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Laws of the Republic of Korea |
1
SECURED BOND TRUST ACT
Act No. 991, Jan. 20, 1962
Amended by Act No. 5453, Dec. 13, 1997
Act No. 5505, Jan. 13, 1998
Act No. 5747, Feb. 5, 1999
Act No. 6627, Jan. 26, 2002
Act No. 8863, Feb. 29, 2008
CHAPTER GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to guide and supervise the trust business in connection with the issuance of secured corporate bonds and protect the bondholders to facilitate investments by the general public in such bonds. Article 2 (Definition)
The term "trust company" means a corporation that engages in trust business for secured bonds.
Article 3 (Issuance of Bonds)
In order to issue secured bonds by backing them by an asset, a trust contract shall be made in advance by and between the issuing company of the bonds (hereinafter referred to as the "trustor") and a trust company. Article 4 (Types of physical collateral)
(1) The assets acceptable as a physical collateral to the secured bonds shall be limited to those listed below:
1. Chattel pledge;
2. Pledge of the right to claim evidenced by a certificate;
3. Stock pledge; and
4. Mortgage on real property and other mortgages acceptable under other Acts or their subordinate statutes.
(2) Offering stocks as a physical collateral requires an approval of the
Financial Services Commission.
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Article 5 (Registration of Trust Business, etc.)
(1) Persons who desire to engage in trust business shall have themselves
registered with the Financial Services Commission.
(2) Persons qualifiable for the registration under the provision of paragraph
(1) shall be limited to the trust companies as defined
in the Trust Business
Act and the financial institutions as defined in the Banking Act.
(3) Persons who desire to have themselves
registered pursuant to the
provision of paragraph (1) shall file with the Financial Services Commission
an application for registration
that shall contain the following information:
1. Trade name;
2. Principal place of business;
3. Information about capital;
4. Information about senior executives and directors; and
5. Information necessary for the examination of the application in addition
to those set forth in subparagraphs 1 through 4, as prescribed
by the
Ordinance of the Prime Minister.
(4) The application under the provision of paragraph (3) shall be accompanied
by the following documents:
1. The Articles of Incorporation;
2. The balance sheet for the previous year;
3. A document stating the shareholder's names and the number of stocks
held by each of them; and
4. A certified copy of the corporate register.
(5) The Financial Services Commission may not deny the registration for
which an
application is filed in compliance with the provision of paragraph
(1), unless there is a false statement on an important information
or omission
of such information in the application itself or any of its accompanying
documents, and shall, upon completion of the
registration, issue to the
applicant a certificate of registration with the following descriptions:
1. Number and date of registration;
2. Trade name and principal place of business of the company;
3. Representative's name; and
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4. Details of registration.
(6) The Financial Services Commission shall notify the applicant of its denial
of the registration under
the provision of paragraph (5) forthwith, if and
when the registration is denied.
The trust business shall be subject to supervision of the Financial Services
Commission.
(1) The Financial Services Commission may, from time to time, inspect the
status of the property included in the business of the
trust company or require
the trust company to submit a report on its business.
The Financial Services Commission may issue an order to suspend the
business of a trust company, demand it to remove a senior executive
or
director, or cancel its registration, if the company falls under one of the
following subparagraphs: 1. If the trust company violates any provision of a law, regulation, or its
Articles of Incorporation, or an order issued under this
Act; or
2. If the trust company commits an act harmful to the public interest.
SECURED BOND TRUST ACT
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[This Article Wholly Amended by Act No. 5747, Feb. 5, 1999]
Article 10-2 (Hearing)
The Financial Services Commission shall hold a hearing whenever it
considers cancelling the registration of a trust business under
the provision
of Article 10.
(1) A corporation who intends to offer bonds for sale by backing them with
a physical collateral to investors in a foreign country
may enter into a trust
contract with a foreign company subject to a prior authorization of the
Financial Services Commission.
(2) The foreign company who accepts the trust under paragraph (1) shall
appoint a representative who resides within the Republic
of Korea, if it has
no branch office in the Republic of Korea.
(3) A commercial company may act as the representative.
(4) When a representative is appointed pursuant to the provision of
paragraph
(2), his/her name and address or the trade name and the principal
place of business of the representative shall be reported to the
Financial
Services Commission forthwith.
(5) The representative of a foreign trust company who resides within the
Republic of Korea shall have the equal authority as that
of a director or
representative officer of the foreign trust company as far as its trust business
is concerned.
CHAPTER TRUST DEED
Article 12 (Trust Contract)
The trust contract shall be made in the form of trust deed.
Article 13 (Mandatory Descriptions of Trust Deed)
The trust deed shall
contain the following descriptions, and the
representatives of both the trustor and the trust company shall sign the
deed:
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1. Trade names of the trustor and the trust company;
2. Total amount of the bonds;
3. Amount of each bond;
4. Issued or minimum value of the bonds;
5. Interest rate of the bonds;
6. Method and maturity for the redemption of the bonds;
7. Method and maturity for the payment for interest;
8. Representation of the descriptions that shall be inserted in the bonds
and the representation of the meaning of a coupon, if it
is the case;
9. Representation of the type of physical collateral, subject matter, priority,
amount of the claim entitled to senior priority to
the collateral, and other
rights to assert against any other security interest holder concerning
the subject matter;
10. Representation of the fact that it is a bond under the provision of Article
28 (1) if it is the case, and the burden alloted
to each company.
