Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
AIIFL Symposium on Corporate Rescue in China: Chinese and Comparative Perspectives 7 October 2002 Insolvency Experts’ Local Questionnaire Japan’s Answer Hon.Prof.Dr. Shinjiro TAKAGI Please see attached my paper entitled “How to Best Restructure In Japan” in detail. 1. Background Information A) Briefly provide an overview of your country’s economic environment, in particular the relevance and significance of any political, social or cultural influences. No. B) Is there systemic insolvency of the banking and/or corporate sectors? No, but Japan is now in more than ten years recession. C) Is there ongoing or recent law reform activity in the areas of commercial and insolvency law? If so, please describe. Yes, see attached article entitled “how to best resctructure in Japan”. D) Is the judiciary effective? Respected by insolvency practitioners? Yes, especially in Tokyo and Osaka. 2. Structure of Business Organizations A) What are the main forms of business organizations in your country? Company limited or Kabushikigaisha. B) What is the usual size of business organizations? Mid size. C) Briefly describe the usual forms of management and ownership of these organizations (eg, public v. private ownership, extent of family control, 1 etc.) Both, public and private ownership. D) Comment briefly on the accounting standards adopted by these organizations and whether independent, outside accountants are employed. Big corporations with capital of more than 500 million Japanese Yen or with debts of more than 20 billion Japanese Yen must employ independent and outside accountants. E) Are there any statutory or regulatory bodies that monitor or supervise these organizations? No, but for financial institutions and other specified corporations. F) Overall, is there a strong ethos of corporate governance and disclosure? Yes, but I think it is not sufficient yet. 3. Nature of Financing for Business Organizations A) What are the main sources of financing for these organizations? Secured and unsecured bank loans, project finance loans, structured finance including securitization, equity financing issuing stocks and bond, leasing, etc.. B) What are the common types of financing (eg, debt v equity)? Both. C) In relation to each type of financing, briefly describe in particular: i) the duration; vary. ii) the usual parties; banks and other finacial institutions, insurance and security companies, leasing corporations and numerous personal investors. iii) the types of expenditure usually funded by such financing vary . iv) whether there is a developed legal regime governing such types of financing. Yes. D) Briefly describe bank lending practices (eg, cash flow v asset lending). Both. E) Briefly describe bank monitoring procedures. Periodical checking of financial statements and hearing. F) Which is the most commonly employed type of financing, and why? 2 Secured and unsecured bank loans. Other financings are too complicated for smaller sized corporations. 4. Secured Creditors A) Briefly describe the usual forms of security. Real estates including land and buildings, accounts receivables. B) Which is the most commonly employed type of security, and why? Real estates. Valuable and stable. C) Is there a system of registration for any types of security? Yes. D) How are the priorities regulated between competing types of security? Perfected time by means of registration. E) Briefly describe the available options open to a security holder to enforce its security interest. For real estate, judicial sale. For accounts receivables, direct collection from a third party debtor. For movables, taking possession and non-judicial sale. F) Can security holders self-enforce their interests? Yes, for movables without breaching peace. G) Does the legal system provide an effective means for the enforcement of secured rights by security holders and also provide adequate protection of their rights? Yes. H) Overall, is it more common for secured creditors to enforce their rights against the security when the corporate debtor is in financial difficulty or to attempt to negotiate a suitable arrangement? First negotiation, then enforcement. 5. Unsecured Creditors A) Briefly describe the options available to an unsecured creditor to collect debts owed. Civil execution proceedings according to Civil Execution Code. Attachment and judical sale of real estate, movables and other assets. Garnishment of debts owed by third party debtors, intellectual properties and other assets. 