JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
Opinion of Counsel An opinion of counsel to support the true sale has normally been obtained because the con - cept and elements of a “true sale” have not yet been clearly stipulated in Japanese law, nor has there been any definitive judicial precedent with regard to it. The material conclusions of such an opinion are that the asset sold or entrusted by the origina - tor is not regarded as collateral, and that, upon being sold, the asset ceased to be part of the bankruptcy or insolvency estate of the originator. Factors to be considered include the following: • the intention of each of the transacting par - ties; • whether the economic risks and interests in respect of the asset have been transferred; • whether the right of control over the relevant asset has been transferred; • whether the asset transfer has been per - fected; • whether the purchase price of the relevant asset is reasonable; • whether the originator has the right or obliga - tion to repurchase the asset and, if so, the terms of the right or obligation; • whether the originator achieves credit enhancement and, if so, the details of the credit enhancement; and • the accounting treatment of the asset transfer by the originator. The typical qualifications of such an opinion are that a Japanese court may have a different opin - ion because there is no judicial precedent with regard to a true sale.
Bankruptcy-Remoteness Bankruptcy-remoteness can refer to two issues under Japanese law, each of which is discussed in turn below: • the bankruptcy-remoteness of a special-pur - pose company (SPC); and • the isolation of an asset from the originator’s bankruptcy or insolvency estate. Bankruptcy-remoteness of an SPC Two types of measures are typically used in Japan to make an SPC bankruptcy-remote. First, SPCs are structured in a way that mini - mises the risk of their insolvency, which is pri - marily achieved through the following: • restricting the objects and powers of the SPC; • limiting the amount of debt the SPC may incur; • appointing independent directors to the SPC; • restricting the SPC’s capacity to undergo a merger or reorganisation; • limiting the SPC’s capacity to amend its organisational documents ( teikan ); • including limited recourse provisions in the agreements to be entered into by the SPC; and • having equity interest with voting rights held by an independent party, such as a general incorporated association ( ippan-shadan-hojin ) established specifically for that purpose. Secondly, “non-petition” provisions are used to prohibit the creditors and directors of an SPC from filing for the commencement of bankrupt - cy proceedings in respect of the SPC. There is, however, uncertainty as to whether Japanese courts will uphold the validity of such provisions.
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