Article 14 (Mandatory Descriptions of Trust Deed for Partial Issuance)
(1) Where total amount of the bonds is
issued in several installments, the
trust deed shall contain the following descriptions in lieu of the descriptions
set forth in
subparagraphs 3 through 8 of Article 13:
1. Representation that the total amount of the bonds is issued in several
installments; and
2. Maximum interest rate for the bonds.
(2) If the relevant trust contract provides specifically for the amount of the
bonds to
be issued initially and thereafter and the details concerning the
descriptions set forth in subparagraphs 3 through 8 of Article
13, such fact
shall also be stated accordingly.
Article 15 (Additional Contract for Partial Issuance)
(1) Where total amount of the bonds is issued in several installments, the
trustor shall make an agreement with the trust company whenever issuing
the bonds, if there is no relevant provision concerning
the description set
forth in Article 14 (2) in the relevant trust contract.
(2) The representatives of both the trustor and the
trust company shall sign
the agreement under paragraph (1).
(3) The deed of agreement under paragraph (1) shall have the same effect
as the trust contract.
SECURED BOND TRUST ACT
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(4) The provision of Article 67 (2) shall apply mutatis mutandis to the written
agreement under paragraph (2).
(5) The amount of each bond shall be the one calculated by dividing the
total amount of the bonds evenly or by a minimum amount.
Article 16 (Preservation and Inspection of Deed)
(1) The trustor and the trust company shall keep each set of the trust deed.
(2) The head office of each party shall keep the original
set of the trust deed,
while each branch office of each party shall keep a certified copy of the deed
respectively.
(3) The original set or certified copy of the trust deed under paragraph (2)
shall be made available for inspection or copying at
any time during the normal
business hours whenever there is a request from a shareholder, bondholder,
or subscriber to do so.
CHAPTER OFFERING OF BONDS
Article 17 (Public Announcement for Public Offering)
(1) The company who publicly offers its bonds secured by a physical collateral
pursuant to the relevant trust contract shall announce the following to the
general public:
1. The descriptions set forth in subparagraphs 1 through 7 and 10 of Article
13;
2. Identification of the bonds backed by a physical collateral;
3. Identification of the relevant trust deed;
4. Summarized descriptions set forth in subparagraph 9 of Article 13 to
the extent necessary for making the value of the physical
collateral
known;
5. Representation of the results of the survey conducted by the trust company
in relation to the value of the collateral;
6. Balance of the bonds previously offered and sold but not redeemed
completely yet;
7. Capital of the company and total amount of paid capital;
8. Value of the assets existing as of the date of the latest balance sheet;
and
SECURED BOND TRUST ACT
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9. Time and place available for subscribers' inspection or copying of the
trust deed or its certified copy.
(2) Where the total amount of the bonds is issued in several installments,
the following information shall also be announced in
addition to the
descriptions set forth in paragraph (1): Provided, That the descriptions set
forth in subparagraphs 3 through 7
of Article 13 shall be limited to those
concerning the bonds issued at that time:
1. Representation that the total amount of the bonds is issued in several
installments and the amount issued at that time;
2. The amount previously issued at each time, the outstanding amount,
and the interest rate and maturity for redemption of the outstanding
amount;
3. Identification of the deed of agreement, if there is a deed of agreement
under Article 15 (1) involved in relation to the issuance
at that time;
and
4. Time and place available for subscribers' inspection or copying of the
deed of agreement set forth in subparagraph 3 or its certified
copy.
(3) The announcement under paragraph (2) shall be subject to an approval
of the trust company.
Article 18 (Delegation of Public Offering)
The trustor may delegate the public offering of bonds to the trust company
in accordance with the relevant trust contract. In this
case, the trust company
shall have power to do any act in relation to the issuance of the bonds,
redemption of the bonds and payment
for interest, except as expressly
specified otherwise in the trust contract.
Article 19 (Vicarious Announcement of Public Offering)
(1) In the case set forth in Article 18, the public announcement under Article
17 shall be made by the trust company.
(2) The public announcement under paragraph (1) shall include the fact
that the trust company makes the public offering of the bonds
vicariously
on behalf of the trustor.
Article 20 (Trust Company's Underwriting of Bonds)
(1) The trust company may underwrite total amount of bonds in accordance
with
the terms and conditions of the trust contract.
(2) In the case set forth in paragraph (1), it is not necessary to make the
SECURED
BOND TRUST ACT
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announcement required by Articles 17 and 19.
Article 21 (Partial Issuance of Bonds)
(1) In the case as set forth in Article 20 (1), the trust company may request
the trustor to issue the bonds underwritten by it
in several installments.
(2) The trust company who has power to issue the bonds in accordance with
the trust contract may issue
the bonds as set forth in paragraph (1) by simply
notifying the trustor of its issuance.
Article 22 (Transfer of Underwritten Bonds)
(1) The trust company who plans to transfer the bonds underwritten in
accordance with the provision of Article 20 (1) to others
shall publicly
announce such a plan.
(2) The provisions of Article 17 shall apply mutatis mutandis to the
descriptions that shall be contained in the public announcement
under
paragraph (1).
(3) The trust company shall, upon receiving a request from a person who
is willing to purchase the bonds, make the trust deed or
its certified copy
available for his/her inspection or copying during its normal business hours.
(4) The trust company shall have
power to do any act in relation to redemption
of the bonds and payment for interest on behalf of the trustor, where the
bonds are
transferred in accordance with the provision of paragraphs (1)
through (3).
