JAPAN Law and Practice Contributed by: Hajime Ueno, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
large and complicated cases, debtors are often grant - ed such extension where, for example, the status of a sponsor bid would justify an extension. Components of the Plan The fundamental components, in terms of legal rights of stakeholders, of a Plan are: • treatment of claims (classification of claims and modifications of claims, discharge, etc); • repayments (form of repayment, timing, etc); and • treatment of existing shares (and issuance of new shares), etc. Modifications of Creditors’ Rights The debtor can set clauses to modify creditors’ rights in the Plan, such as reducing the amounts of claims, releasing claims, DES (Debt Equity Swap), extend - ing the term for claims, etc. As a general rule, this modification of rights shall be equal between credi - tors. However, this shall not apply where any credi - tors who will suffer detriment have given consent or where equity will not be undermined even if the plan otherwise provides for small claims, etc, or any other difference in the treatment of creditors. As a general rule, there is only one class which can vote: holders of “rehabilitation claims” who submitted “proofs of claims”. Corporate reorganisation Classes are separated for each type of creditor – secured claims, other general priority claims, general unsecured claims, consensually subordinated claims and shares – or the creditors who hold the types of rights specified by the court. Voting Civil rehabilitation The threshold to approve the Plan is: • the majority of voting rights-holders (in terms of headcount); and • the majority in terms of claim amounts – ie, of the holders of claims that account for not less than Class of Creditors Civil rehabilitation
half of the total amount of claims (basically, which equate to voting rights). Corporate reorganisation The threshold depends on each class and how the claims will be modified. In the general unsecured claim class, approval by the holders of claims that account for more than half of the total amount of claims (basi - cally, which equate to voting rights) is required. In the secured claim class, (i) for a Plan which extends the terms of secured claims, approval by the holders of claims that account for not less than two-thirds of the total amount of claims (basically, which equate to vot - ing rights) or (ii) for a Plan which reduces and releases debts for secured claims or provides measures that may affect the rights of secured creditors other than extensions of terms, approval by the holders of claims that account for not less than three-quarters of the total amount of claims (basically, which equate to vot - ing rights) are required. Claims of Dissenting Creditors Cram-down is available, but only in limited cases. As a general rule, if the Plan is not approved by a certain class, that Plan will not be confirmed. However, the court may issue a Plan Confirmation Order by modify - ing the proposed Plan and specifying a clause to pro - tect the rights of those whose consent has not been obtained, in the interests of those holders, when at least one class has consented to the proposed Plan. The contents of a clause to protect rights depend on the class to be protected. A clause to protect a certain class can be included in the Plan in advance. In this case, creditors who belong to that class (as long as fully protected) cannot vote on the Plan. Plan Confirmation Order Following a creditors’ meeting that met the thresh - old requirement, the court makes a decision about whether or not to confirm a Plan. When legal require - ments (such as the feasibility test, or the best interests of creditors test) are met, the court should issue a Plan Confirmation Order. A Plan shall be effective in the interests of and against the debtor, all creditors (unsecured creditors in civil rehabilitation, unsecured and secured creditors in corporate reorganisation) and shareholders, etc, regardless of whether each spe - cific creditor voted or not. However, note that in civil
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