2023-11-07 09:32:00
Due to the economic downturn and high interest rates, corporate bankruptcy applications had already reached a record high on an annual basis by the third quarter of this year, and the number of personal rehabilitation applications had also soared to an all-time high. Citizens are entering the Seoul Rehabilitation Court in Seocho-dong. / Hankyung DB The number of companies filing for bankruptcy this year reached a record high. Personal rehabilitation is also expected to reach an all-time high, surpassing last year’s total by the third quarter. There are concerns that the ‘triangular wave’ of economic recession, high interest rates, and inflation has led to a full-blown bankruptcy crisis for businesses and individuals.
According to the National Court Administration on the 7th, the number of corporate bankruptcy applications as of the third quarter of this year was 1,213, the highest ever on an annual basis. It is a 20.8% increase from last year’s 1,004 cases, and even exceeded the 1,069 cases in 2020, when there were the most bankruptcy applications.
Considering that there were 1,160 applications for rehabilitation (sum of rehabilitation stand-alone and rehabilitation agreement cases) as of September, the first ‘dead cross’, in which bankruptcies outnumber rehabilitations on an annual basis, is expected to become a reality. This means that the number of companies giving up attempts at revival and closing down is rapidly increasing. Recent bankruptcy applications are spreading across all fronts, including not only traditional industries such as construction and manufacturing, but also new industries including platforms.
The number of rehabilitation applications for individuals in the pre-bankruptcy stage is also expected to reach an all-time high. By September, there were 90,437 cases, a 40.1% increase compared to the same period last year, exceeding last year’s annual volume (89,966 cases). It is certain that it will even surpass the record set in 2014 (110,707 cases), which had the highest number of applications for rehabilitation. This can be interpreted as the result of a sharp increase in applications from self-employed people who survived on policy funds during the COVID-19 period and young people in their 20s and 30s whose economic situation worsened due to cryptocurrency and stock investment losses and lease fraud.
The simultaneous insolvency of companies and individuals is leading to a sharp increase in cases of people giving up on inheritance because they have more debt than assets. As of the third quarter, the number of applications for inheritance renunciation to the court was 22,127, an increase of 15.4% compared to the same period last year. This is also an annual record and is expected to break last year’s record (25,679 cases), which reached an all-time high.
Attorney Jeon Dae-gyu, a former rehabilitation court judge, said, “Companies and individuals who are unable to survive due to rising loan interest rates are being forced into bankruptcy and rehabilitation.” He added, “As interest and other costs increase in an economic downturn, the fear of bankruptcy will grow even more next year.” said.
Even my will to make a comeback was lost at 3 high… Corporate bankruptcy surpasses rehabilitation for the first time in history
An ’emergency light’ has been turned on in the real economy, with corporate bankruptcy filings reaching an all-time high. There is an analysis that as the price of raw materials and financing costs soar while experiencing physical exhaustion due to COVID-19, there are many cases of people not being able to endure it and filing for bankruptcy. In particular, experts say that the seriousness of the situation is heightened by the fact that the ‘dead cross’, in which bankruptcy applications exceed rehabilitation (the sum of rehabilitation cases and rehabilitation agreement cases) on an annual basis, has become a reality for the first time this year.
○Even the platform fears ‘bankruptcy’
According to the court on the 7th, Wonju Briquette, the only briquette factory in Wonju, Gangwon-do, was declared bankrupt by the Seoul Bankruptcy Court in September. This company, which produced up to 100,000 briquettes per day, saw its business situation deteriorate rapidly as coal import prices more than doubled due to the followingmath of the war in Ukraine and the rise in exchange rates. After repeated closures and restarts since the beginning of the year, the company eventually chose bankruptcy.
Company A, a parts manufacturer in Ulsan, filed for bankruptcy in court early this year as it was unable to withstand the burden of rising raw material prices. Last year, we asked the main contractor, a large company, to increase the delivery price, but when it was rejected, we decided to go bankrupt. Upon hearing the news of the bankruptcy filing, the original contractor belatedly said it would raise the unit price, but the management’s will for revival had already broken. An industry insider said, “Considering the difficult business environment and skyrocketing loan interest rates, I believe they decided to close the business because they judged that it would be difficult to save the company even with the increased unit price level.”
The number of companies closing down in the construction industry is also rapidly increasing. According to the Ministry of Land, Infrastructure and Transport, the number of general construction companies that closed as of September this year was 294, an increase of 94.7% compared to the same period last year. The closure of specialized construction companies mainly responsible for subcontracting (1,427 cases) also increased by 21% during the same period. This year, following Daewoo Shipbuilding & Marine Engineering & Construction, companies ranked in the top 100 in the Ministry of Land, Infrastructure and Transport’s construction capability evaluation, including H&INC, Daechang Enterprises, and Shinil, began rehabilitation procedures, and in September, Daewoo Industrial Development, which owns the apartment brand ‘Ian’, began rehabilitation procedures. started.
The platform industry, which has been in the spotlight in the Corona era, is no exception. Live commerce platform Bithumb Live was declared bankrupt last month. Virtual asset exchange Bithumb and media company Bucket Studio each invested 6 billion won in 2021 to establish a commerce platform that introduced Metaverse and non-fungible tokens (NFTs), but went bankrupt due to mounting losses.
The same goes for Delivery, a taxi delivery platform startup founded in 2018. The company suffered from financial difficulties due to failure to receive new investment and was eventually declared bankrupt by the court last week.
○ “There is a surge in bankruptcies among marginal companies.”
As of September of this year, the number of applications for corporate rehabilitation was at the pre-corona level, but corporate bankruptcy has already exceeded the highest annual figure since statistics were compiled in 2003. Corporate bankruptcy is the final procedure taken when management has lost its will to continue the business or when the company determines that it is unable to recover. Previously, there were more cases of attempting a comeback through rehabilitation procedures than through bankruptcy. However, as more and more companies were driven to a moribund state with no chance of recovery this year, a dead cross occurred for the first time on a cumulative basis in September.
Concerns regarding companies going bankrupt are expected to continue for the time being. This is because the number of companies experiencing financial difficulties, including an increase in the amount of bills dishonored, continues to increase. According to the Bank of Korea, the amount of bills dishonored from January to September this year was 4.1568 trillion won. It increased 3.1 times from 1.3203 trillion won in the same period last year.
It was found that the financial pressure felt during the actual management process is increasing, especially among small and medium-sized businesses. The Business Survey Index (BSI) for the financial situation of small and medium-sized enterprises announced by the Bank of Korea decreased from 79 in June to 74 last month. Choi Cheol-min, the representative attorney of Choi & Lee Law Firm, a law firm specializing in small and medium-sized businesses, said, “Inquiries regarding bankruptcy applications have increased in the second half of the year,” and added, “There will be more bankruptcies among startups and small and medium-sized businesses with limited funding.”
Reporter Min Kyung-jin/Kim Jin-seong/Park Si-on/Kang Jin-gyu min@hankyung.com
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