JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
amount of each bond is JPY100 million or more or (ii) the number obtained by dividing the total amount of bonds of a certain class by the mini - mum amounts of the number of each bond of that class is less than 50 (Article 702). However, given the cumbersome mandatory pro - visions under the Companies Act, most sophisti - cated securitisation transactions for institutional investors do not, in practice, involve the appoint - ment of “bond administrators”, in reliance on either of the exemptions described above. Instead, financial advisers or fiscal agents (FA) are appointed and their rights and obligations may be provided for in the bond documents. 2.8 Security Trustees/Agents Security trusts became available in Japan pur - suant to amendments to the Trust Law, which were proposed in 2006 and came into effect in 2007. Trust banks usually act as security trus - tees that owe fiduciary duties to multiple lend - ers, typically in the context of syndicated loans for project finance, such as renewable energy projects. However, secured “bonds” are rarely used because of the provisions of the Secured Bond Trust Act, which require trust agreements to be executed with trust banks, etc, having a special licence. Accordingly, the use of security trusts for securitisation purposes is extremely rare. 3. Documentation 3.1 Bankruptcy-Remote Transfer of Financial Assets To ensure the bankruptcy remoteness of a trans - fer (ie, a true sale), the asset transfer agreements or trust agreements should contain provisions covering the following:
• the parties’ intent to effect a true sale; and • representations and warranties on the par - ties’ solvency, including the fact that no event has occurred that would result in the parties’ bankruptcy or expose them to insolvency proceedings. However, provisions covering the following should be avoided: • grant of full recourse to the transferor or a covenant by the transferor to compensate for credit risks in transferred assets; • grant of control over the transferred assets to the transferor; and • commitment by the transferor to repurchase the transferred assets and the like. 3.2 Principal Warranties In addition to the standard representations and warranties by the transferor (covering matters such as due incorporation, full authority to transfer, compliance with applicable laws and constitutional documents, legality, validity and enforceability of obligations under the trans - action documents, absence of litigation and absence of violation of any court or governmen - tal order), warranties relating to true sale, the absence of the possibility to exercise any right of avoidance, the parties’ intention to effect a true sale, the absence of or reasons for the com - mencement of bankruptcy, civil rehabilitation, corporate reorganisation or other similar insol - vency proceedings, the absence of fraudulent intent and the like are also used in securitisation documentation. Compensation for damages incurred is the prin - cipal remedy for breaches of representations and warranties.
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