The Special Act on the Protection of Guarantors (the “Act”) has been criticized as lacking adequate safeguards for individuals who execute a guarantee contract with a private money lender or loan business registered with a local government, although the Act currently does protect individual guarantors who enter into a guarantee contract with a financial institution licensed by the Financial Services Commission.

On March 25, 2014, in response to such criticism, the Korean government submitted to the National Assembly a bill proposing a partial amendment of the Civil Code (the “Proposed Bill”), stating that the Proposed Bill aims “to protect individual guarantors by prescribing statutory formality for a guarantee and provisions on geun-guarantee, since the current provisions on guarantees under the Civil Code do not provide adequate safeguards for guarantors and the application of the Act is limited to guarantees provided without consideration.”   Further, the Proposed Bill contains provisions relating to tour products for the protection of travelers.

The key provisions on guarantees under the Proposed Bill are as follows:

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