Article 23 (Third Party's Underwriting for Total Amount of Bonds)
(1) Either the trustor or the trust company may invite a third
party to
underwrite total amount of the bonds in accordance with the terms and
conditions of the trust contract.
(2) Underwriting total amount of the bonds under the provision of paragraph
(1) shall be deemed to be a commercial transaction.
(3) The underwriter for total amount of bonds in accordance with the provision
of paragraph (1) may request the trustor to issue
bonds in appropriate
installments.
(4) If the trust company has power to issue the bonds in accordance with
the trust contract, such a request as provided for in paragraph
(1) may be
made to the trust company.
Article 24 (Mutatis Mutandis Application to Underwriting for Total Amount
of Bonds)
SECURED BOND TRUST ACT
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(1) The provisions of Articles 20 (2) and 22 (1), (2) and (4) shall apply
mutatis mutandis to the case where a third party underwrites
total amount
of bonds in accordance with the provision of Article 23 (1).
(2) Where a third party underwrites total amount of bonds
in accordance
with Article 23 (1), the descriptions set forth in Article 17 (1) 5 may be
substituted with the representation of
the results of the survey conducted
by the third party in relation to the value of the collateral.
Article 25 (Delivery of Certified
Copy of Trust Deed)
(1) Either the trustor or the trust company shall deliver a certified copy
of the trust deed to the underwriter
for total amount of bonds in accordance
with the provision of Article 23 (1).
(2) The certified copy under paragraph (1) shall be signed by the
representative of either the trustor or the trust company, and
shall carry
a certification that it is true and identical with its original set.
(3) The provision of Article 22 (3) shall apply
mutatis mutandis to the
certified copy under paragraph (1).
Article 26 (Term for Partial Issuance of Bonds)
Where the total amount of bonds is issued in several installments, the
issuance for the last installment shall be made within five
years from the
execution date of the trust deed.
Article 27 (Partial Issuance and Reduction of Total Amount of Bonds)
(1) Where the total amount of bonds is issued in several installments,
the
trustor may make an agreement with the trust company to reduce the total
amount of the bonds by up to the amount of issued
bonds if there are any
bonds not issued yet. In this case, the trust company may not refuse to execute
such an agreement without
a justifiable reason.
(2) The trustor shall compensate for the loss or damage sustained by the
trust company, if any, due to the execution of such an
agreement under
paragraph (1).
(3) The provisions of Articles 15 (2) and 67 shall apply mutatis mutandis
to the agreement under paragraph (1).
Article 28 (Issuance of Joint Bonds)
(1) A company may jointly issue bonds. In this case, the company shall either
delegate the public offering of the bonds to the trust
company or allow the
trust company to underwrite total amount of the bonds.
SECURED BOND TRUST ACT
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(2) In the case set forth in paragraph (1), the trust company shall have
power to do any act in relation to the issuance of the
bonds, redemption
of the bonds, and payment for interest.
Article 29 (Partial Underwriting for Bonds)
Where total amount of bonds is issued in several installments, the
underwriting for the amount issued at each time shall be deemed
to be the
underwriting for total amount of the bonds.
Article 30 Deleted.
Article 31 (Mandatory Descriptions of Bond)
Each bond issued under a trust deed shall bear the following descriptions:
1. Descriptions set forth in subparagraphs 1 through 3 and 5 through 7
of Article 13;
2. Descriptions set forth in Article 17 (1) 2 and 3;
3. Descriptions set forth in Article 17 (2) 1 and 3, if the total amount of
the bonds is issued in several installments;
4. Serial number of the bond; and
5. Descriptions set forth in Article 30 (1) 3 and 4.
Article 32 (Certification of Bond)
(1) In issuing the bonds that conform to the terms and conditions of the
trust contract, the trust company shall, upon receiving
a request, certify
that the bonds are the one issued in compliance with the trust contract and
deliver them to the trustor or a
person designated by the trustor.
(2) The certification under paragraph (1) shall be stated in each bond and
followed by a signature
of a director or representative officer of the trust
company.
Article 33 (Invalidity of Bond)
A bond issued under a trust deed shall be invalid if there is no certification
in the bond as set forth in Article 32.
Article 34 (Vicarious Issuance of Bond)
(1) The trust company who issues bonds vicariously on behalf of the trustor
shall state the fact of its vicarious issuance in each
bond and its director
SECURED BOND TRUST ACT
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or representative officer shall write his/her signature on the statement.
(2) The provisions of Articles 32 and 33 shall not apply
to the bonds issued
in compliance with paragraph (1).
Article 35 (Right and Duty of Vicarious Issuer of Bonds)
(1) Where the trust company issues bonds vicariously on behalf of the trustor,
the trusty company shall be obliged to put the descriptions as prescribed
in the provisions of Article 479 of the Commercial Act
and the provisions
pursuant to which the aforesaid Article shall become applicable mutatis
mutandis, while the request in accordance
with the provision of Article 480
of the Commercial Act and the provisions pursuant to which the aforesaid
Article shall become
applicable mutatis mutandis shall be made to the trust
company.
