JAPAN Law and Practice Contributed by: Taro Omoto, Yusuke Nakajima and Makoto Sakai, Mori Hamada & Matsumoto
2.9.3 Co-Ordination, Recognition or Relief in Connection With Overseas Proceedings The Bankruptcy Act provides that, if foreign insolven - cy proceedings are taken against the bankrupt, the bankruptcy trustee may request the foreign trustee to co-operate and provide any necessary information for the proper implementation of the bankruptcy pro - ceeding, and the bankruptcy trustee shall endeavour to do the same for the proper implementation of the foreign insolvency proceeding. There are similar pro - visions in the Corporate Reorganisation Act and the Civil Rehabilitation Act. Under the Act on Recognition of and Assistance for Foreign Insolvency Proceedings, which is based on the UNCITRAL Model Law on Cross-Border Insolven - cy, a foreign trustee may file a petition with a court for recognition of foreign insolvency proceedings. Upon such filing, the court may issue an order of recognition of the foreign insolvency proceeding and order a stay on compulsory execution or other procedures on the debtor’s property, as necessary. 2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney It is the owner of an aircraft, not the lessee, who applies for deregistration under the Japanese aircraft registration system. Therefore, a deregistration power of attorney from a lessee is irrelevant. Insolvency pro - ceedings with respect to a lessee do not have any effect on the validity of the deregistration power of attorney from the owner. If the owner becomes subject to an order commenc - ing a bankruptcy proceeding, the deregistration power of attorney will be automatically terminated. Unlike a bankruptcy proceeding, the deregistration power of attorney will not be automatically terminated even if the owner becomes subject to an order commencing a corporate reorganisation proceeding or civil reha - bilitation proceeding. 2.9.5 Other Effects of a Lessee’s Insolvency In the case of an operating lease, if an insolvency pro - ceeding commences with respect to the lessee, the trustee (or the lessee in the case of a civil rehabilita - tion proceeding) is given an option to terminate or
continue the lease. If the termination option is chosen, the lease will be terminated. The lessor may also terminate the lease if they have already been entitled to terminate the lease pursuant to the provisions of the lease agreement before the commencement of the insolvency proceeding, or if the lessee does not pay the rent accrued after the commencement of the insolvency proceeding. How - ever, the lessor may not terminate the lease due to non-payment of the insolvency claims. If the lease is validly terminated, the lessor may repossess the air - craft outside the insolvency proceedings. The aircraft will not be deemed part of the lessee’s property. In the case of a finance lease, the lessor is treated as a secured creditor with a security interest in the aircraft. 2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent As mentioned in 2.9.2 Overview of Relevant Types of Voluntary and Involuntary Restructurings, Reor- ganisations, Insolvencies and Receivership , in a cor - porate reorganisation proceeding, secured creditors are prevented from enforcing their security interests to collect their claims, although the secured creditors are given preferential treatment in the reorganisation plan. In a civil rehabilitation proceeding, the debtor may apply to the court for an order to suspend the enforce - ment procedure of the security interests for a reason - able period of time. In addition, the debtor subject to a civil rehabilitation proceeding may file a petition to the court for permission to have security interests that exist on its assets extinguished, by paying to the court the amount of money equivalent to the value of the assets if the relevant assets are indispensable for the continuation of the business of the debtor. 2.9.7 Imposition of Moratoria in Connection With Insolvency Proceedings After the commencement of an insolvency proceed - ing, the legal procedures (such as compulsory exe - cution) for the collection of insolvency claims cannot generally be exercised. However, in a bankruptcy proceeding and a civil rehabilitation proceeding, the
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