3 B) May unsecured creditors pursue self-enforcement? No, but for exceptional emergent cases. C) Does the legal system provide an effective means for the collection of debts by unsecured creditors and also provide adequate protection of their rights? Yes, but debtors own insufficient available assets to be attached usually. D) Overall, is it more common for unsecured creditors to pursue legal remedies when the corporate debtor is in financial difficulty or to negotiate a suitable arrangement? Both. 6. Overall Insolvency Law Regime A) What are the principal laws governing insolvency in your country? Bankruptcy Law, Civil Rehabilitation Law, Corporate Reorganization Law, Commercial Code. i) Are there separate insolvency laws for individuals and corporate enterprises? Are there separate laws for liquidation and reorganization? Yes. ii) Is the insolvency law a separate piece of legislation, or is it part of the general company law? Separate pieces. iii) Is there separate insolvency legislation for regulated industries such as banks, investment banks, insurance companies, etc? Yes. B) Briefly summarize recent insolvency statistics for your country. In 2001. Straight bankruptcy 168,811 Civil Rehabilitation 1,110 Corporate Reorganization 47 Special Liquidation 335 C) Which courts are competent to exercise jurisdiction in insolvency matters? Is there any specialized court to hear insolvency matters? District courts with general jurisdiction, but larger district courts have their bankruptcy divisions. D) Is there a sufficient pool of professionals competent and experienced in handling insolvency matters? 4 Yes, but not enough. E) Please advise on the identity of the relevant government authority and their role in the insolvency process. Financial Supervisory Agency and Deposit Insurance Organization assume supervisory role including appointment of trustees for bankrupt banks, credit unions, insurance corporations and security corporations. 7. Liquidation and Formal (Court-Based) Restructuring A) What types of insolvency proceedings are available against a corporate debtor? Bankruptcy Law, Civil Rehabilitation Law, Corporate Reorganization Law and Commercial Code. i) In relation to each type of insolvency proceeding: a) Who may commence the proceeding? A debtor, creditors and sometimes stockholders. b) What are the procedures for commencing the insolvency proceeding? Filing a petition and a opening order rendered by a court. c) What is the usual time gap between the commencement of the proceeding and the final distribution to creditors in a liquidation and the approval of a plan in a reorganization? Bankruptcy cases 1 year. Civil rehabilitation cases 6-7 months. Corporate Reorganization cases a few years. d) What claims are recognized? Unsecured claims. In corporate reorganization cases, secured claims also recognized. e) What percentage of their debts do creditors generally recover? In bankruptcy cases, about 5%. In rehabilitation and reorganization cases vary considerably. B) Powers to recover assets. In relation to each type of insolvency proceeding: i) What kinds of avoidance powers will be triggered by the commencement of the insolvency proceeding? Preferences and fraudulent transfers. ii) Who exercises the avoidance powers? 5 Trustees and supervisors. iii) How frequently are avoidance powers exercised and are they effective? Not very often but effective. iv) Describe the procedures for examination and against whom they are applicable. Creditors, transferees and beneficiaries are sued. Any witnesses can be examined. v) Describe any additional powers that may be used to increase the pool of assets available for distribution to creditors. Assumption and rejection of executory contracts. C) Rights and liabilities of specific classes of parties. i) In relation to each type of insolvency proceeding, how does the commencement of the proceeding affect the following classes of parties: a) Corporate directors and officers Are there any civil/criminal liabilities (eg, fraudulent trading or wrongful trading)? Yes. Are their powers of management curtailed? Yes. Other effects Special summary proceedings to recover damages. b) Secured Creditors Are their rights to realize their security subject to a stay or moratorium? In corporate reorganization proceeding, yes. In civil rehabilitation proceeding, yes in some cases. In straight bankruptcy cases, no. Is the priority of their claims adversely affected? Yes, in some extent. Other effects Amount of secured claims are limited to the value of the collateral. c) Unsecured Creditors Are their rights to commencing legal actions or to collect their claims subject to a stay or moratorium? Yes. 6 Is the priority of their claims adversely affected? Yes. Other effects d) Workers Prority status. e) Other specific type of creditors in your country Administrative expences and sovereign