CHAPTER BOND REGISTER
Article 36 (Mandatory Descriptions of Bond Register)
(1) Where a company issues bonds backed by a physical collateral, the bond
register shall contain the following descriptions in addition to the
descriptions set forth in each subparagraph of Article 488
of the Commercial
Act:
1. Descriptions under subparagraphs 1, 9 and 10 of Article 13;
2. Descriptions under Article 17 (1) 2 and 3;
3. The fact that there exists the delegation under the provision of Article
18 or the underwriting under the provision of Article
20 (1); and
4. The fact that there is an underwriter for the bonds under the provision
of Article 23 (1), if any, and the name or trade name
of the underwriter.
(2) Where total amount of bonds is issued in several installments, the
descriptions set forth in Article 17
(2) 1 and 3 shall be entered in the bond
register in addition to the descriptions set forth in paragraph (1), whenever
issuing
the bonds.
Article 37 (Preparation of Certified Copy)
(1) The trustor shall prepare and deliver a certified copy of the bond register
to the trust company or the underwriter for total
amount of the bonds under
the provision of Article 23 (1).
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(2) A director or a representative officer of the trustor shall put his/her
signature in the certified copy prepared in accordance
with paragraph (1)
and shall certify that the copy is true and identical with its original register.
(3) The trust company shall
keep the certified copy prepared in accordance
with paragraph (2) and shall make it available for a bondholder's inspection
or
copying at any time during its normal business hours whenever requested
by the bondholder.
Article 38 (Vicarious Preparation of Issuer's Register and Delivery of
Certified Copy)
(1) Where bonds are issued by the trust company vicariously on behalf of
the trustor, the trust company shall prepare and keep the
bond register in
its head office, and shall deliver the certified copy thereof to the trustor
and the underwriter for total amount
of the bonds under the provision of
Article 23 (1).
(2) The provisions of Articles 37 (2) and (3) and 39 of this Act and Article
396 (2) of the Commercial Act 27 shall apply mutatis
mutandis to the case
as set forth in paragraph (1).
(1) Either the trustor or the trust company shall notify the other party by
a document signed by its director or representative
officer of modification
whenever such modification is made in the bond register.
(2) The trust company or the trustor shall, upon
receiving the document
mentioned in paragraph (1), file and keep it with the certified copy of the
bond register.
Article 40 (Process for Modification of Register)
The trustor, the trust company or the underwriter for total amount of bonds
under
the provision of Article 23 (1) shall notify the company that keeps
the bond register in writing of its act that it has done to
cause any modification
of the bond register consequently.
CHAPTER ASSEMBLY OF BONDHOLDERS
Article 41 (Call for Meeting of Assembly of Bondholders)
Either the trust company or the underwriter for total amount of bonds under
SECURED BOND TRUST ACT
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the provision of Article 23 (1) may call a meeting of the assembly of
bondholders (hereinafter referred to as the "assembly") at
any time whenever
it is considered necessary.
Article 42 (Right to Call Meeting)
(1) Either the trustor or a bondholder who holds at least ten percent of total
amount of bonds may submit to the trust company or
the underwriter for
total amount of the bonds under the provision of Article 23 (1) a document
stating the purpose of a meeting
and the reason for calling the meeting to
request it to hold the meeting.
(2) If the person to whom the request under paragraph (1) has been submitted
fails to initiate the process necessary for calling
the meeting within two weeks
after receiving such request, the requesting party may call the meeting
subject to a prior authorization
by the Financial Services Commission.
(1) A bondholder who holds at least ten percent of total amount of bonds
shall have a right to call a meeting prescribed in Article
78, 83, or 87.
(2) The meeting called in accordance with paragraph (1) shall be held in
the trust company's principal place of
business except as provided for
otherwise in the trust contract.
(3) The meeting prescribed in Article 83 or 87 may also be called by the
trustor itself.
Article 44 (Mutatis Mutandis Application of Commercial Act)
The provisions of Article 363 (1) through (3) of the Commercial Act
shall
apply mutatis mutandis to the call for the meetings.
Article 45 (Proceedings of Meeting)
(1) A resolution by the assembly shall require the consent of a majority of
the actually exercised voting rights except as provided
for otherwise in the
trust contract: Provided, That the resolutions concerning the matters set
forth in Articles 55, 57 (1), 65,
74, 75, and 86 (1) shall require the exercise
of voting rights by the bondholders who hold at least one half of total amount
of
the bonds among at least one half of the persons who hold their registered
bonds and the persons who have deposited their bonds
in accordance with
paragraph (2).
SECURED BOND TRUST ACT
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(2) The provisions of Article 368 (2) through (4) of the Commercial Act shall
apply mutatis mutandis to the resolution by the assembly.
(3) A bondholder absent from the meeting may exercise his/her voting right
in writing, except as provided otherwise in the trust
contract.
(4) Each bondholder has one vote for each unit of minimum amount: Provided,
That the voting right of a bondholder who
holds bonds eleven times as much
as the minimum amount of each bond may be restricted by the trust contract.
Article 46 (Underwriter's
Right to Attend Meeting)
The underwriter for total amount of bonds under the provision of Article
23 (1) or its representative
may attend the meeting to speak or make a
statement in writing.
Article 47 (Representative of Trust Company's Right to Attend Meeting)
The representative of the trust company may attend the meeting
to speak
or make a statement in writing, unless the meeting is the one called for the
matters set forth in Article 78 (2).
Article 48 (Notice of Call for Meeting)
(1) The person who calls a meeting shall notify the persons named in Articles
46 and 47 or their representatives of the call.
(2) The provisions of Article 363 (1) and (2) of the Commercial Act shall
apply mutatis mutandis to the notice under paragraph (1).
