[1] Whether Article 44 of the Composition Act may apply mutatis mutandis to a composition creditor who created a right to collateral security to real estate provided as security by a general partner of a limited partnership company, a composition debtor (negative)

[2] The purpose of reporting composition bonds and the scope of exercising voting rights

[3] Whether Article 163 (2) of the Bankruptcy Act on the Prohibition of Exercise of Voting Rights by Special Interested Persons applies mutatis mutandis to composition under the Composition Act (affirmative)

[1] The general partner of a limited partnership company bears a direct, joint and unlimited and unlimited liability to creditors of the limited partnership company. However, since such liability has an influence and supplement to the obligations of the limited partnership company, it is interpreted that the general partner who has repaid the company's obligation to creditors of the limited partnership company also acquires the right to indemnity or acquires the right to the limited partnership company in accordance with the provisions on subrogation of the person who has repaid the obligation. Article 44 of the Composition Act provides that in the case of bankruptcy, a person who has the right to exercise the right to separation may exercise his right as a composition creditor with respect to the amount of claim which cannot be repaid by exercising the right. Thus, there is no express provision that the above provision shall apply mutatis mutandis to the composition creditor of the limited partnership company's general partner with respect to the real estate provided as security. Article 201 through 203 of the Bankruptcy Act does not apply mutatis mutandis to the procedure for reporting the claim of the general partner with respect to real estate by the general partner with the right to separate settlement.

[2] The report of composition claims does not aim at the inspection and confirmation of composition claims, unlike in the case of bankruptcy proceedings, not simply at the inspection and confirmation of composition claims, but at the expense of obtaining the qualifications present at the meeting of creditors in order to exercise voting rights as to the approval terms and conditions of composition and clarifying the voting rights. If the composition administrator, reorganization member, composition creditor, etc. do not raise any objection against composition claims reported, the composition creditor may exercise his/her voting rights to the total amount of reported claims.

[3] Article 53 of the Composition Act does not apply mutatis mutandis to Articles 162 and 165 of the Bankruptcy Act, which are general provisions concerning the meeting of creditors, to Article 163 (2) of the Bankruptcy Act which limits the exercise of voting rights by special interested parties. However, Article 163 (2) of the Bankruptcy Act which limits the exercise of voting rights by special interested parties does not apply mutatis mutandis to the composition of the Composition Act, but Article 163 (2) of the Composition Act is excluded from creditors who are entitled to exercise voting rights under Article 278 of the Composition Act because compulsory composition, the same nature as the composition of the Composition Act, is likely to impair the fairness of composition procedures, and such procedural necessity is the same in composition of the Composition Act, and Article 53 of the Composition Act applies mutatis mutandis to Article 278 of the Composition Act on the requirements for resolution, so it can be interpreted that Article 163 (2) of the Bankruptcy Act on the prohibition of exercise of voting rights by special interested parties can be applied mutatis mutandis to the Composition Act.

[1] Article 44 of the Composition Act / [2] Articles 49, 50, and 51 of the Composition Act, Article 201 of the Bankruptcy Act / [3] Article 53 of the Composition Act, Articles 163 (2), and 278 of the Composition Act

[1] Supreme Court Decision 95Da719 delivered on February 9, 1996 (Gong1996Sang, 894) / [2] Supreme Court Decision 88Da22671 delivered on October 27, 1989 (Gong1989, 1775)

1. The term “the term “the term” means “the term” means “the term “the term” means “the term” means “the term.

New Asia Trade Co., Ltd. (Law Firm Barun Law, Attorneys Cho Young-soo et al., Counsel for the plaintiff-appellant)

Seoul High Court Order 2002Ra436 dated December 20, 2002

The order of the court below is reversed, and the case is remanded to Seoul High Court.

The grounds of reappeal are examined.

1. The judgment of the court below

On March 22, 2002, the court below decided that the Re-Appellant was a limited partnership company engaged in the manufacturing industry of Hanba and Hanba medicine and received the commencement of composition decision from the above court on May 2, 2002. On July 15 of the same year, the re-Appellant provided composition condition that 35% of the total amount of composition bonds should be paid in equal installments from 2006 to 201. According to the resolution of the creditors, 147 (35%) out of 151 members present at the meeting of creditors who did not have the right of indemnity against the non-party 46, 316, 409, 139, 348, 392, 756 (7.53) of the above non-party 2)'s meeting of creditors, and the non-party 1 who did not have the right of indemnity against the above non-party 1's creditors holding the right of indemnity against the above non-party 1's creditors meeting of creditors.

2. The judgment of this Court

However, the above judgment of the court below is not acceptable.

A. The general partner of a limited partnership company bears a direct, joint and unlimited and unlimited liability to creditors of the limited partnership company, but the liability is subsidiary and complementary to the obligations of the limited partnership company (see Supreme Court Decision 95Da719 delivered on February 9, 196). It is interpreted that the general partner who has discharged the company's obligations to creditors of the limited partnership company also acquires the right to indemnity corresponding to the guarantor of the trust, or acquires the right to the limited partnership company in accordance with the provisions on subrogation of the person who has repaid the obligation. In the event of bankruptcy, Article 44 of the Composition Act provides that a person who has the right to exercise the right to separation in the event of bankruptcy can exercise the right as a composition creditor with respect to the amount of the claim which cannot be paid by the exercise of the right. In light of the above provisions, Article 201 through 203 of the Bankruptcy Act does not apply mutatis mutandis to composition creditors who are the debtor of the limited partnership company, and Article 204 of the Composition Act limits the stability of the general partner's rights to real estate as collateral.

