1.

Grant of Preferential Repayment Rights for Credit Newly Extended by a Third Party

The New CRPA provides that the Council, if necessary for the corporate improvement of a company under joint management and requested by such company, may allow a third party that is not a Participating Financial Creditor to extend new credit to the company (Article 18 (2)). In such case the third party’s financial claims relating to the new credit shall be granted the same preferential repayment rights that would have been granted to any Participating Financial Creditors if they had provided new credit to the company (Article 18 (3)), subject to any statutory security rights. In other words, financial claims arising from new credit extended by a third party would be entitled to preferential repayment before the financial claims held by Participating Financial Creditors, but after statutory security rights. It is our understanding that the purpose of the above provision is to promote the extension of credit to companies under joint management by third parties. However, in the event that a joint management proceeding fails after a third party has extended new credit to the company, the preferential repayment right that was available to the new credit under the joint management proceeding would not necessarily apply if the company were to subsequently enter a court-supervised rehabilitation or bankruptcy proceeding. The specifics of the rights of the third party in the subsequent rehabilitation or bankruptcy proceeding will be determined by the court on a case-by-case basis by taking into account various considerations, including matters resolved by the Council with respect to preferential repayment rights, the terms and conditions of the relevant credit agreement entered into by the third party and the company under joint management, and the existence of security rights.
 

2.

Immunity from Disciplinary Action in Accordance with a Mediation Decision of the Mediation Committee

In addition, the New CRPA adds an additional basis for granting immunity to creditor financial institutions and their officers and employees from liability (such as the imposition of disciplinary actions, reprimand or any request therefor) under the Banking Act, the Board of Audit and Inspection Act or the CRPA for actions relating to the joint management proceeding. Such immunity was available under the Former CRPA only for creditor financial institutions and their officers and employees “that actively performed duties in furtherance of the corporate restructuring under the CRPA without bad faith or gross negligence” (unless certain exceptions apply). The New CRPA also extends such immunity to creditor financial institutions and their officers and employees that “actively perform duties in further of the corporate restructuring in accordance with a mediation decision of the Mediation Committee” (Article 34). The Mediation Committee is a committee established under Article 29 of the CRPA and operated for the purpose of facilitating efficient and fair corporate restructurings and mediating differences among financial creditors pursuant to the CRPA. A mediation decision established by the Mediation Committee has the same effect as a resolution of the Council. The purpose of the above provision is understood to facilitate the establishment and implementation of mediation decisions by the Mediation Committee.