More filings for bankruptcy, receivership than in 1997 crisis

By Choi Sung-jin

The number of businesses that filed for bankruptcy or receivership last year exceeded similar filings in the wake of the Asian financial crisis, court officials said Monday.

The 1997-98 currency crisis saw large businesses go bankrupt, but those that fell to the financial crunch last year were mostly small and medium-sized enterprises (SMEs), said officials at the Seoul Central District Court. The combined assets of SMEs that filed for bankruptcy or receivership equaled the size of assets of the nation’s 18th-largest company.

According to the court, 1,375 businesses filed for bankruptcy or receivership as of Nov. 30, 2015, and the number was estimated to exceed 1,500 for the whole of last year. “Although we do not have the official statistics, last year’s number was larger than those of either 1998 or 1999, when the comparable number of bankruptcies stood at around 1,300, according to the unofficial tally,” a court official said.

The number of filings has been on the rise since the government introduced the Integrated Bankruptcy Law in 2006, from 208 that year to 248 in 2007, 557 in 2008, 1,024 in 2011 and 1,412 in 2014.

As of last July, the combined assets of companies in receivership at the district court amounted to 12.35 trillion won ($10.18 billion) with their debts totaling 21.86 trillion won. Their assets, according to the rankings made by the Fair Trade Commission, were close to the 12.6 trillion won held by Hyundai Group (different from Hyundai Motor Group), which is Korea’s 18th-largest chaebol.

In the wake of the 1997 Asian financial crisis, the comparable assets in receivership at the same court reached 35 trillion won, similar to the size of the fourth-largest chaebol, as the filings were made by large businesses, including Hanbo Steel and Kia Motors, at the time.

“The larger number of businesses and the smaller size of their total assets show that SMEs are on the brink this time around,” said the court official. “In other words, corporate Korea is being shaken from its roots.”