debts. D) Matters specific to formal court-based reorganizations i) Who is responsible for formulating the plan or scheme? In civil rehabilitation cases, debtors or a trustees if appointed. In corporate reorganization cases, trustees. ii) What are the main sources of funding for the debtor during the formal workout process and what protection is given to the providers of such funds? Reserved money, proceeds of accounts receivables collected after the filing of the petition and new money lending. iii) Are there any time limits within which a plan or scheme must be formulated? Yes. iv) Describe the voting procedures and approval requirements. a) Are creditors divided into separate classes? In civil rehabilitation cases, no. In corporate reorganization case, yes. b) For approval, what percentages of amount of debts and of creditors are required? (eg. 2/3 of amount, majority in number) In civil rehabilitation cases, simple majority in amount and number. In corporate reorganization case, for unsecured creditors simple majority, for secured creditors 2/3 for extension only and 3/4 for other impairments both in amounts. c) Is court approval necessary? Yes. v) Is the approved plan or scheme binding on all creditors? Yes. vi) What are the rights of those who voted against the scheme? Impaired according to approved plan. vii) What happens when a plan or scheme is not approved? Converted to straight bankruptcy cases mostly. 7 8. Out-of-Court Workouts A) Are out-of-court workouts common? More common than formal court-based reorganizations? Yes. B) What are the incentives/disincentives for using out-of-court restructuring mechanisms rather than formal court-based mechanisms? Speed and less expensive. For big cases, less adversely affects to reputation. C) Are out-of-court mechanisms controlled/administered by the private sector or the public sector? Private. i) Are asset management companies (“AMCs”) involved in the process? If so, what are their roles? No. ii) Are there any specific procedures mandating government or any public body intervention in certain workouts (eg, for banks or where fraud is discovered?) No. iii) Is there a sufficient pool of professionals competent and experienced in handling out-of-court workouts? Yes, but not enough. D) Are the out-of-court mechanisms formal or informal? Yes. i) Are there any structured informal workout guidelines or procedures that exist in the country (eg, the London Approach?) Yes. E) Who the parties are to out-of-court restructuring agreements? Banks and other financial institutions mostly. F) What are the carrots (incentives) and sticks (disincentives) for negotiating and reaching a consensus? Economical reasonableness. G) What are the frequently used devices for facilitating rescue (eg, debt/equity swaps, delayed payment, etc.) or for providing exit strategies for creditors (eg, debt trading)? Partly exemption or release of debts, extension, debts to equity swaps. H) What are the main sources of funding during the out-of-court workout 8 process and what protection is given to the providers of such funds? Former lenders of big amounts. Priority status. I) To what extent do secured creditor remedies (eg, receivership) lead to out-of-court rescues? No receivership system in Japan. J) What options are available to creditors should the out-of-court workout negotiations ultimately collapse? Court supervised bankruptcy and reorganization proceedings. K) Are there any specific legislative provisions that give effect to the out-of-court workout plan in a formal judicial restructuring proceeding (eg, a “prepack”)? No. L) Please give an assessment of the overall effectiveness and fairness of the out-of-court workout procedures. Multi-creditors out of court workout according to the Guideline adopted in 2001 by National Bank Association, Federation of Managers Groups and other relevant organizations is effective. See attached paper entitled “how to be structure in Japan”. 9 Cross-Border Insolvency The new Law for recognition and assistance to foreign insolvency proceedings which adopted UNCITRAL Model Law was enacted in Japan in 2001. A) Outbound issues – Describe the problems that may arise in formal court-based reorganizations or in out-of-court workouts when the debtor company in your jurisdiction has assets outside the jurisdiction. Assets located in oversea countries consist of estate of debtor corporations. B) Inbound issues – Describe the problems that may arise in formal court-based reorganizations or in out-of-court workouts when the debtor company in another jurisdiction has assets in your jurisdiction. Foreign representatives may request to recognize and assist the foreign proceeding in Tokyo District Court. 9