This is the abstract of an article on the e-Registration System in Korea, which is contained in the International Trade Law Journal, Vol.13 No.1, published in July 2006.

Since the so-called IMF financial crisis was over, small businesses in Korea have been able to cash in on the receivables arising out of transactions with large companies. It empowers small and medium enterprises to raise additional fund though they have insufficient collateral. At present, there are three ways in capitalizing on account receivables: outright assignment for securitization, assignment by way of security, and discount in the form of bills.

First, it could be realized by way of securitization. The originator ("Supplier") assigns the account receivables to the special purpose vehicle (SPV) by means of a true sale, as provided for in the Act on Asset-backed Securitization( the "ABS Act"). The receivables are usually pooled up to a considerable amount. Then the SPV may issue asset-backed securities. According to the ABS Act, the originator's assignment of receivables is perfected by the notification to the respective debtors and the registration of securitization plan with the Financial Supervisory Service (FSS). Just after the FSS's screening, the securitization plan together with the specifications of receivables assigned by the originator will be disclosed on the Data Analysis, Retrieval and Transfer (DART) System, and the interested person may look into the disclosed data and documents on the Internet.

Second, the account receivables may be transformed into electronic claims ("e-claims"), which will be assigned as security to the bank for a loan up to the amount of receivables. Supplier may apply to its bank ("Supplier's Bank") for the payment by means of e-claims based upon the account receivables. After Buyer acknowledges the sale and delivery of goods, it agrees to issue the e-claims through its bank ("Buyer's Bank"). Then Buyer's Bank notifies the issuance of e-claims to the Korea Financial Telecommunications & Clearings Institute (KFTC) and demands the registration in the KFTC Registry. When Supplier's Bank is notified of such transaction, it relays the notification to Supplier. If Supplier applies for a loan up to the amount of receivables, it is required to assign the e-claims by way of security to Supplier's Bank. Its biggest merit is to get the appropriate cash financing from the bank rather than the discount of bills even before the due date.

Third, the account receivables may be transformed into the electronic promissory notes ("e-bills"). Buyer may issue the e-bill to pay Supplier via Buyer's Bank. Then Buyer's Bank notifies the issuance of e-bill to the e-bill administrator, which is currently conducted by KFTC, which relays the notification to Supplier's Bank. The presentation of e-bills and subsequent settlement will be automatically processed by and between Supplier's Bank and Buyer's Bank. This mechanism has been formalized in September 2005 upon the implementation of the "Act on the Issuance and Negotiation of e-Bills." The registry maintained by KFTC keeps the particulars of each e-bill, not the truncated image of original promissory notes, and would prevent any forgery or alteration of the bills. The e-bill could be negotiated and endorsed up to 20 times during the life of twelve-month maximum.

On the international scenes, the United Nations Commission on International Trade Law (UNCITRAL) has made efforts to effectuate the Convention on the Assignment of Receivables in International Trade. The UN Receivables Convention seems to be helpful to cash in on the account receivables of the international nature. The Convention provides for five alternatives, including the registration system, in the Annex to govern the priority among the rights of an assignee and other competing claimants.

As mentioned before, Korean enterprises have utilized more efficient ways to convert account receivables into cash by means of electronic registration. To further these mechanisms in Korea, it is advisable to expand the scope of receivables financing, and to enhance its availability to the ordinary small businesses. For the time being, however, it is unlikely for small and medium enterprises to use e-bills because they will show detailed financial transactions to the outsiders including tax collectors.

Another problem is that the electronic registries are scattered among FSS in the Administration, KFTC, a non-profit organization, and the Registration Office of the Judiciary Branch. To enhance the notification effect, however, it is more important for users to search the necessary data without consuming too much time, cost and efforts rather than a centrally-controlled registration system. Therefore, we had better to wait and see some more major trading partners to join the Receivables Convention before Korea decides to accede to the Convention.