Hynix and KEB cases would make a good example for the competing bankruptcy arguments, i.e., the Creditors' Bargain Theory and the Team Production Theory as explained by Professor Lynn LoPucki's article. The Korean government, the largest substantial shareholder and future creditor of KEB, took initiative to sell the time-honored bank to an American private equity fund, Lone Star. At that time, as the Creditors' Bargain Theory insists, the government officials regarded the board of directors of KEB as a mere agent of shareholders. Likewise, the creditor banks and the government initially pursued to sell Hynix to Micron. However, the board of directors of Hynix refused to endorse the execution of MOU to sell the company to Micron on account of the stakeholders' interests as stressed by the Team Production Theory. The review of Hynix and KEB cases confirms what matters in the bankruptcy reorganization, "Whose interests should bankruptcy serve first?" Total disregard of the interests of parties with non-economic rights and community interests might play havoc with the bankruptcy reorganization itself. From the viewpoint of the sharing of information on bankruptcy reorganization, the Creditors' Bargain Theory seems to have an advantage because creditors and shareholders have more influence over the board of directors than any other constituencies of the insolvent firm. But Production Team members want to preserve the going concern value of the firm and are willing to delegate necessary powers to the board of directors to the extent they share such information with the board. It is quite strange that KEB's shareholders and large creditors would make an agreement "ex ante" to dispose the bank to a foreign capital once the bank's capital adequacy ratio fell below the required level. On the contrary, it is reasonable to expect the board of directors of KEB rather than the biased shareholders to have concluded an independent reorganization plan with sufficient information. In conclusion, it is advisable that the new Bankruptcy Act of Korea accommodate several improvements in line with the Team Production Theory and the efficient information sharing scheme. In addition to the proposed amendment, careful consideration of non-economic rights and community interests would be helpful to avoid the recurrence of a KEB case.

Hynix and KEB cases would make a good example for the competing bankruptcy arguments, i.e., the Creditors' Bargain Theory and the Team Production Theory as explained by Professor Lynn LoPucki's article. The Korean government, the largest substantial shareholder and future creditor of KEB, took initiative to sell the time-honored bank to an American private equity fund, Lone Star. At that time, as the Creditors' Bargain Theory insists, the government officials regarded the board of directors of KEB as a mere agent of shareholders. Likewise, the creditor banks and the government initially pursued to sell Hynix to Micron. However, the board of directors of Hynix refused to endorse the execution of MOU to sell the company to Micron on account of the stakeholders' interests as stressed by the Team Production Theory. The review of Hynix and KEB cases confirms what matters in the bankruptcy reorganization, "Whose interests should bankruptcy serve first?" Total disregard of the interests of parties with non-economic rights and community interests might play havoc with the bankruptcy reorganization itself. From the viewpoint of the sharing of information on bankruptcy reorganization, the Creditors' Bargain Theory seems to have an advantage because creditors and shareholders have more influence over the board of directors than any other constituencies of the insolvent firm. But Production Team members want to preserve the going concern value of the firm and are willing to delegate necessary powers to the board of directors to the extent they share such information with the board. It is quite strange that KEB's shareholders and large creditors would make an agreement "ex ante" to dispose the bank to a foreign capital once the bank's capital adequacy ratio fell below the required level. On the contrary, it is reasonable to expect the board of directors of KEB rather than the biased shareholders to have concluded an independent reorganization plan with sufficient information. In conclusion, it is advisable that the new Bankruptcy Act of Korea accommodate several improvements in line with the Team Production Theory and the efficient information sharing scheme. In addition to the proposed amendment, careful consideration of non-economic rights and community interests would be helpful to avoid the recurrence of a KEB case.

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corporate insolvency, bankruptcy law, the Act concerning Debtor's Reorganization and Bankruptcy, Creditors' Bargain Theory, Team Production Theory, cramdown, reorganization plan, liquidation value, going concern value