TMON and WeMakePrice, e-commerce platforms owned by Singapore-based Qoo10, filed for corporate rehabilitation on July 29 after failing to pay sellers hundreds of billions of won. The payment delays caused a consumer “refund crunch,” exacerbating the companies’ liquidity crisis.
“We have filed for corporate rehabilitation to minimize damage to sellers and consumers, as cash flow has deteriorated sharply due to the suspension of transactions and the departure of sellers,” the two companies said in a statement.
Corporate rehabilitation is a court-supervised process that allows a financially distressed company on the verge of bankruptcy to temporarily suspend debt payments to avoid bankruptcy and restructure operations to save the business. If the court approves the rehabilitation, it will become nearly impossible for sellers who listed their products on the two platforms to fully recover their sales payments as the procedure temporarily suspends all debt payments and claims from creditors. If the court does not accept the rehabilitation and both TMON and WeMakePrice file for bankruptcy, it will become even more difficult for sellers to receive payment.
The government estimated that the two companies owed sellers approximately 213.4 billion won ($154 million). Adding unsettled amounts from June onwards, the total could reach 1 trillion won. The corporate rehabilitation filing has left many sellers feeling hopeless. “It’s all over now,” one seller said with a sigh. “We’ve been deceived,” another seller cried.
Ku Young-bae, the founder and CEO of Qoo10, pledged to resolve the current liquidity crisis by selling his stake in Qoo10 or using it as collateral. The Justice Ministry imposed a travel ban on Ku, and prosecutors have formed a task force to investigate the issue.
Eight hours after Ku vowed to “minimize the damage,” TMON and WeMakePrice filed for court receivership, leading industry insiders to question the sincerity of Ku and Qoo10′s efforts to repair the damage.
The court will now review the applications for rehabilitation to determine whether it is in the public interest to proceed. If the rehabilitation process begins, all debt payments, including payments to sellers, will be temporarily suspended. “It is common for companies undergoing rehabilitation to pay off between 20 and 30% of their total debt due to partial debt forgiveness,” said a lawyer specializing in corporate rehabilitation.
If the court rejects the rehabilitation, the two platforms could face bankruptcy. In the case of bankruptcy, the companies would sell assets, such as office buildings, to pay off their debts. With TMON’s total debt standing at 785.9 billion won as of 2022 and WeMakePrice’s debt at 331.8 billion won in 2023, it is highly unlikely there will be any remaining funds to repay the sellers.
