[Corporate Bankruptcy Order] Proceeding with corporate bankruptcy procedures for A Company, which engages in pharmaceutical and cosmetic manufacturing.
Article posted in 2020-02-03 15:55:13 | VEAT
Law firm Veat (hereinafter referred to as "Veat") proceeded with the corporate bankruptcy proceedings of A Company, which engages in the manufacturing of over-the-counter products and cosmetics.
1. Overview of Debtor A Company
A Company operated its main business by launching brands based on overseas corporate know-how, producing basic cosmetics via OEM, and supplying them to hospitals and medical institutions. A Company received product deliveries from suppliers and supplied products to approximately 40 customer outlets.
2. A Company's Assets and Liabilities Reviewing A Company's balance sheet, we confirmed that liabilities were approximately 1.5 times greater than assets. In particular, due to the nature of A Company's assets, most of which were cosmetics, their value was expected to decline further. Moreover, the amortization of tangible assets on the balance sheet was not properly reflected, and R&D expenses were also misstated, so the actual value of assets could inevitably decrease. Also, due to the OEM business structure of purchasing and selling various products, A Company inevitably had a significant amount of accounts payable. 3. Circumstances Leading to Bankruptcy A Company aimed to increase revenue by selling various imported products or OEM processed products, but accumulated significant debt by borrowing from financial institutions and prepaying purchase prices. In this state, when the company's CEO, K, was diagnosed with terminal cancer and began hospital treatment, A Company's financial structure worsened further. Ultimately, employees, feeling uneasy about the deteriorating management, all resigned, making it impossible for A Company to operate normally.
Therefore, CEO K made every effort to repay debt and maintain the company until the very end, but due to a worsening condition, it became impossible to continue management, and he filed for this bankruptcy to minimize the loss to stakeholders and proceeded with the corporate bankruptcy proceedings.
4. Corporate Bankruptcy Proceedings With the death of the sole director, CEO K, no one remained to manage A Company's assets, and various expenses were left unpaid, and cosmetics stacked in the warehouse were abandoned and decaying. Therefore, considering the staff shortage and the inconvenience of creditors, it was necessary to proceed with the corporate bankruptcy proceedings as soon as possible.
The Seoul Bankruptcy Court recognized A Company's inability to pay and the fact that liabilities exceeded assets as a cause for bankruptcy, appointed a bankruptcy trustee, and applied Article 105 and 106 of the Bankruptcy Act and pronounced the corporate bankruptcy. Article 105 (Grounds for Ordinary Bankruptcy) Article 106 (Grounds for Corporate Bankruptcy) Law firm Veat's significance lies in the fact that it proceeded with the corporate bankruptcy proceedings under circumstances where all personnel related to A Company were absent due to the death of the sole director and the resignation of all employees, making it difficult even to grasp the basic assets, while securing objective data and substantiating the inability to pay.
According to the Ministry of SMEs and Startups' 'Startup Trends', a total of 1.34 million startups increased by 7.0% (90,000) year-on-year, recording an increase for the second consecutive year. Law firm Veat provides objective and professional consulting to numerous startups based on the experience of serving as a deputy director of the Korea Bar Association's Startup Legal Support Team, led by Managing Partner Choi Sung-ho. If you are considering corporate bankruptcy proceedings, please contact Law firm Veat.
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① When a debtor is unable to pay, the court may declare bankruptcy by decision upon application.
② When a debtor suspends payment, it shall be presumed to be unable to pay.
① In the case of a corporation, bankruptcy may be pronounced even when the total amount of its liabilities exceeds the total amount of its assets.
② The provision of paragraph 1 shall not apply to a general partnership or a limited partnership during their existence.
5. Conclusion and Implications
Numerous companies are emerging and disappearing every year. Corporate bankruptcy proceedings, which conclude a company's lifespan, often occur when management cannot objectively assess the management status, so it is recommended to seek the help of legal professionals rather than making decisions on their own.
Law firm Veat