JAPAN Law and Practice Contributed by: Hajime Ueno, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
2. Creditors 2.1 Types of Creditors Claims are classified into different classes in different insolvency proceedings. Secured Creditors A distinction is made between secured creditors who have a security interest in individual assets and those who only have a general priority over the debtor’s assets. The former has priority in insolvency and restructuring proceedings with respect to the value of the assets in question, and in bankruptcy and civil rehabilitation, the secured creditors can exercise the security interest outside the proceedings to collect their claims, whereas in a corporate reorganisation, individual foreclosure on security interests is prohibit - ed and, in principle, the secured creditors may receive repayments only based on an approved reorganisa - tion plan. Secured creditors who have a general priority over the debtor’s assets are categorised as holding claims with general priorities. If the asset value of a security inter - est is less than the amount of the claim, the secured creditors may participate in the proceedings as unse - cured creditors in respect of the deficient amounts. Unsecured Creditors Bankruptcy The hierarchy of payment priorities is as follows (in descending order of priority): • common benefit claims ( zaidan-saiken ); • bankruptcy claims with general priorities; • general bankruptcy claims; • subordinated bankruptcy claims; and • consensually subordinated bankruptcy claims. Common benefit claims are paid outside bankruptcy at any time by the bankruptcy estate. Bankruptcy claims with general priorities, typically some labour and tax claims that arose prior to the commencement of bankruptcy, have priority over other general claims to receive distribution.
General bankruptcy claims are paid by distribution on a pro rata basis. Subordinated bankruptcy claims, typically interests and damages for default after commencement of the proceedings, are subordinated to general bankruptcy claims in terms of distribution. Consensually subordinated bankruptcy claims are subordinated to subordinated bankruptcy claims, as agreed between the debtor and a creditor before the commencement. Civil rehabilitation and corporate reorganisation The hierarchy of payment priorities is as follows (in descending order of priority): • common benefit claims ( kyoueki-saiken ); • claims with general priorities; • general claims; and • consensually subordinated claims. Common benefit claims are paid outside civil reha - bilitation and corporate reorganisation proceedings, at any time. Claims with general priorities have payment priority over other general claims. While in corporate reorganisation, claims with general priorities are paid pursuant to the reorganisation plan, these claims are repaid outside the proceedings at any time in a civil rehabilitation. General claims are paid pursuant to the restructuring plan. Consensually subordinated claims are fairly and equi - tably differentiated from other claims in the restructur - ing plan, taking into account the agreed-upon subor - dination. Division of a Class While the statutes, namely the Civil Rehabilitation Act and the Corporate Reorganisation Act, both grant the competent court a statutory authority and power to divide general unsecured creditors into multiple class - es – eg, classifying unsecured creditors into the trade
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