Article 49 (Right to Demand to Attend Meeting)
The person who calls a meeting may demand the trustor to dispatch its
representative to attend the meeting by sending a notice to
it, if considered
necessary.
Article 50 (Right to Request Declaration of Invalidity of Resolution)
(1) The trustor, the trust company, or each bondholder has
a right to request
the competent court to declare the invalidity of a resolution, if the process
for calling the meeting or its
way of resolution breaches the provisions of
this Act and the terms or conditions of the trust contract.
(2) The request under
paragraph (1) shall be made within one month after
the relevant resolution is made.
(3) The bondholder who files a complaint to seek for the declaration under
paragraph (1) shall deposit his/her bonds, and shall
offer adequate security
SECURED BOND TRUST ACT
15
if requested by the person who called the meeting to do so.
Article 51 (Agenda for Resolution)
The agenda for resolution by the assembly shall be limited to those specified
in the trust contract in addition to those prescribed
by this Act.
Article 52 (Preparation and Inspection of Minutes of Meeting)
(1) The person who calls a meeting shall prepare the
minutes of meeting.
(2) If any person other than the trust company prepares the minutes of
meeting, such a person shall keep the
original and deliver its certified copy
to the trust company.
(3) The trust company shall keep the original minutes of meeting at its head
office and a certified copy at each of its branch offices.
(4) The trust company shall, upon receiving a request from the trustor or
a bondholder, make the minutes of meeting mentioned in
paragraph (3)
available for inspection or copying at any time during its normal business
hours.
Article 53 (Liability for Expenses)
The person who calls a meeting shall be liable for all expenses incurred for
the meeting except the case where the meeting is called
by the trust company
or the underwriter for total amount of bonds under the provision of Article
23 (1).
Article 54 (Executor of Resolution)
The trust company shall be responsible for executing the resolutions by the
assembly: Provided, That a person shall be appointed
by the assembly to
execute a resolution if the resolution in its nature is not the one that can
be executed by the trust company.
Article 55 (Delegation of Resolution)
(1) Unless there is a provision otherwise in the trust contract, the assembly
may appoint one or more representatives to delegate
them to make a decision
on its agenda.
(2) Each representative shall be appointed from among the underwriter for
total amount of bonds under the provision of Article 23
(1) and persons who
hold at least ten percent of total amount of the bonds.
(3) Where there are many representatives, the agenda
over which the
representatives have power to resolve shall be resolved by the consent of
a majority of the representatives except
as otherwise resolved by the
SECURED BOND TRUST ACT
16
assembly.
Article 56 (Announcement of Representative's Inauguration and Authority
of Representative)
(1) The representative's inauguration shall be publicly announced
immediately and notified to the trustor, the trust company and
the
underwriter for total amount of bonds under the provision of Article 23 (1).
(2) A representative who falls under the proviso
of Article 54 may execute
the matters within his authority or delegate another person to execute them
on his/her behalf.
Article 57 (Removal of Representative and Change in Authority)
(1) The assembly may remove its representative or change his/her
authority
at any time.
(2) In the case set forth in paragraph (1), the assembly shall publicly
announce its resolution and notify the trustor and the underwriter
for total
amount of bonds under the provision of Article 23 (1) of its resolution.
Article 58 (Resolution by Assembly at the Time
of Partial Issuance of Bonds)
(1) Where total amount of bonds is issued in several installments, the item
in which only the holders
of bonds issued in a certain installment have interest
and that does not cause any loss or damage to the holders of bonds issued
in any installment other than the specific installment shall be resolved by
the assembly of the holders of the bonds issued in
the specific installment.
(2) Where it is anticipated that a resolution by the assembly is likely to
cause a loss or damage to
the holders of bonds issued in a certain installment,
the resolution shall be made only by the assembly of the holders of the bonds
issued in the specific installment.
(3) The provisions concerning assembly shall apply mutatis mutandis to
the assembly of the bondholders under paragraph (1).
CHAPTER
EFFECT OF TRUST CONTRACT
Article 59 (Trust Company's Duty)
The trust company shall perform its duty in good faith with fairness and
integrity, and shall manage its trust business with a reasonable
care of a
good fiduciary for the trustor and bondholders.
SECURED BOND TRUST ACT
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Article 60 (Vesting of Ownership of Physical Collateral)
(1) The ownership of the physical collateral under the trust contract shall
vest in the trust company for the whole of the bonds stated in the trust deed.
(2) The trust company shall keep safe and exercise
the security interest
for all bondholders.
Article 61 (Bondholders' Benefit)
Each bondholder shall be entitled to the benefit from the collateral equally
in proportion of the amount of the bonds held by him/her.
Article 62 (Effect of Physical Collateral)
The physical collateral under the trust contract shall become effective even
before the bonds backed by it become effective.
Article 63 (Inapplicability of Certain Provisions of Civil Act and Commercial
Act)
The provisions of Article 336 of the Civil Act and Article 59 of the Commercial
Act shall not apply to the security interest under
the trust contract.
Article 64 (Addition of Collateral)
The trust company may add another collateral by an agreement with the
trustor.
Article 65 (Replacement of Collateral)
The trust company may replace the collateral with another property by an
agreement with the trustor subject to a resolution of the
assembly.
Article 66 (Effect of Agreement for Addition or Replacement)
The agreements under Articles 64 and 65 shall have the same
effect as that
of the trust contract.
