Hello, this is Kim Kwang-sik, attorney at Cheongchul Law Firm.

As JTBC and other JoongAng Group affiliates have successively entered corporate rehabilitation proceedings, attention has turned to how the rehabilitation process is structured and the question of who will run the company — the trustee appointment issue. On June 12, 2026, JTBC declared default after failing to repay a KRW 20.6 billion securitization loan at maturity, and on June 15, five entities — holding company JoongAng Holdings together with JTBC, Contentree JoongAng, Megabox JoongAng, and JoongAng P&I — filed for rehabilitation with the Seoul Rehabilitation Court.

The Seoul Rehabilitation Court assigned the case to the 2nd Rehabilitation Division, issued preservation orders and comprehensive injunctions against all five entities to freeze assets and claims, and conducted hearings of each company's representative on June 23. The court will review for several weeks before deciding whether to open rehabilitation, during which it remains a key issue for the legal and media communities whether a 'third-party trustee' rather than existing management — or a joint trustee structure — should be appointed in light of responsibility for management failure and procedural transparency.

Today, using the JoongAng Group case as a starting point, we organize how the corporate rehabilitation process proceeds step by step, what status and powers the trustee holds, and when a third-party trustee or joint trustee may be appointed despite the Debtor-in-Possession (DIP) principle of an existing-management trustee.

[Question]

If a company like JTBC or other JoongAng affiliates files for corporate rehabilitation due to inability to repay debts, in what order does the process proceed? And once rehabilitation begins, does existing management continue to run the company, or does a new 'third-party trustee' take over?

[Answer]

1. What is corporate rehabilitation — an overview of the system

Corporate rehabilitation is an insolvency proceeding under the Debtor Rehabilitation and Bankruptcy Act (DRBA), aimed at companies facing financial distress that continue operations while adjusting the rights of creditors, shareholders, and other stakeholders to pursue rehabilitation. Unlike bankruptcy, which winds up and dissolves the company, rehabilitation targets 'keeping the business alive to enable greater repayment.' That is, when the going-concern value of continued operations exceeds the liquidation value of immediate winding up, the procedure allows creditors and the company to share the difference.

Rehabilitation is usually filed by the debtor itself, but creditors holding claims equal to at least one-tenth of the company's capital may also file alone. The JoongAng Group case is distinct in that the holding company and affiliates filed 'voluntarily' after JTBC's default — a different starting point from cases initiated by creditors.

📝 Card News Summary ▶ Corporate rehabilitation 'keeps the business alive to repay more' rather than liquidating it. When going-concern value exceeds liquidation value, the difference is shared between creditors and the company.

2. The order in which rehabilitation proceeds

Corporate rehabilitation generally proceeds in the following stages. First, application for commencement of rehabilitation. Second, preservation orders and comprehensive injunctions: a preservation order bars the company from arbitrarily disposing of assets or repaying debts so that assets remain tied up, while a comprehensive injunction collectively halts individual creditors from launching compulsory execution, provisional attachment, and the like. Such measures were issued against the five JoongAng entities immediately after their filings, freezing assets and claims.

Third, the representative hearing, in which the court directly examines the company representative on debt status, the cause of financial distress, reasons for filing, and proposed debt adjustment measures; in the JoongAng case, hearings were conducted sequentially from the holding company onward starting June 23. Fourth, the rehabilitation commencement decision, at which the court reviews commencement requirements, decides whether to open rehabilitation, and appoints (or declines to appoint) a trustee. Fifth, claims are filed and investigated and thereby finalized; sixth, the trustee drafts a rehabilitation plan and submits it to the court; seventh, the plan is voted by class at the meeting of interested parties, and once approved and confirmed by the court, repayments under the plan begin. The repayment period in principle may not exceed 10 years.

📝 Card News Summary ▶ Rehabilitation proceeds in the order: filing → preservation order/comprehensive injunction → representative hearing → commencement decision (trustee appointment) → claim investigation → rehabilitation plan → confirmation/repayment. The five JoongAng entities have completed hearings and await the commencement decision.

3. The trustee's status and the 'Debtor-in-Possession (DIP)' principle

Once rehabilitation begins, the right to conduct the company's business and to manage and dispose of its assets vests exclusively in the 'trustee.' Under the court's supervision, the trustee runs the company, manages assets, and drafts and executes the rehabilitation plan as a core actor, while also serving as a public fiduciary acting in the interests of all stakeholders — creditors and shareholders alike — rather than as the agent of any particular party. The identity of the trustee thus critically shapes the direction and transparency of the rehabilitation.

