Insolvency 2025

JAPAN Law and Practice Contributed by: Hajime Ueno, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)

only if all the creditors agree; the same goes for super- priority liens and thus is not a norm. In the event the TADR ends in failure and has to be transferred to in- court insolvency proceedings, the court is allowed, under a statutory provision, to “consider” granting repayment priority to the Pre-DIP financing. A capital injection into the debtor by new sponsors can be set A typical TADR case would take three to four months. The debtor, in general, needs to conduct financial and business due diligence, evaluation of the assets based on the evaluation standard of the TADR and provide necessary information to the creditors so that they can make informed decisions. Organising a creditor steering committee is a rarity during the TADR; rather, the mediators, consisting of third-party professionals, would lead the process. In the TADR Plan with a debt waiver by the creditors, the amounts to be waived are normally calculated on a pro rata basis based on the non-secured amount of each creditor’s claim; thus, contractual priority, security/lien priority, priority rights, and the relative positions of competing credi - tor classes would not be affected unless by unani - mous consent of all relevant creditors. Equity holders are usually not a part of the process, and thus would remain unaffected. Developments The government has been considering presenting a bill to introduce a new out-of-court workout scheme to facilitate business restructuring by allowing in-class cram-down in combination with court approval, but it had not yet been proposed to the Diet as of the end of August 2025. 3.2 Legal Status out in the TADR Plan. Typical TADR Case All out-of-court procedures noted in 3.1 Out-of-Court Restructuring Process are consensual, thus are bind - ing only on those creditors (and the debtor(s)) who participated in the procedure, and the restructuring reached as a conclusion of those procedures can - not be invoked against another creditor or any other stakeholder. In contrast, pure consensual out-of-court workouts that involve syndicated loans or bonds could bind

dissenting creditors. For lenders, there are typically contractual provisions permitting a majority or super- majority of lenders to bind dissenting lenders to changed credit agreement terms. For bondholders, there was an amendment to a statute to permit such majority voting in the bondholders’ meeting with the court’s authorisation pursuant to the Companies Act. Also, there is no mandatory or forced stay/standstill under out-of-court workouts, so secured creditors would continue to have the ability to enforce/foreclose outside the process, unless the secured creditor itself agrees to be bound by a stay/standstill. 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation Civil rehabilitation and corporate reorganisation can be initiated by both the debtors themselves (ie, vol - untary proceedings) and by creditors (ie, involuntary proceedings). Stakeholders other than creditors have standing to initiate some of these proceedings, but not all. Respective requirements/criteria for commencement of these proceedings are as follows. Civil Rehabilitation A creditor may file a petition to commence a civil reha - bilitation by providing evidence to show the existence of the creditor’s claim, and facts establishing that there is a “threat” of insolvency. Corporate Reorganisation This can be initiated as follows: • a creditor who holds claims that account for one- tenth or more of the amounts of the stated capital of the debtor; and/or • a shareholder who holds one-tenth or more of the voting rights of all shareholders of the debtor, may file a petition to commence a corporate reorgani - sation by providing evidence to show the existence of:

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