Article 67 (Announcement of Agreement for Addition or Replacement)
(1) The agreements under Articles 64 and 65 shall be made in
the form of
a document signed by the representatives of both the trustor and the trust
company, and the trustor and the trust company
shall publicly announce
the agreements immediately: Provided, That a notice shall be given
individually to each of known bondholders
and the underwriter for total
amount of the bonds under Article 23 (1).
(2) The provisions of Articles 16 and 25 shall apply mutatis mutandis to
the deed of agreement under paragraph (1).
Article 68 (Extent of Enforcement of Security Interest)
SECURED BOND TRUST ACT
18
The security interest under the trust contract may be enforceable only for
all bondholders.
Article 69 (Redemption of Bond and Payment for Interest)
(1) If the bonds that shall be redeemed by the trustor in installments
on
a regular basis are overdue for two months, or if the payment for interest
by the trustor is overdue for three months, the trust
company may send
a peremptory notice to the trustor, subject to the resolution by the assembly,
demanding to make the redemption
or payment within a certain period of
time stating and reminding that the acceleration clause will be enforced for
the total amount
of the bonds if the trustor fails to redeem the bonds or
pay the interest within the specific period of time.
(2) The acceleration
clause shall become enforceable against the trustor if
it fails to make such redemption or payment within the specific period of
time as set forth in paragraph (1).
(4) The peremptory notice under paragraph (1) shall be made in writing.
Article 70 (Public Announcement and Notice of Acceleration)
If and when the acceleration clause is enforced against the trustor in
accordance with the provisions of Article 69, the trust
company shall publicly
announce the acceleration immediately: Provided, That a notice shall be
given individually to each of known
bondholders and the underwriter for
total amount of the bonds under the provision of Article 23 (1).
Article 71 (Enforcement of
Security Interest)
(1) If there remain bonds not redeemed after the lapse of the maturity or
if the trustor dissolves without completing its redemption
of the bonds, the
trust company shall enforce its security interest immediately subject to a
prior resolution by the assembly.
(2) The provision of Article 338 (2) of the Civil Act shall not be applicable
to the chattel pledge under the trust contract.
Article 72 (Judicial Execution)
(1) The trust company may initiate judicial execution over the collateral
for all bondholders with the original judgment or order
by which the authority
for execution is granted by the competent court, or apply or delegate judicial
sale in accordance with the
Civil Execution Act.
SECURED BOND TRUST ACT
19
(2) In the case set forth in paragraph (1), the right to contest against the
bondholders may be also asserted against the trust
company.
Article 73 (Right to Redemption of Bonds)
The trust company shall have full power to do any act necessary for having
the bonds redeemed for all bondholders, if there is no
provision to the contrary
in the trust contract.
Article 74 (Suspension of Payment, Discharge of Liability, or Settlement)
The trust company shall have a right to suspend the payment
for all bonds,
discharge the liability arising from nonperformance or default, or settle a
dispute, subject to the resolution by
the assembly.
Article 75 (Litigation)
The trust company shall have a right to execute litigation for all bondholders,
or conduct any act in connection with the bankruptcy
proceedings, subject
to the resolution by the assembly.
Article 76 (Public Announcement and Notice of Measures Taken)
The trust company shall, upon closing any action set forth in the
provisions
of Article 71, 74 or 75, publicly announce its closing immediately: Provided,
That a notice shall be given individually
to each of the known bondholders
and the underwriter for total amount of the bonds under the provision of
Article 23 (1).
Article 77 (Delivery of Repaid Money)
(1) The trust company shall deliver to each bondholder the money received
as repayment for bondholders immediately in proportion
of the amount of
bonds held by each bondholder.
(2) The provisions of Article 685 of the Civil Act shall apply mutatis mutandis
to the case where the trust company has spent the
money set forth in
paragraph (1) for its own interest.
(3) The trust company shall deposit the money set forth in paragraph (2)
for a bondholder, if it is impossible to locate the bondholder,
or if the
bondholder refuses, or is unable, to receive the money.
(4) The trust company may delegate the underwriter for total
amount of
bonds under the provision of Article 23 (1) to do acts under paragraphs (1)
and (3), if considered necessary.
Article 78 (Appointment of Special Representative)
(1) If the trust company neglects its duty to do an act for all bondholders,
SECURED BOND TRUST ACT
20
the Financial Services Commission may, upon receiving a request from the
assembly, appoint a special representative to perform the
duty instead.
Article 79 (Representation of All Bondholders)
It is not necessary to name each bondholder individually in case where an
act is done within or without judicial proceedings on
behalf of all bondholders
in accordance with this Act.
Article 80 (Request for Remuneration)
(1) The trust company may request the trustor to pay adequate remuneration
for providing the trust service.
(2) The provisions of Article 686 (2) and (3) of the Civil Act shall apply
mutatis mutandis to the trust contract, except as provided
for otherwise
in the trust contract.
Article 81 (Reimbursement of Expenses)
(1) The trustor shall reimburse the trust company for all expenses paid by
the trust company for providing the trust service, pay
the interest for the
period of time from the date when the trust company paid the expenses to
the date when the expenses are reimbursed
completely, and also compensate
all damages, if any, sustained by the trust company without its own fault.
(2) The trust company
may request the trustor to pay in advance the expenses
required for providing its trust service.
(3) The provisions of paragraphs (1) and (2) shall apply mutatis mutandis
to the underwriter for total amount of bonds under the
provision of Article
23 (1).
