Insolvency Law at North Korea
North Korea's insolvency framework is primarily governed by the Law of the Democratic People's Republic of Korea on Bankruptcy of Foreign-invested Enterprises, adopted by Decree No. 1504 of the Presidium of the Supreme People's Assembly on April 19, 2000. This law applies specifically to foreign-invested enterprises operating within the country. (Law on Bankruptcy « North Korean Economy Watch)
⚖️ Legal Framework
The bankruptcy law comprises six chapters and 54 articles, detailing procedures for both voluntary and involuntary bankruptcy. It aims to ensure the correct settlement of debts and claims of foreign-invested enterprises while protecting the rights and interests of creditors. The law reflects the unique economic structure of North Korea, emphasizing state control and alignment with national economic policies. (Law on Bankruptcy « North Korean Economy Watch, Understanding Liquidation and Insolvency Procedures in North Korea)
🧑⚖️ Bankruptcy Procedures
1. Voluntary Bankruptcy
Foreign-invested enterprises may apply for bankruptcy if they are unable to repay debts within the set period, their debts exceed assets, or they cannot be maintained due to significant losses. Applications must be submitted to the court with supporting documentation, including a list of debts and assets. (Law on Bankruptcy « North Korean Economy Watch)
2. Involuntary Bankruptcy
Creditors who are unable to receive repayment may apply for the bankruptcy of an enterprise. If the enterprise has over three creditors, approval from more than one creditor is required. The application must include details of the claim and supporting documents. (Law on Bankruptcy « North Korean Economy Watch)
3. Court Decision
The court decides on the bankruptcy application within 30 days. If accepted, the enterprise is declared bankrupt, and a liquidation committee is appointed to manage the process. The enterprise's operations are suspended, and its assets are secured for distribution. (Law on Bankruptcy « North Korean Economy Watch)
📋 Priority of Claims
In the liquidation process, creditors' claims are prioritized as follows:
Secured Creditors: Those with collateral backing their debts.
Preferential Creditors: Including employees' claims and tax authorities.
Unsecured Creditors: General creditors without collateral.
This structured approach ensures an equitable distribution of the debtor's assets among creditors.
🏛️ Judicial Oversight
The Supreme People's Court oversees bankruptcy proceedings, ensuring they align with state policies. The court appoints a liquidation committee to manage the process, which includes securing assets, investigating claims, and distributing proceeds. The committee operates under the guidance of the court and relevant government authorities. (Law on Bankruptcy « North Korean Economy Watch)
⚠️ Limitations and Considerations
State Control: The bankruptcy process is heavily influenced by state policies, and outcomes may align with national economic objectives rather than purely commercial considerations.
Lack of Transparency: There is limited public information on individual bankruptcy cases, and the process may lack transparency.
Limited Applicability: The law primarily applies to foreign-invested enterprises, with limited provisions for domestic entities. (Law on Bankruptcy « North Korean Economy Watch)
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