[비즈한국] The Seoul Bankruptcy Court has decided to close the bankruptcy proceedings for Burning Sun Entertainment, the operating company of Club Burning Sun, which stood at the center of the 2019 "Burning Sun Gate" scandal. Since its declaration of bankruptcy in March of last year, Burning Sun Entertainment had attempted to recover receivables and liquidate its assets. However, it ultimately failed to cover even the costs required for the bankruptcy proceedings, leading to the termination of the process.
“Unable to cover even the costs of bankruptcy proceedings”
On the 20th, the Seoul Bankruptcy Court decided to close the bankruptcy of Burning Sun Entertainment. The court stated, "The bankruptcy estate is insufficient to cover the costs of the bankruptcy proceedings," and added, "We hereby close the bankruptcy in this case."
Closing bankruptcy refers to terminating proceedings without further action. Typically, in bankruptcy proceedings, a company's remaining assets are liquidated and distributed to creditors. However, if the company's assets are insufficient to even cover the costs required to conduct the proceedings, the court may discontinue the process and decide to close it.
Burning Sun Entertainment was declared bankrupt under a simplified process by the Seoul Bankruptcy Court on March 18 of last year. Simplified bankruptcy is a procedure applied when the assets belonging to the bankruptcy estate are less than 500 million won at the time of the declaration. Although the proceedings followed, the decision to close the case was made after about one year and seven months, as it reached a situation where even the costs of the proceedings could not be met.
There have been previous cases where proceedings were discontinued due to a lack of assets following a bankruptcy declaration. In January last year, Hanjin Shipping had its bankruptcy proceedings closed about eight years after being declared bankrupt. At the time, Hanjin Shipping had secured approximately 477.1 billion won through asset liquidation, but it was insufficient to cover the costs of the bankruptcy proceedings and the priority claims that had to be repaid first, leaving nothing to be distributed to creditors.
Woongjin Energy, a solar material company, also had its bankruptcy proceedings closed in June last year, about three years after receiving a bankruptcy declaration in July 2022. It was found that the amount secured by Woongjin Energy through the sale of assets was also insufficient to cover the costs of the proceedings and the repayment of estate claims.
Failed loan lawsuits and trademark sales… Limitations in securing assets
Burning Sun Entertainment is the operator of Club Burning Sun in Gangnam-gu, Seoul. It garnered significant attention as Seungri (Lee Seung-hyun), a former member of the group Big Bang, had served as an executive director. However, following an assault incident at the club in November 2018, various suspicions including drug use and distribution, sex crimes, and collusion with police surfaced, causing a massive social stir. Burning Sun halted operations in February 2019 as the controversy spread.
It appears that following the bankruptcy declaration, Burning Sun Entertainment attempted to secure its remaining assets through debt collection and asset liquidation. According to documents submitted to the court, the bankruptcy trustee for Burning Sun Entertainment filed six lawsuits to claim the return of loans in September last year. These were legal actions intended to recover money the company had lent to other individuals or entities.
The company also faced difficulties in the process of liquidating its holdings. An attempt to sell trademark rights held by Burning Sun Entertainment failed, and the company gave up on the sale in January this year. In August, it also attempted to sell uncollectible receivables through a public auction, but there were no takers.
Ultimately, the bankruptcy trustee filed a motion with the court to close the bankruptcy proceedings on September 17, citing a lack of assets. Subsequently, a final report on the work conducted was submitted on the 15th of this month, and the court made the decision to close the bankruptcy five days later.
An immediate appeal against the court's decision to close the bankruptcy is possible. If the decision is finalized without any challenges, the bankruptcy proceedings for Burning Sun Entertainment will end, and follow-up procedures regarding the dissolution of the corporation will take place. However, the exact scale of assets actually secured during the bankruptcy proceedings and whether any payments were made to creditors have not been confirmed.