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The Debtor Rehabilitation and Bankruptcy Act adopts the DIP system of America, which does not call for appointing a trustee or can stipulate principally to appoint the turnaround debtor as a trustee when needed. A company, however, currently undergoing a turnaround procedure, has already forfeited the stock value whose ownership is of the creditor within the liquidation value range. Hence, it should be uncontested that the creditor within the liquidation value range resolves the governance system. For that point, developed nations reflect the creditor’s opinion during the process of appointing a trustee who is in charge of the management of a turnaround company. In Korea, however, the court exercises plenary powers, and the creditor is left with only the rights to express opinions which are not generally satisfactorily contemplated. Moreover, M&A cannot go without a hitch insofar as a trustee is appointed out of the previous management. M&A must be sought to acquire working capital when a company’s management status seems problematical for a turnaround with only its own profit and when it is necessary for a large scale of investment in plant and equipment or an extensive foundation for marketing. In that case, a trustee must not be appointed from the previous management, but should be an expert on M&A or corporate restructuring. Lastly, a newly-appointed trustee should be a competent person with previous managerial experiences, who can prevail over the limitations of previous managerial skills. Although previous managers earnestly operated the company without any insolvency management, an outside expert should be resolutely appointed as a trustee upon exposing limits on managerial skills. Professional managerial skills should reflect previous managerial experiences and necessitate trusteey attainments, for which a trustee must take into consideration his positive attitude by, for example, completing a related managerial curriculum. Furthermore, for an efficient division of management for a turnaround, a multiple number of trustees can be sought for mutual cooperation and control, but confliction may deteriorate managerial efficiencies or set off a division of the company due to excessive competition and recrimination. Hence, a multiple trustee system can be exceptionally effective in the areas that require professional managerial know-how’s.

The Debtor Rehabilitation and Bankruptcy Act( Law ) promulgated in 2005 newly inserted one Chapter on cross-border insolvency based on the UNCITRAL Model Law on Cross-Border Insolvency. In reviewing the area of cross-border insolvency under the Law, with regard to the roles of the three entities acting in crossborder insolvency cases, that is, bankrupt companies, creditors and courts, we propose to consider the three different approaches, that is, inbound approach, outbound approach and reciprocal approach, which will help understanding and easily solving various issues arising from cross-border insolvency. The inbound approach involves the issues as to if creditors can participate in domestic insolvency proceedings to satisfy the claims, or if the foreign representative of bankrupt companies can get the recognition of foreign insolvency proceedings and obtain reliefs and assistance from the domestic court, or to participate in the domestic proceedings. With regard to the outbound approach, the issues are if domestic creditors can participate in foreign insolvency proceedings; if domestic companies can initiate and proceed with foreign insolvency proceedings; or if the domestic insolvency proceedings can be recognized by foreign courts or can get reliefs from such foreign courts. The reciprocal approach mainly involves the issues of reciprocal adjustment and conciliation among concurrent insolvency proceedings for the same debtor and of cross-border cooperation between domestic court and foreign courts, or foreign representative to facilitate the progress of cross-border insolvency proceedings. The Law enacted several provisions relevant to the above three approaches such as role of foreign representative, recognition of foreign proceeding, relief granted upon recognition of foreign proceeding, cooperation with foreign courts and foreign representative, concurrent proceedings, while the issue of recognition of foreign insolvency proceedings and grating relief to such proceedings is the most important one in dealing with cross-border insolvency cases. This issue requires more in-depth and vast review and discussion from theoretical or practical perspectives. However, in view of the legislation purpose of the UNCITRAL Model Law, that is, equal and harmonious treatment of cross-border insolvency cases, the core provisions in dealing with cross-border insolvency cases are cooperation among the courts and administrators concerning cross-border insolvency cases and conclusion and use of cross-border agreements. While our country is at the primitive stage in dealing with cross-border insolvency cases, various types of judicial cooperation on cross-border insolvency cases are implemented in Western countries including US and UK. We expect that effective and equal treatment of cross-border insolvency cases be accomplished in future through in-depth and vast theoretical review and accumulated experiences in cross-border insolvency cases.

When a debtor who applied for a individual rehabilitation proceeding owns a house with a lien set up by a banking institution, an allegation has arisen about the necessity of special measures distinctively from a general lien acknowledged as a preferential claim (hence, the exclusion of preferential claim). Such an allegation, however, (1) stands against equity for other lienholders who acquired a security from the debtor’s asset other than a house, (2) also stands against the equity for discrimination without justifiable reasons for the same collateral lien because the lien - lien right, pledge right, leaseholder right, etc. - has been set up as well as mortgage right or provisional security on housing as well, and (3) brings out a contradiction that the debtor who owns a house can be safeguarded, but a tenant who does not own a house cannot when the tenant has set up the pledge right on the house mortgages. When the preferential claim on the house mortgages is authorized, compulsory execution on the guarantor should not be enforced for a certain period of time. The validity of the change right on the house mortgages affecting the guarantor as well should not be delimited only to the guarantor of the house mortgages, but to all guarantors. Moreover, the rehabilitation proceeding and the bankruptcy proceeding should also be assessed for possible applications, in addition to the individual rehabilitation proceeding. When an unattainable plan is set up, proceeding abolishment or bankruptcy adjudication can take place recursively. Indiscrete purchases of housing and unattainable preferential claims can also bring about cases of misapplication. International consistency cannot be achieved despite the comparison with, for example, Germany, where the creditor furnishes resolution procedures and whose court decides after a debtor sincerely makes repayments for six years and then after he applies for the exemption permit, which can give rise to the debtor’s moral hazard. To conclude, these allegations mentioned above seem somewhat irrational even after comparing with Korea’s economic status and the legislations of more developed nations than Korea. An alternative measure is to expand the range of exemption properties, so that if a need arises to secure a debtor’s residential right, equity must be maintained between the debtor who resides in a leased housing and the debtor who files an bankruptcy proceeding.

The rehabilitation procedure in accordance with The Debtor Rehabilitation and Bankruptcy Act directs at mediating legal matters for conflicting interest parties such as creditor, stock holder, etc., on behalf of a debtor who faces up to insolvency due to financial difficulties, and at contriving an effective rehabilitation for the debtor or his company. Assessing the execution status of company rehabilitation cases carried out by the court before and after the enforcement of The Debtor Rehabilitation and Bankruptcy Act, the number of cases has increased annually in a large degree, denoting a positive evaluation. A negative aspect is, however, a greater decline of the rehabilitation rate for the present rehabilitation procedure than the rate for the previous company insolvency procedure. The author after on-site experiences evidences a dilemma for the apparent management responsibility for a public trustee as a supervisor and the existing management supervisor system which is passive for M&A, as well as rehabilitation uncertainties due to a long process time for a rehabilitation procedure. In order to enhance the rehabilitation possibility, the lead-time for a rehabilitation procedure should be shortened. For a rapid process of rehabilitation procedure, the system and business affairs must be ameliorated and supplemented than before. A rehabilitation procedure by the court must be carried out hastily and its lead-time for a supervisor’s rehabilitation procedure must be restrained, for which understanding and cooperation are requisite for creditors and conflicting interest parties. The lead-time can be reduced by effectively utilizing work improvement for the disclosure list by the creditor, preliminary submission of the rehabilitation plan in cooperation with the creditors committee, the transfer of previous sales to the rehabilitation plan approval after the rehabilitation procedure onset arranged for the revitalization of M&A, written consent, early launch of M&A, etc.