Workout Law Expiry Risks Corporate Restructuring Amid Zombie Surge

The Chosun Ilbo · Yu Jun-ho · 2026-11-06 15:37 UTC

Workout Law Expiry Risks Corporate Restructuring Amid Zombie Surge 19.1% of firms unable to cover interest; experts urge permanent extension of debt restructuring law

Oh, 40 years old, the representative of an automotive parts company in Yesan, South Chungcheong Province, faced the closure of his business in 2018. He borrowed approximately 5 billion Korean won from a bank to invest in equipment for producing hybrid vehicle parts, but orders fell short of expectations as the automotive market shifted toward electric vehicles. To repay debts, he even put his factory site up for sale, but no buyers emerged. Eventually, Oh applied for a "workout (corporate restructuring process)" to negotiate with creditors, including banks, to lower interest rates and extend repayment deadlines.

Thanks to the workout, the company managed to avoid repaying the principal loan for four years. The interest rate, which could have risen to 7–8% annually, was reduced to the 4% range. During this period, the company streamlined unprofitable products and adjusted supply prices, returning to profit after five years last year. Oh stated, "Without the workout, we would have gone bankrupt."

The Corporate Restructuring Promotion Act (CRPA), which allows struggling companies to restructure debts through workouts instead of court-led corporate rehabilitation procedures, is set to expire at the end of this year. Amid a rise in "zombie companies"—those unable to cover interest with operating profits for three consecutive years—to 5,632 last year, concerns grow that businesses in crisis may miss timely restructuring opportunities.

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