Government and Democratic Party Announce Second Plan for Rationalizing Economic Criminal Penalties
Ministry of Justice to Delete and Ease Punitive Provisions in the Debtor Rehabilitation and Bankruptcy Act
Cases where individuals become criminals due to mistakes such as omissions in bookkeeping during bankruptcy or rehabilitation proceedings will be eliminated. The intention is to prevent the practice of "harsh punishment," which has excessively imposed criminal penalties for minor administrative mistakes made unintentionally by debtors.
Kwon Chilseung, head of the Task Force for Rationalization of Economic Criminal and Civil Liability of the Democratic Party of Korea, and Koo Yooncheol, Deputy Prime Minister and Minister of Economy and Finance, are posing for a commemorative photo at the 2nd Party-Government Meeting on Rationalization of Economic Criminal and Civil Liability held at the National Assembly on December 30, 2025. Photo by Yonhap News
On December 30, the government and the Democratic Party announced the "Second Plan for Rationalizing Economic Criminal Penalties." The Ministry of Justice will delete several punitive provisions in the Debtor Rehabilitation and Bankruptcy Act or ease the requirements for establishing criminal liability.
The government has first removed violations of "procedural obligations," which are close to simple administrative mistakes, from the scope of criminal punishment. Previously, failure to prepare commercial books before or after a bankruptcy declaration, making inaccurate entries, or altering books that had been sealed by court clerks could result in a prison sentence of up to five years or a fine of up to 50 million won. However, the revised plan will delete all relevant provisions from Articles 251 to 254.
The requirements for establishing criminal liability under the punitive provisions of the Debtor Rehabilitation and Bankruptcy Act will also be relaxed. The current regulation (Article 228) imposes a prison sentence of up to ten years or a fine of up to 100 million won for acts such as damaging or concealing a debtor's assets, or disposing of them to the disadvantage of rehabilitation creditors, secured creditors, shareholders, or equity holders, with the intent to benefit oneself or another or to harm creditors.
However, in the revised plan, the phrase "to benefit oneself or another" has been removed. Previously, debtors could be punished simply for intending to benefit themselves, but going forward, the scope will be limited to cases where there is a clear intent to harm creditors. Other provisions have also been similarly narrowed in scope.
In addition, the Ministry of Justice will integrate individually separated punitive provisions into general clauses and implement "sentence reduction" measures to lower the severity of penalties. Articles 230, 234, and 240 are subject to these changes. These provisions will now be governed by newly established general clauses instead of the previous strict penalties, which is expected to lower the overall level of sentencing.
However, some have expressed concerns about easing criminal penalties for both corporations and individual debtors. Critics point out that by significantly narrowing the scope of those who can be penalized under the Debtor Rehabilitation and Bankruptcy Act and converting some criminal penalties into general administrative fines, there is an increased risk of abuse or recidivism. Punishment for acts such as concealing the books of bankrupt debtors is also expected to be eliminated under these measures.
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