JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
3.3 Principal Perfection Provisions The appropriate method of perfection depends on the type of asset in question. Securitisation of real estate, movable assets and monetary claims is perfected by way of registration ( toki ), regis - tration or transfer of possession, and registra - tion of claim assignment or provision of notice to, or procurement of consent from, the obligor, respectively. The relevant transaction docu - ments would typically stipulate the method of perfection required. 3.4 Principal Covenants Securitisation documentation typically contains standard covenants to comply with the applica - ble laws and the terms of the applicable transac - tion documents, and to ensure that no adverse changes occur in respect of the securitised assets. In transactions involving the securitisation of monetary claims, where the collection and ser - vicing of the monetary claims will usually be delegated to the transferor servicer, a transferor will typically also covenant not to make material changes in its collection policy and to comply with its fiduciary duties (including segregating the management of its proprietary accounts from the management of accounts containing the securitised assets). Damages are the principal remedy available for breach of covenants because specific per - formance and injunctive relief are, in principle, unavailable for such a breach. 3.5 Principal Servicing Provisions In transactions involving the securitisation of monetary claims, collection and other services in respect of the monetary claims will usually be delegated to the originator under a servic - ing agreement between the originator and the
transferee SPE. Such servicing agreements usu - ally contain provisions requiring the servicer to service the monetary claims in the same way as before, based on fiduciary duties that the ser - vicer owes to the transferee SPE and, ultimately, investors in the transferee SPE. Delegation to a third person, including the origi - nator, to collect receivables, raises issues under the Attorney Act, which prohibits any person other than a qualified attorney from engaging in the business of providing legal advice or rep - resentation, handling arbitration matters, aiding in conciliation, or providing other legal services in connection with any lawsuit, non-contentious case (or a case similar thereto), or other gen - eral legal services, for the purpose of obtain - ing compensation. Violation of this prohibition is punishable by criminal sanction. An exception to this prohibition is where the service provider is licensed under the Act on Special Measures Concerning Claim Management and Collection Businesses (the Servicing Act) to perform the relevant services. 3.6 Principal Defaults Principal defaults typically used in securitisation documentation include: • the repurchase of all the securitised assets upon the occurrence of certain tax events; • the exercise of a clean-up call option if the exposure underlying the securitised assets has decreased to 10-15% of the initial expo - sure; and • early amortisation in the event of the ser- vicer’s default or deterioration in the perfor - mance of the securitised assets. Damages are the principal remedy available for such a default, because specific performance
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