It is a system aimed at coordinating the legal relations of stakeholders such as creditors, shareholders, and equity holders against companies facing financial difficulties to promote the efficient rehabilitation of the business and its debtors.
Even if a company is facing financial collapse, in principle if it is recognized that the value of continuing the business is greater than the value of the liquidation of the business, the bankruptcy can be prevented by comprehensively prohibiting creditors from exercising their claims and compulsory execution under court supervision, and continuing to operate and maintaining the company's assets, and prepare a reasonable rehabilitation plan by examining the company's assets and status in detail, and obtaining a consent of rehabilitation creditors etc. to ensure mutual protection of creditors, shareholders, and management rights.
The purpose is to rehabilitate the debtor or its business by enabling companies to make profit-making activities continuously.
When a corporation exceeds its debts or becomes insolvent due to operational difficulties, it is declared bankrupt through bankruptcy procedures.
Under court supervision the investigation of bond procedure is carried out to determine the rights of creditors and convert the assets of the company to distribute the converted amount according to the priority rights and receivables.
Therefore, the court compulsorily manages and converts the total assets of a corporate company that has reached a state of bankruptcy among creditors and other interested parties to minimize property damage and achieve the purpose of this system by distributing and repaying fairly to all creditors.