets is an agreement between financial institutions for the purpose of promoting the normalization of an enterprise with insolvency signs and promoting the soundness of financial assets through early joint payments of the enterprise with insolvency signs and determining that it is possible for creditor financial institutions to establish a consultative council in order to deliberate on the support plan for the enterprise with insolvency signs among the enterprises with insolvency signs whose management crisis is faced with the improvement of financial assets and the disposal plan of non-performing loans against the enterprise with insolvency signs such as the procedure for the normalization of the enterprise with insolvency signs, the procedure for the reorganization of non-performing loans at the time of normalization, and the procedure for the disposal of non-performing loans such as the reorganization proceedings at the time of normalization, which are judged impossible to be implemented continuously if it is judged that it is possible for creditor financial institutions to apply for the postponement of repayment due to consultation with the company with the company with the company with insolvency signs, the scale of the company and the possibility of rehabilitation in the case of being evaluated as impossible independently, and the company can select the company subject to postpone the repayment agreement at the time of repayment.

4. Judgment of party members

However, we cannot accept the judgment of the court below for the following reasons.

Article 78 (1) 4 of the Company Reorganization Act provides that "any gratuitous act performed by the company after the suspension of payment, etc. has been made or within six months prior thereto, and any commercial act to be done simultaneously with such act may be denied on behalf of the company's property after the commencement of reorganization proceedings," and Article 78 (1) 2 of the Company Reorganization Act provides that "application for the suspension of payment, bankruptcy, commencement of composition or commencement of reorganization proceedings" shall be "suspension of payment, etc." and the suspension of payment refers to the act that explicitly and explicitly expresses that the debtor is not able to make a general and continuous repayment due to lack of self-sufficiency, and lack of self-sufficiency refers to the act that has no asset for which the debtor is able to repay his/her obligation, has been postponed, or has no credit rating that is sufficient for repayment, or for repayment.

However, in light of the records, the so-called insolvency grace agreement is concluded between financial institutions, such as banks, merchant banks, insurance companies, securities companies, etc., for the purpose of promoting the normalization of enterprises with insolvency signs and effectively arranging non-performing loans, with the aim of preventing the largeization of non-performing loans and enhancing the soundness of financial assets by taking an early joint account of creditor financial institutions on April 21, 1997 (the name of the formal agreement is "the agreement between financial institutions for the promotion of the normalization of insolvent enterprises and the efficient liquidation of non-performing loans"), and it is judged that it is possible to normalize enterprises after assessing the possibility of normalization for enterprises with insolvency signs in the management crisis, it shall continue support as stipulated in the agreement, and if it is judged that it is impossible to normalize them in itself, it shall commence legal management, banking management, third-party takeover or liquidation, etc. for the disposal of non-performing loans, and it is impossible for financial institutions to temporarily postpone the exercise of their claims and provide funds required for normal business activities for the period prior to such evaluation, and thus, it is impossible for the enterprises to be selected from a financial institution itself and subject to be determined.

Furthermore, in light of the records adopted by the court below, the reorganization company requested the main creditor bank to select the company as the company subject to the 1st creditor bank agreement, and thereafter the defaulted. On May 17, 1997, the reorganization company requested the main creditor bank to select all the four companies subject to the 4th creditor bank as the company subject to the 4th creditor bank agreement, and the main creditor bank decided on May 19, 1997 that the 198th creditor financial company should not be able to exercise the rights of the creditor financial company subject to the 1st creditor financial institution normalization until the date of the 198th representative meeting of the creditor financial institution, or that the 198th creditor financial company subject to the 198th creditor financial institution's 198th creditor financial institution's 198th creditor financial institution's 198th creditor financial institution's 198th creditor financial institution's 3rd creditor financial institution's 198th creditor company's 198th creditor company's 198th creditor company.

5. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Han-gu (Presiding Justice)