Commencement of Rehabilitation Proceedings and Application for Voluntary Corporate Restructuring Support
Franchise Owner's Claim for Unjust Enrichment Rejected
Gaining Time Through Rehabilitation Proceedings Amid Threat of Forced Execution on Claims
Korea Pizza Hut has filed for the commencement of rehabilitation proceedings with the court. This move aims to block enforcement and buy time by initiating rehabilitation procedures after losing a lawsuit filed by franchisees demanding the return of unjust enrichment, which put the company at risk of having its claims forcibly executed.
Korea Pizza Hut stated, "This is an unavoidable measure to protect the livelihoods of over 1,000 members of the Pizza Hut business ecosystem," and added, "We will conduct amicable consultations with the parties involved and lift the account freeze as soon as possible."
The Seoul Rehabilitation Court announced on the 5th that Korea Pizza Hut applied for the commencement of rehabilitation proceedings and the Autonomous Restructuring Support (ARS) program the day before. The ARS program is a system where a company autonomously negotiates repayment plans with creditors. Rehabilitation proceedings will be suspended for up to three months.
The court’s Rehabilitation Division 12 (presiding judge Oh Byung-hee) assigned to the case issued a preservation order and a comprehensive injunction on the same day. The preservation order prevents the company from disposing of assets to preferentially repay certain creditors. Conversely, the comprehensive injunction freezes claims to prevent creditors from securing the company’s major assets through forced execution, provisional seizure, or auction before the commencement of corporate rehabilitation.
Korea Pizza Hut applied for rehabilitation proceedings and ARS because it faced the risk of forced execution of compensation following a lawsuit filed by franchisees. Last month, Korea Pizza Hut lost the second trial in a lawsuit filed by 94 franchisees demanding the return of unjust enrichment against the headquarters. The first trial ordered Korea Pizza Hut to compensate the franchisees 7.5 billion KRW, and the second trial increased the compensation amount to 21 billion KRW.
A Korea Pizza Hut representative explained, "We are currently in the Supreme Court appeal process regarding the second trial results of the differential franchise fee lawsuit filed by some franchisees. Meanwhile, on the 4th of last month, the participating franchisees carried out seizure and collection measures on the bank account used by the headquarters to handle business operating costs, which inevitably led us to initiate rehabilitation proceedings."
Korea Pizza Hut emphasized that the commencement of rehabilitation proceedings does not indicate operational problems within the company. A company representative said, "Over 330 Pizza Hut stores are operating normally, and there are no fundamental issues with the business operations," adding, "There are only temporary difficulties caused by the account freeze due to forced execution by some plaintiffs following the second trial ruling."
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