Article 82 (Receipt of Preferential Repayment)
(1) The physical collateral under the trust contract shall be also effective
for the claims that the trust company might have in
the future in accordance
with the provision of Article 81 (1).
(2) The trust company shall have a right to have its own claims under
paragraph (1) satisfied from the collateral prior to any bondholder.
Article 83 (Deposit Money)
SECURED BOND TRUST ACT
21
(1) The Financial Services Commission may, upon receiving a request from
the trustor or the assembly, require the trust company
to deposit an adequate
amount of money, if the physical collateral is extinguished or its value is
reduced due to the trust company's
intentional or negligent conduct. In this
case, it shall be deemed that the trustor owns a pledge right over the deposit
money.
Article 84 (Inspection of Collateral)
(1) The trustor, the representative appointed in accordance with the
provision of Article 55 (1), or a bondholder who holds at least
ten percent
of total amount of the bonds may inspect the status of the collateral in the
custody of the trust company at any time.
(2) A person who holds a bearer bond shall not be allowed to conduct the
inspection under paragraph (1), unless and until he/she
deposits his/her
bond with the trust company.
Article 85 (Inapplicability of Provision of Civil Act)
The provision of Article 324 (3) of the Civil Act shall not be applicable
to
the pledge right under the trust contract.
CHAPTER SUCCESSION AND
TERMINATION OF TRUST
SERVICE
Article 86 (Resignation from Trustee)
(1) The trust company may resign from its position of trustee, in accordance
with the terms and conditions of the trust contract
or if there is consent
of the trustor and the assembly, after nominating its successor who will
succeed to its trust service: Provided,
That it may resign with a prior
authorization of the Financial Services Commission, if there is an inevitable
reason or cause.
22
where the successor of the trust service is a foreign company.
Article 87 (Removal of Trustee)
The Financial Services Commission may, upon receiving a request from the
trustor or the assembly, remove the trust company, if the
trust company
breaches its fiduciary duty, if it is found that it is not competent for providing
the trust service, or if there
is any other justifiable reason.
The Financial Services Commission shall appoint a new trust company to
let it succeed to the trust service, if the trust company
currently in service
resigns or is removed in accordance with the proviso of Articles 86 (1) and
87, if its registration is cancelled,
or if it is dissolved.
(1) The succession to the trust business under the provision of Article 86
shall become effective when the representatives of the
trustor, the previous
trust company, and the new trust company prepare and sign the agreement.
(2) The trustor and the trust companies,
previous and new, shall, upon
signing the agreement under the provision of paragraph (1), report the
agreement in writing to the
Financial Services Commission immediately.
Article 90 (Public Announcement of Succession)
The succession to the trust business shall be publicly announced immediately
by the trustor and the trust companies, previous and
new, in the case set
forth in Article 86, and by the trustor and new trust company in the case
set forth in Article 88: Provided,
That a notice shall be given individually
to each of known bondholders and the underwriter for total amount of bonds
under the
provision of Article 23 (1).
Article 91 (Successor's Service)
(1) New trust company nominated in accordance with the provisions of Article
86 or appointed in accordance with the provisions of
Article 88 shall provide
SECURED BOND TRUST ACT
23
its service in compliance with the terms and conditions as agreed by its
predecessor.
(2) The rights vested in and duties imposed on the previous trust company
for bondholders and the trustor shall be transferred to
new trust company
retroactively as of the time when the previous trust company resigned or
was removed, its registration was cancelled,
or it was dissolved: Provided,
That the foregoing shall not apply to the liability arising from the breach
of the contract or a
tortious or illegal conduct on the part of the previous
trust company.
It shall be deemed that new trust company is deprived of its possession of
a pledged property, if another person has taken the possession
in bad faith
as a consequence of the previous trust company's unauthorized disposition.
Article 93 (Transfer Procedure)
(1) A director, representative officer, or trustee in bankruptcy of the previous
trust company shall transfer to new trust company
all articles kept in its
custody for the trustor or bondholders and documents related to the trust
service immediately, and shall
take all other measures necessary for
transferring the trust service to new trust company.
(2) Upon completion of the transfer
under the provision of paragraph (1),
the trustor and the trust companies, previous and new, shall report jointly
their completion
of the transfer in writing to the Financial Services
Commission.
Article 94 (Supervision)
The Financial Services Commission shall be responsible for the supervision
over the administrative affairs related to the succession.
The trust company shall, upon termination of its trust service, prepare and
publicly announce the final settlement statements.
CHAPTER REGISTRATION
SECURED BOND TRUST ACT
24
Article 96 (Starting Point of Registration Period)
As to the matters that the trust company shall register and for which an
authorization
of the Financial Services Commission or registration with the
Financial Services Commission is required, the registration period
shall
begin on the date when the letter of authorization or certificate of registration
is delivered.
Article 97 (Registration of Suspension of Business, Cancellation of
Registration, etc.)
The Registrar's Office shall, upon receiving a request from the Financial
Services Commission, register the suspension of business
or cancellation
of registration decided by the Financial Services Commission under Article
9 or 10.
As to the registration of the creation of the security interest under the trust
contract, the trust company shall be the registered
right holder.
Article 101 (Mandatory Descriptions of Application for Registration of
Security Interest)
(1) The amount of bonds that shall be described in accordance with the
provisions of Article 140 of the Registration of Real Estate
Act may be shown
only in total amount of the bonds in filing an application for registration
of the creation of the security interest
under the trust contract.
