JAPAN Trends and Developments Contributed by: Hajime Ueno, Masaru Shibahara and Takahiro Kato, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
to cover administrative expenses and other payments that must be made as part of the proceedings. Therefore, the holder of Title Transfer Security in col - lective claims pursuant to this type of agreement must pay compensation for the relevant expenses if asked to do so by the debtor in possession or the trustee. Conclusion As mentioned previously, the Act on the Promotion of Cash Flow-Based Lending was introduced in order to change the custom of lending with real estate col - lateral and personal guarantees. The Act on Security Transfer Agreements and Title Retention Agreements was introduced to clarify the rules based on exist - ing customs and case law, and to stabilise collateral transactions based on movable property and claims, which also serve as an alternative to real estate collat - eral and personal guarantees. These new rules could promote new lending patterns for start-ups and ven - ture companies, and change the practice of rescue loans to businesses in distress. These two laws also introduced new rules relating to debt restructuring. The rules governing enforcement
of EVC are somewhat similar to court-supervised bankruptcy and restructuring procedures, and could lead to new practices once EVC becomes an option for debtors and creditors. On the other hand, the revised rules governing Title Transfer Security rights in bankruptcy proceedings, such as orders for prohibi - tion and rescission of Title Transfer Security, in addi - tion to suspending enforcement, and disgorgement/ contribution of funds for other creditors, give debtors alternative bargaining power by which to reach a deal with secured creditors during these proceedings. The majority vote mechanism in the Early Business Recovery Act could have an enormous impact on business and debt restructuring practices because it directly creates a new system alongside the existing out-of-court workout and court-supervised judicial procedures. It could expedite the process and sig - nificantly assist debt-heavy businesses and compa - nies. However, the system still cannot modify secured claims (although it can stop enforcement actions by security holders). It is hoped that these new laws establish sound prac - tices and help to boost Japan’s economy in the future.
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