|Hyung Soo Lee|
Following the 1997 financial crisis in Korea, there was a sharp increase in public interest for the need to strengthen the procedural mechanism which allowed for provision of non-real properties as collateral. Much debate on the matter has led to the legislation of the Act on Security Interests in Movable Properties and Other Claims, etc, which will introduce a central register for personal non-real properties. The new Act is expected to come into force on June 11 2012.
The most notable feature of the Act is the establishment of a new type of security interest in respect of moveable properties and other claims and charges which can be extended in its application to a specific asset group or movable properties that are not yet in possession. Unlike other security interests created under the Civil Act of Korea, the security interest under the new Act is created with a simple registration on the security register without passing on the possession of property, or other items. It is, however, necessary for the creator of the security interest to be a company or a person with a registered trade name pursuant to the Commercial Registration Act.
The security interest holder is given preferential rights in the disposition of the property and the security interest remains over the whole of the property until the relevant claims or liabilities are fully discharged. The term of the registered security interest must generally not exceed five years, although it is possible to seek extensions of five years at a time. There are no limitations on the number of extensions permitted.
Under the Act, the property disposition must be made through auctions except in special circumstances where there is a justifiable cause, in which case the security holder may acquire the title of the property outright or sell to a third party, and in respect of other claims, seek recourse from the debtors of such claims.
Hyung Soo Lee