Therefore, a composition creditor who has a right to collateral security against a limited partnership company which is a debtor of composition may report the whole amount of a claim against the limited partnership company as a composition claim. Article 55 subparagraph 4 of the Composition Act provides that "if the resolution of composition is contrary to the general interest of the composition creditor" can make a decision of non-authorization of composition ex officio or upon the application of composition creditor, the court may make a decision of non-authorization of composition ex officio or upon the application of composition creditor. Thus, if a composition becomes final in contravention of the general interest of composition creditors by recognizing voting rights on the whole amount of a composition claim of a composition creditor who holds a right to collateral security against the real estate provided by a general partner of a limited partnership company which is a debtor of composition, the court may make a decision of non-authorization of composition in accordance with the above provision. Thus, even if interpreted above, it would prejudice the general interest of composition creditors or the fairness of the resolution

In addition, the report of composition claims is different from the case of bankruptcy proceedings, not simply with the purpose of final inspection of composition claims, but with the purpose of clarifying the amount of voting rights after acquiring the qualification to be present at the meeting of creditors in order to exercise voting rights as to the supporting condition of composition (see Supreme Court Decision 88Meu22671, Oct. 27, 1989), composition administrator, reorganization member, composition creditor, etc. can exercise voting rights as to the total amount of reported composition claims if they do not raise any objection against composition claims.

According to the records, the composition creditor of the non-party, who is general partner of the non-party, who is a composition debtor, filed a report of 7,028,451,275 won as composition credit for the re-appellant company. On July 15, 2002, the creditors meeting date of this case held at Suwon District Court on July 15, 2002, the first instance court acknowledged the voting right as to the whole of composition credit amount reported by the composition administrator, reorganization member, other composition creditors, etc., as it did not raise any objection against composition credit amount reported by the Dong Mutual Savings and Finance Company.

In the same way, the first instance court did not examine the amount of claims that can be repaid by the mutual savings and finance company of the above non-party from the collateral provided by the above non-party, and it is justifiable to recognize the voting rights as to the whole amount of composition claims reported by the mutual savings and finance company of the above non-party, and the composition procedure is not erroneous

B. Meanwhile, Article 53 of the Composition Act does not apply mutatis mutandis to Article 162 and Article 165 of the Bankruptcy Act, which is a general provision on the meeting of creditors, mutatis mutandis to Article 165 of the Composition Act, but Article 163 (2) of the Bankruptcy Act, which limits the exercise of voting rights by a special interested party, does not apply mutatis mutandis to the composition and its nature. However, if a special interested party as provided in Article 163 (2) of the Composition Act participates in a resolution, a compulsory composition, the composition and its nature of which are identical, is likely to impair the fairness of the composition procedure, it is excluded from the creditors entitled to exercise voting rights under Article 278 of the Composition Act. Such procedural necessity is the same in composition under the Composition Act, Article 53 of the Composition Act applies mutatis mutandis to Article 278 of the Composition Act on the requirements for resolution, so it can be interpreted that Article 163 (2) of the Bankruptcy Act on the prohibition of exercise of voting rights by a special interested party can be applied mutatis mutandis to Article 163 (2) of the Composition.

However, the issue of which composition creditor has a special interest should be determined individually and specifically as of the time of resolution of composition. Thus, a composition creditor who holds a right to collateral with respect to real estate offered by a general partner with unlimited liability in a limited partnership company, who is a composition debtor, has a special interest in the composition resolution, cannot be said to be a person with a special interest in the composition resolution, just because the general partner who will acquire the right to collateral with respect to the limited partnership company upon the execution of the above right to collateral after resolution of composition can be restricted from exercising his/her voting right as a person with a special interest in the composition resolution.

Therefore, on the premise that the first instance court cannot be deemed as a person with a special interest in the resolution of the composition of this case, the measures that did not restrict voting rights are also justifiable, and no other circumstance exists where the procedure or resolution of composition is deemed as contrary to the provisions of the law.

C. Nevertheless, since Article 44 of the Composition Act applies mutatis mutandis to composition creditors holding a right to collateral security to real estate provided as collateral by a general partner with unlimited liability of a limited partnership company which is a composition debtor, the court below revoked the composition approval decision of the court of the first instance and made a decision not to authorize the composition of this case against Article 44 and Article 55 subparagraph 1 of the Composition Act because the resolution of this case constitutes "if the procedure or resolution of composition is contrary to the provisions of law and it is impossible to complete the defect," and therefore, the court below erred in violation of Article 5 subparagraph 1 of the Composition Act. The ground for reappeal pointing this out is with merit.

3. Therefore, the order of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Seo-sung (Presiding Justice)