[1] In a case where the creditor financial institutions council, while allowing a creditor financial institution to newly extend credit to an enterprise showing signs of insolvency, has decided that the creditor financial institution cannot exercise its right to request a purchase of objection, whether such resolution has the effect on the creditor financial institution

[2] In a case where the principal creditor bank did not notify the relevant creditor financial institution of the date, time, place, purpose, etc. of the meeting at least seven days prior to the scheduled date of the meeting in order to allow the creditor financial institution to make a new credit extension to the enterprise showing signs of insolvency, whether the above resolution of the council is effective against the relevant creditor financial institution (negative in principle)

[1] Under Article 2(1) of the former Corporate Restructuring Promotion Act (amended by Act No. 10684, May 19, 201; hereinafter the same shall apply), the former Corporate Restructuring Promotion Act (amended by Act No. 10684, Jan. 1, 201; hereinafter the same shall apply) stipulates that a creditor financial institution of a company showing signs of insolvency shall establish a coordinating committee comprised of creditor financial institutions of the relevant company for the efficient restructuring of the company (hereinafter “ coordinating committee”). Since the creditor financial institution of the company showing signs of insolvency is a person who has extended credit to the relevant company and falls under any of the items of subparagraph 1 of Article 2 (Article 2 subparagraph 1), it shall be a member of the coordinating committee automatically regardless of its intention, regardless of the consent (Article 2 subparagraph 1). In addition, the coordinating committee shall pass a resolution with the consent of the creditor financial institution holding more than 3/4 of the total amount of credit extension by creditor financial institutions, and creditor financial institutions shall faithfully perform the matters so decided (Article 18(2).

According to the former Corporate Restructuring Promotion Act, if deemed necessary for the normalization of the business of an enterprise showing signs of insolvency, creditor financial institutions may grant new credit to the relevant enterprise (Article 10(1)), and the Council may deliberate and decide on matters such as the establishment of plans for credit extension (Article 17(1)7). However, the former Corporate Restructuring Promotion Act has separate provisions protecting the legal status of creditor financial institutions for such new credit extension. In other words, where there is a resolution of the Council on new credit extension, creditor financial institutions opposing the resolution are allowed to request creditor financial institutions consenting to the resolution of the Council to purchase their claims against the creditor financial institutions that agreed to the resolution of the Council within seven days from the date of such resolution (Article 20(1)2), and to withdraw from the Council without complying with the resolution of the Council on new credit extension. In addition, as seen below, there are special provisions on the convocation of the Council to deliberate and decide on the formulation of plans for credit extension.

In full view of the contents and purport of the provisions of the former Corporate Restructuring Promotion Act, impact of a resolution of the Council on new credit extension on the legal status of creditor financial institutions, and the purpose and purport of the corporate restructuring system under the former Corporate Restructuring Promotion Act, if the Council, while allowing creditor financial institutions to newly extend credit, decided that the creditor financial institutions cannot exercise their opposing right to purchase, such a resolution of the Council is in violation of the former Corporate Restructuring Promotion Act and thus, is not effective

[2] Where the former Enforcement Decree of the Corporate Restructuring Promotion Act (Presidential Decree No. 23047, Jul. 25, 2011; Presidential Decree No. 23047, Sept. 25, 2011; Presidential Decree No. 23047) intends to convene a meeting of the creditor financial institutions consultative council of creditor financial institutions (hereinafter “consultative council”) upon delegation by the former Corporate Restructuring Promotion Act (amended by Act No. 10684, May 19, 201; hereinafter the same shall apply), the former Enforcement Decree of the Corporate Restructuring Promotion Act (amended by Presidential Decree No. 23047, Jan. 1, 201; Presidential Decree No. 23047) intends to notify the creditor financial institutions of the date, time, place, purpose, etc. of the meeting three days prior to the scheduled date of the meeting, except in urgent cases

Therefore, if a creditor financial institution did not notify the creditor financial institution of the date, time, place, purpose, etc. of the meeting at least seven days prior to the scheduled date of the meeting in order to allow the creditor financial institution to hold a new credit extension, such a resolution by the council is in violation of the former Corporate Restructuring Promotion Act, unless there are special circumstances to deem that the creditor financial institution did not interfere with the right to attend the meeting and the appropriate exercise of voting rights, and thus the resolution by the council

[1] Article 2 subparag. 1, Articles 10(1), 15(1), 17(1)7, 18(1) and (2), and 20(1)2 of the former Corporate Restructuring Promotion Act (amended by Act No. 10684, May 19, 201); Articles 15(1) and 17(1)7 of the former Corporate Restructuring Promotion Act (amended by Presidential Decree No. 23047, Jul. 25, 2011); Article 4(1)2 of the former Enforcement Decree of the former Corporate Restructuring Promotion Act (amended by Act No. 10684, May 19, 201);

Nonghyup Bank and one other (Law Firm, Kim & Lee LLC et al., Counsel for the defendant-appellant)

Korea Investment Securities Co., Ltd. (Attorney Seo-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2013Na51119 decided August 12, 2016

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. (1) The former Corporate Restructuring Promotion Act (amended by Act No. 10684, May 19, 201; hereinafter the same shall apply) stipulates that a creditor financial institution organized by the creditor financial institutions of the relevant company for efficient restructuring of an enterprise showing signs of insolvency (hereinafter referred to as “Council”) shall be established in the creditor financial institutions of the relevant company for efficient restructuring (Article 15(1)). The creditor financial institutions of the enterprise showing signs of insolvency have been established in advance as a person who has granted credit to the relevant company and falls under any of the items of subparagraph 1 of Article 2 (Article 2 subparag. 1). Thus, the council automatically becomes a member of the Council regardless of its intention, regardless of its intention. In addition, the council shall make a resolution with the consent of the creditor financial institution holding more than three-fourths of the total amount of credit extension by the creditor financial institutions (Article 18(1) main sentence of the Act), and the creditor financial institutions shall faithfully perform the matters so decided (Article 18(2)).

