Since the corporate spin-off was adopted in Korean business corporation law in 1998, many Korean exchange-listed and KOSDAQ- registered firms have applied this system. Especially, the Korean bankruptcy court realized that the spin-off is a very useful tool for reorganizing firms and rescuing them from financial distress. The actual benefits of corporate spin-offs include the (i) enhancement of management efficiency, (ii) improvement of the sound structure of corporate governance, and (iii) alleviation of information asymmetry by dividing a well-diversified business in the market, among others. This article analyzes two reorganizing firms’ division cases, which successfully completed a turnaround from insolvency by applying spin-offs.

Corporate spin-off, as a legal process, is controversial. The most critical disputes involve creditor and shareholder interest protection and the subject of division. This article examines many practical issues with a focus on spin-off procedures. This article covers the following topics: (i) the significance, need, and legal nature of a spin-off; (ii) the various ways of creating a company spin-off such as simple division, merger by split, merger through a newly incorporated division, merger by split, and in rem division; (iii) the divided firm’s scope, asset, and debts; (iv) spin-off procedure for reorganizing a company; and (v) the effects of a spin-off and status of reorganizing a company.

Since 1999, many Korean firms have begun to implement spin-offs for their own purposes, but there has been limited academic research on them. Therefore, Germany and France have been used as other jurisdictional sources for explanation. This article conducts an in-depth analysis of the spin-off process at two reorganizing Korean companies and it will provide understanding as to why corporate spin-offs have been used since the Korean economy’s collapse in 1998.