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Efficient And Inefficient Debt Restructuring: A Comparative Analysis On Voting Rules In Workouts, Hyun Chul Lee
Efficient And Inefficient Debt Restructuring: A Comparative Analysis On Voting Rules In Workouts, Hyun Chul Lee
Hyun-Chul Lee
Two jurisdictions, Korea and America, have contrasting legal rules governing voting in workouts: Voting Mandating Rule and Voting Prohibition Rule. Voting in a bond workout has long been prohibited in the Trust Indenture Act of the United States. In stark contrast, Korea enacted a unique statute that mandated a voting scheme in workout in an effort to resolve corporate insolvencies crisis and incompetent bankruptcy institutions. Voting facilitates the completion of workouts, but it gives majority creditors an opportunity to disproportionately benefit from workouts. I explore the contrariness of the two seemingly unrelated statutes, and bring their respective implications for efficiency …