Law on Bankruptcy of Foreign-invested Enterprises
Thursday, March 1st, 2007From Naenara:
The Law of the Democratic People’s Republic of Korea on Bankruptcy of Foreign-invested Enterprises was adopted by Decree No. 1504 of the Presidium of the Supreme People’s Assembly on April 19, 2000 and is in force.
This law contributes to correct settlement of debts and claims of foreign-invested enterprises and protection of the rights and interests of creditors.
The law consists of 54 articles in 6 chapters.
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Chapter 1. Fundamentals (Articles 1-7)
This chapter stipulates the purpose of institution of the law, foreign investors to which the law is applied, conditions of bankruptcy, reason for exemption from their obligations, and a competent court to handle and settle the cases of enterprise bankruptcy.
The law applies to foreign-invested enterprises (equity or contractual joint-venture enterprises, and wholly foreign-owned enterprises) and foreign-invested banks (equity or contractual joint-venture banks, and wholly foreign-owned banks) that are registered as a corporate body of the DPRK and carry out business activities in the territory of the DPRK.
A foreign-invested enterprise may be declared bankrupt when it fails to repay its debts within the set period for its insolvency, or the debts of the business exceed its assets, or the enterprise cannot be maintained any longer due to a grave loss, or the enterprise cannot be dissolved through normal procedures.
An enterprise may be exempted from bankruptcy when there is assurance that the overdue debts can be settled within 6 months from the time of application for bankruptcy or when it can receive financial assistance for its management from an organ, enterprise or association of the DPRK, or when the parties agree to reconcile with each other after an application is made for bankruptcy.
Chapter 2. Application for and Declaration of Bankruptcy (Articles 8-22)
This chapter defines an applicant for bankruptcy, procedures for an application of bankruptcy, the declaration of bankruptcy of an enterprise made by the court and its legal effect, and the organization (or appointment) of a liquidation committee and its responsibility.
The procedures and method for application of bankruptcy are as follows.
A creditor who is unable to receive the repayment of his claim within the period set in the contract may apply for declaration of bankruptcy of the enterprise to the court having jurisdiction over the seat of the enterprise concerned with a view to collecting his claim. In this case, he should obtain an approval from more than one creditor when the enterprise has over three creditors.
The application will state the title (or name) and address of the creditor, the name and address of the legal representative and his agent, the description, amount and period of the claim, the name and address of the enterprise to be declared bankrupt, and be accompanied by documents explaining the reason for non-repayment of the claim and certifying that the approval has been obtained for an application of the bankruptcy.
An enterprise that has become insolvent may apply to the court for its bankruptcy according to a decision of its board of directors or joint consultative board in order to be exempted from its obligations.
The application for bankruptcy will state the contents concerning the enterprise and its operation, a description of the loss of the enterprise and the reasons for its inability to repay its debts, and be accompanied by such documents as a list of debts and assets.
In case that the debts of an enterprise exceed its assets, the liquidation committee in charge of handling the dissolution of an enterprise may apply for its bankruptcy to the relevant court when it is deemed appropriate for creditors and enterprise to declare the enterprise bankrupt.
The application for bankruptcy will state the name and address of the enterprise, information on its assets and debts and the fact that the enterprise cannot be dissolved through normal procedures.
A court will decide whether to accept or reject an application for bankruptcy within 30 days of receipt of the application. In this case, it may undertake investigation as it deems necessary.
When a court believes that an application for bankruptcy is reasonable after the investigation, it will declare the enterprise bankrupt by making a judgment to that effect and send copies of the written judgment to the applicant and the enterprise concerned.
The written judgment will state the name of the enterprise declared bankrupt, the name of the legal representative, the reason for bankruptcy, the date of judgment and the like.
An enterprise declared bankrupt will suspend its bookkeeping, normal property transactions and management activities from the day of receipt of a copy of the written judgment.
An enterprise notified of the declaration of its bankruptcy will, within 2 days of the receipt of the notice, inform the central organ for guidance of economic cooperation of the fact that it has been declared bankrupt and make necessary registration.
The legal representative (manager of an enterprise) or his agent of the bankrupt enterprise cannot leave the seat of the enterprise and his domicile without permission from the court until the bankruptcy procedures have been completed and will give answers to matters related to the bankruptcy or cooperation in the bankruptcy procedures.
Where a bankrupt enterprise has concealed, distributed, donated or transferred at a low price its assets during the period of 6 months preceding the application for bankruptcy or after the submission of the application or where it has waived its claims without legal ground during the period of 30 days preceding the application for bankruptcy or after the submission of the application or where it has afflicted losses upon its creditors in anticipation of its bankruptcy, such acts will be null and void.
Chapter 3. Declaration, Investigation and Determination of Claims (Articles 23-31)
The chapter stipulates the claim declaration, receipt of declaration, investigation and determination of the claims and the preparation of a list of claims.
A creditor to the bankrupt enterprise will declare his claims in writing to the liquidation committee within the period of claim declaration.
Any claim that has not been declared during the period of claim declaration will be null and void.
The liquidation committee will investigate the claims on the basis of the contents of the declaration within the period of claim investigation.
The creditor may institute a civil lawsuit against the complainant before a court handling the bankruptcy case.
The liquidation committee will be responsible for the final determination of claims for which there is discrepancy between the declarations and finding of the investigation and claims for which a complaint has been raised but no civil lawsuit has been instituted.
Claim declarations and list of claims may be kept by the court. The court may allow parties related to the bankrupt enterprise to read relevant documents upon their request.
Chapter 4. Distribution of Assets of a Bankrupt Enterprise (Articles 32-44)
This chapter defines the securing of assets of the bankrupt enterprise, the order of distribution, an assets distribution schedule, distribution of the assets and termination of the bankruptcy case.
Chapter 5. Reconciliation (Articles 45-52)
The chapter stipulates the reconciliation, procedure and method for submission of reconciliation and the decision of the court approving or rejecting the reconciliation.
Chapter 6. Penalties (Articles 53-54)
It defines the authority of the liquidation committee for sanctions and the legal responsibilities for the violation of this law.