The current DRBA in principle appoints existing management as the trustee, a system known by the English acronym DIP (Debtor in Possession). The rationale is that having existing management — who knows the company best — lead the proceeding favors business continuity, preservation of trading relationships, and prevention of talent loss, and encourages management not to hesitate in filing, thereby promoting 'early rehabilitation.' In practice, courts often appoint no separate trustee (decision not to appoint a trustee) or appoint existing management as trustee outright, so the perception that 'entering rehabilitation invariably means management changes' is inaccurate.

📝 Card News Summary ▶ Once rehabilitation opens, management and asset rights pass to a 'trustee' — a public fiduciary acting for all creditors and shareholders. The principle, however, is DIP: existing management continues for business continuity.

4. 'Third-party trustee' and 'joint trustee' — issues around management replacement

The DIP principle has important exceptions. The DRBA allows appointment of a third party rather than existing management as trustee where ① financial distress stems from directors' misappropriation or concealment of assets, or from severe mismanagement for which the directors bear significant responsibility, or ② there is a request from the creditors' council with substantial cause. In other words, when management is judged to bear 'significant responsibility' for the failure or when creditors find existing management hard to trust, a third-party trustee may be appointed. The reason third-party trustee appointment has become an issue in the JoongAng Group case is that assessing managerial responsibility for the large-scale default and securing procedural transparency and trust are central variables; reportedly, employees and unions have also pointed to management responsibility.

That said, existing-management trustee and third-party trustee are not a strict either/or. The court may appoint multiple trustees, and in practice a compromise — appointing existing management together with a third party (such as a restructuring specialist or a person trusted by creditors) as 'joint trustees' — is used to preserve the expertise and continuity of existing management while securing procedural transparency and mutual checks. In cases like JoongAng, where the business carries strong industry specificity (broadcasting, cinema, content) alongside heightened demands for accountability and transparency, a joint trustee structure may be considered to strike a balance. Which form to use is decided at the commencement stage, with the court comprehensively considering the cause of distress, the degree of managerial responsibility, and the views of the creditors' council.

📝 Card News Summary ▶ If management bears significant responsibility for mismanagement or creditors do not trust them, a 'third-party trustee' may be appointed; where compromise is needed, a 'joint trustee' combining existing management and a third party may be chosen. This is the core issue in the JoongAng case.

5. ARS (Autonomous Restructuring Support) and the timing of trustee appointment

Another notable aspect of the JoongAng case is that JTBC, unlike the other affiliates, filed for a temporary suspension of the commencement decision together with a request for the Autonomous Restructuring Support (ARS) program. ARS is a system in which the court refrains from immediately deciding to open rehabilitation and instead suspends the decision for a defined period, supporting the company and creditors as they autonomously negotiate restructuring.

When ARS applies and the commencement decision is suspended, rehabilitation does not formally begin during that period, so trustee appointment is also postponed. The question of who will be trustee is thus tied to the 'rehabilitation commencement decision,' and if autonomous negotiations under ARS succeed, restructuring may be wrapped up by agreement with creditors without formal rehabilitation. Even within the same group, the pace of proceedings and the timing of trustee appointment may differ depending on whether ARS is requested — a point worth watching in practice.

📝 Card News Summary ▶ JTBC's ARS request suspends the opening of rehabilitation for autonomous negotiation with creditors; during this period, trustee appointment is postponed. Even within one group, the pace of proceedings can vary by ARS request.

6. Summary — practical takeaways from the case

The JoongAng Group case showcases, all at once, key dimensions of corporate rehabilitation practice: ① simultaneous group-wide rehabilitation filings triggered by default, ② commencement review through preservation orders, comprehensive injunctions, and representative hearings, ③ issues around the existing-manager trustee principle and the appointment of third-party or joint trustees, and ④ attempts at autonomous restructuring via ARS.

Companies considering rehabilitation should comprehensively review, from the filing stage, how to organize and explain the cause of distress and the structure of managerial responsibility, what materials and demonstrated commitment will support keeping an existing-manager trustee, how to manage relations with the creditors' council, and whether alternative restructuring tools such as ARS can be used. Trustee appointment is not a mere formal step but the starting point that determines the leadership and credibility of the rehabilitation.

📝 Card News Summary ▶ The JoongAng case compresses the essentials of rehabilitation practice — simultaneous filings, trustee appointment issues, and ARS. Trustee appointment is the starting point that shapes leadership and trust in the proceeding.

Cheongchul Law Firm provides comprehensive legal advice across the entire rehabilitation process, from filing-stage consultation on corporate rehabilitation, to handling preservation orders and comprehensive injunctions, maintaining existing-manager trustee status and responding to third-party/joint trustee appointment issues, negotiating with the creditors' council, drafting rehabilitation plans, and designing autonomous restructuring measures such as ARS. If you need to consider corporate rehabilitation or restructuring, we recommend organizing materials on financial conditions, debt structure, and the cause of distress systematically from the earliest stage to design your response.