JAPAN Law and Practice Contributed by: Hajime Ueno, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
However, in some cases, for example, where com - mon benefit claims that exceed the bar amount set by the court will be incurred by the continuance of the business operations (ie, usage of its assets), the court may require the debtor/trustee to seek approval of the court. Directors (as a DIP in a typical civil rehabilitation) or a trustee (in a corporate reorganisation) operate their business and execute the sale of assets. However, approval from the supervisor/examiner or the court is required to sell their assets. There are some excep - tions: for example, if the sale is within the ordinary course of business, such approval is not required. To transfer their business to a third party not based on a Plan, the debtor or trustee needs to obtain the court’s approval. However, the approval itself does not clear claims or liens, and an agreement with a claim holder/security interest holder will be separately required for such purpose. There is no credit bid system in Japan. The creditor may be a stalking horse, but it is treated the same as other candidates. Existing Contracts/Agreements If an existing contract is an “executory contract”, a bilateral contract under which the main obligations have not been completely performed by both the debtor and a creditor at the time the court procedures for insolvency commence, in the said proceedings, a trustee/debtor may terminate such executory contract. When the trustee/debtor determines that continuing the executory contract is advantageous or necessary even after the procedure commences, they may con - tinue the contract. In such case, they may request that the counterparty perform its obligation, and the trustee/debtor shall perform their counter-obligation as administrative expenses. By contrast, the counter - party may not terminate the executory contract and is bound by it; in other words, an executory contract may not be terminated by the counterparty. However, the counterparty may specify a reasonable period and make a demand that the debtor/trustee provide a definite answer within a set period with regard to whether the debtor/trustee will terminate the execu - tory contract or not.
In addition, even if a contract contains a clause which gives the counterparty the right to terminate the con - tract when the debtor files a petition to commence court procedures for insolvency/restructuring (here - inafter referred to as the “Ipso Facto Clause”), such clause is generally considered to be invalid in Japan in accordance with a Supreme Court ruling. However, an acceleration clause forfeiting the debtor’s benefit of time if the debtor files a petition to commence court procedure for insolvency is considered to be valid. In a civil rehabilitation, the debtor continues its busi - ness and the process under supervision by a supervi - sor appointed by the court. However, in exceptional cases, where the court finds it particularly necessary to rehabilitate the debtor’s business, it may appoint a trustee, rather than allow the debtor to continue to have the rights and authority to operate. In a corporate reorganisation, the main statutory offic - ers involved are the trustee, the provisional admin - istrator and an examiner appointed by the court. In normal practice, the trustee consists of a legal trus - tee appointed from among practising attorneys and a business trustee appointed from the debtor or new sponsor (if already selected). Roles, Rights and Responsibilities of Statutory Officers A supervisor, in a civil rehabilitation, receives reports from the debtor on the execution of business and the proceedings, and gives its consent to the debt - or’s important activities that are similar to matters approved by the trustee in a corporate reorganisation. The supervisor is also responsible for ensuring that the court and the creditors make appropriate decisions by reporting its findings and providing an opinion to the court. The roles, rights and responsibilities of a trustee in a civil rehabilitation, if appointed, are almost the same as the trustee in a corporate reorganisation. In a corporate reorganisation, the provisional admin - istrator administers the business and the assets of the debtor until commencement, and also investigates 4.5 The Position of Office Holders in Restructuring, Rehabilitation and Reorganisation Types of Statutory Officers
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