(2) Where total amount of bonds is issued in several installments among
the cases set forth in paragraph
(1), the application shall state only total
amount of the bonds, the representation that the total amount of bonds is
issued in
several installments, and the maximum interest rate,
notwithstanding the provision of Article 140 of the Registration of Real Estate
Act.
Article 102 Deleted.
SECURED BOND TRUST ACT
25
Article 103 (Penal Provision)
A person who engages in the trust business in violation of the provisions
of Article 5 shall be punished by a fine not exceeding
ten million won.
Article 104 (Penal Provision)
(1) An employee, officer, director, trustee in bankruptcy, or special
representative under Article 78 of the company, or a representative
of a
foreign company, who is responsible for execution of the business of the
company, shall be punished by a fine not exceeding
five million won, if he/she
falls under any of the following subparagraphs:
1. Deleted; 2. If it violates an order of the Financial Services Commission under this
Act;
3. through 12. Deleted.
(1) An employee, officer, director, trustee in bankruptcy, or special
representative under Article 78 of a company, or a representative
of a foreign
company, who is responsible for execution of the business of the company,
shall be punished by a fine for negligence
not exceeding five million won,
if he/she falls under any of the following subparagraphs:
1. If he/she interferes with the inspection by the Financial Services
Commission;
2. If he/she violates the provision of Article 11 (1) or 86 (2);
3. If he/she fails to state any of mandatory descriptions in the bonds in
compliance with this Act or makes a wrong statement thereof;
4. If he/she issues the bonds without following the procedure prescribed
in the provisions of Article 32, in case where the trustor
issues the bonds;
5. If he/she fails to keep safe or exercise the security interest in compliance
with the provision of Article 60 (2);
6. If he/she violates the provision of Article 77 (1) or (3);
7. If he/she interferes with the inspection under the provision of Article
84 (1);
SECURED BOND TRUST ACT
26
8. If he/she neglects the transfer of the business affairs under the provision
of Article 93 (1);
9. If he/she breaches his/her duty to follow or violates a resolution made
by the assembly of the bondholders; or
10. If he/she makes a false report to the assembly of the bondholders or
the representative thereof, or conceals a true fact.
(2)
An employee, officer, director, trustee in bankruptcy, underwriter for
total amount of bonds under the provision of Article 23 (1),
representative
under Article 55, or special representative under Article 78 of a company,
or a representative of a foreign company,
who is responsible for execution
of the business of the company, shall be punished by a fine for negligence
not exceeding one million
won, if he/she falls under any of the following
subparagraphs:
1. If he/she neglects his/her duty to make a report, public announcement,
or notice under this Act or makes a wrong public announcement
or notice;
2. If he/she breaches his/her duty to deliver a document in compliance with
this Act or makes a wrong statement;
3. If he/she breaches his/her duty to make documents available for
inspection or copying in compliance with this Act without a justifiable
reason; or
4. If he/she breaches his/her duty to keep a document in compliance with
this Act or state a mandatory description in such a document,
or states
a wrong description therein.
(3) The fine for negligence under the provisions of paragraphs (1) and (2)
shall be imposed and collected by the Financial Services
Commission, as
prescribed by the Presidential Decree.
SECURED BOND TRUST ACT
27
(6) The fine for negligence, which has not been paid without filing an objection
within the period of time as prescribed in paragraph
(4), shall be collected
in accordance with the practice for the disposition of delinquent national
taxes.
[This Article Wholly Amended by Act No. 5505, Jan. 13, 1998]
Article 106 Deleted.
(1) (Enforcement Date) This Act shall enter into force on the date of its
promulgation.
(2) (Repealed Act or Decree) The Secured Bond Trust Act (Decree No. 533
of 1920) enforced in Korea under colonial rule shall be
repealed.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1998. (Proviso Omitted)
Article 2 Omitted.
ADDENDA
(1) (Enforcement Date) This Act shall enter into force on April 1, 1998. (Proviso
Omitted)
(2) (Transitional Measure concerning Dispositions, etc.) The authorizations
and other actions of administrative organs, etc. made
under the previous
provisions in force at the time when this Act enters into force or the reports
and other actions already made
to or against the administrative organs in
accordance with such previous provisions shall be deemed to be the
authorizations and
actions of, to, or against the administrative organs made
under this Act.
(3) Omitted.
(4) (Transitional Measure concerning Penal Provisions) The previous penal
provisions shall apply to the offenses committed in violation
of the provisions
of Article 103, 104 or 105 of the Secured Bond Trust Act in force before this
Act enters into force.
(5) Omitted.
SECURED BOND TRUST ACT
28
ADDENDA
(1) (Enforcement Date) This Act shall enter into force on the date of its
promulgation.
(2) (Transitional Measure concerning Trust Companies) It shall be deemed
that the persons who engage in the trust business with
an authorization of
the Minister of Finance and Economy at the time when this Act enters into
force have completed their registration
with the Financial Supervisory
Commission in accordance with the provisions of Article 5 as amended.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on July 1, 2002.
Articles 2 through 5 Omitted.
Articles 6 (Amendment to Other Acts)
(1) through <17> Omitted.
<18> The Secured Bond Trust Act shall be amended as follows:
The words "the Civil Procedure Act" in Article 72 (1) shall now read "the
Civil Execution Act."
<19> through <55> Omitted.
Articles 7 Omitted.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
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