Implementation of Private University Restructuring Law Approved, Lacks Key Provisions

On August 4, the Cabinet approved the enforcement decree of the Private University Restructuring Law, but experts have criticized it as lacking essential provisions. Choi Young-chan, a lawyer, described the decree as "a steamed bun without filling," noting that it fails to define clear financial criteria for universities in management crisis or the legal requirements for key restructuring measures such as the transfer of educational operations and the consolidation of private universities.

Experts argue that the decree only outlines soft measures like consulting from the Private School Promotion Foundation and voluntary reserve fund utilization, making substantial restructuring or a series of school closures unlikely. The Ministry of Education announced that the enforcement decree, which includes financial assessments, designation of universities in crisis, and special provisions for restructuring, will take effect on August 15 as a ten-year temporary law.

According to the decree, private universities designated as in management crisis will have temporary relaxations on asset disposal criteria and faculty retention rates (up to a 30% relaxation) if they establish and implement a restructuring plan. Additionally, reserve funds previously earmarked for specific purposes such as construction, research, and scholarships can be converted for restructuring use. Schools that voluntarily dissolve can receive part of their remaining assets as dissolution compensation or contribute to public interest corporations focused on education, scholarships, child welfare, elderly care, or disability support.

Conversely, the decree includes restrictions on foundations that have committed serious financial misconduct, such as accounting fraud, embezzlement, or bribery. Foundations with executives who have engaged in significant illegal activities related to corporate assets or operations within the last ten years, or those that have failed to comply with corrective actions from authorities, will be excluded from receiving dissolution compensation. Additionally, any attempts to improperly transfer remaining assets to related parties or public interest corporations established within ten years will be strictly prohibited.

The decree also includes measures to mitigate the impact on faculty and students due to school closures. Faculty members laid off due to closure will receive compensation or severance pay within the limits of remaining assets, and protections will be in place to ensure that their research activities are not adversely affected.

To safeguard students' right to education, support for transferring to other universities will be promoted, and students who choose not to transfer will receive compensation for study interruptions from the remaining assets. Additionally, a "Closed University Record Management System" will be established to continue administrative support, including the issuance of graduation and career certificates.

Experts have expressed concerns that the enforcement decree lacks substance, predicting limitations in higher education reform beyond small self-help measures. Choi Young-chan stated, "The transfer of educational operations and consolidation, which are key restructuring methods, are significant legal actions that alter the identity of private universities. However, the current decree focuses solely on small self-help measures that allow universities to maintain their identity."

He further noted, "Submitting a restructuring plan to the Private School Promotion Foundation or seeking management advice is merely a self-initiated effort, and it is impossible for universities in management crisis, where student numbers are not increasing, to normalize through simple consulting. Given that the legal requirements and effects necessary for substantial higher education restructuring are omitted, the incentive for restructuring through this decree will be limited."