According to the former Corporate Restructuring Promotion Act, if deemed necessary for the normalization of the business of an enterprise showing signs of insolvency, creditor financial institutions may grant new credit to the relevant enterprise (Article 10(1)), and the Council may deliberate and decide on matters such as the establishment of plans for credit extension (Article 17(1)7). However, the former Corporate Restructuring Promotion Act has separate provisions protecting the legal status of creditor financial institutions for such new credit extension. In other words, where there is a resolution of the Council on new credit extension, creditor financial institutions opposing the resolution are allowed to request creditor financial institutions consenting to the resolution of the Council to purchase their claims against the creditor financial institutions that agreed to the resolution of the Council within seven days from the date of such resolution (Article 20(1)2), and to withdraw from the Council without complying with the resolution of the Council on new credit extension. In addition, as seen below, there are special provisions on the convocation of the Council to deliberate and decide on the formulation of plans for credit extension.

In full view of the contents and purport of the provisions of the former Corporate Restructuring Promotion Act, the effect of a resolution of the Council on new credit extension on the legal status of creditor financial institutions, and the purpose and purport of the corporate restructuring system under the former Corporate Restructuring Promotion Act, if the Council, while allowing creditor financial institutions to newly extend credit, decided that the creditor financial institutions cannot exercise their opposing right to purchase, such a resolution of the Council is in violation of the former Corporate Restructuring Promotion Act, and is not effective against

(2) In addition, the former Enforcement Decree of the Corporate Restructuring Promotion Act (amended by Presidential Decree No. 23047, Jul. 25, 2011) upon delegation by the former Corporate Restructuring Promotion Act requires a creditor financial institution to notify matters concerning the date, time, venue, purpose, etc. of the meeting to the creditor financial institution by no later than three days prior to the scheduled date of holding the meeting, except in urgent cases, and where it is intended to deliberate and resolve on the formulation of the credit extension plan, the said matters shall be notified by no later than seven days prior to the scheduled date of holding the meeting (Article 4(1)).

Therefore, if a creditor financial institution did not notify the creditor financial institution of the date, time, place, purpose, etc. of the meeting at least seven days prior to the scheduled date of the meeting in order to allow the creditor financial institution to hold a new credit extension, such a resolution by the council is in violation of the former Corporate Restructuring Promotion Act, unless there is any special circumstance to deem that the creditor financial institution did not interfere with the creditor financial institution's right to attend the meeting and the appropriate exercise of voting rights, and thus,

B. For the following reasons, the lower court determined that the 5th Council PF treatment proposal did not have effect on the Plaintiffs due to substantial and procedural defects.

(1) The 5th Council PF treatment proposal is a new credit extension that is different from the 3th Council PF treatment proposal and the nature of the 3th Council, in that it only covers the plaintiffs and sets forth the amount and conditions of the loan as the obligation to make a new loan to PP Management Co., Ltd. (hereinafter “PP Management Industry”).

(2) The fifth Council's fifth Council's resolution on new credit extension should be granted to the plaintiffs the opposite right of purchase as stipulated in Article 20 (1) of the former Corporate Restructuring Promotion Act, but the fifth Council's resolution on the opposite right of purchase is not a matter of new credit extension, thereby unfairly restricting the plaintiffs' legitimate exercise of their rights.

(3) In the case of convening a meeting of the Council to deliberate and resolve on the 5th PF treatment proposal for new credit extension, there is procedural defect in which the notification procedure is not complied with, even though it notifies the Plaintiffs of the date, time, place, purpose, etc. of the meeting seven days prior to the meeting of the Council.

(4) Despite the Plaintiffs’ request for inspection, the 5th Council PF treatment proposal sets out a new loan amount of approximately KRW 80.1 billion, which is an outstanding amount for construction works for which the actual wind industry is able to receive, based only on the data submitted by the Plaintiffs, and, without any special reason, transfers the above subsidies to the Plaintiffs for the business risks of the relevant workplace by making the aforementioned subsidies repaid only surplus construction cost at the relevant workplace. In addition, the bearing of the risks of the PF project to some creditor financial institutions is contrary to fairness and fairness, unless there is a plan to grant other special benefits to the creditor financial institutions or to share the losses incurred from the insolvency risk of the relevant company to other institutions.

C. Examining the reasoning of the lower judgment in light of the foregoing legal doctrine and the record, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, contrary to what is alleged in the grounds of appeal, by misapprehending the legal doctrine on the effectiveness of the resolution of the Council as prescribed by the former Corporate Restructuring Promotion Act or the guarantee

2. Regarding ground of appeal No. 2

Based on its stated reasoning, the lower court determined that it is difficult to recognize a proximate causal relationship between the Plaintiffs’ violation of the resolution by the Council of the March 4th and the nonperformance of the wind industry. Accordingly, the Defendant did not accept the offset defense, asserting the damage claim against the Plaintiffs.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on causation.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kwon Soon-il (Presiding Justice)