JAPAN Law and Practice Contributed by: Jiro Mikami, Ryo Okubo, Hiromi Hattori and Tomohiro Koyasu, Nagashima Ohno & Tsunematsu
of the amount of the secured claim is imposed when registering the security interest over reg- istrable intellectual property rights, which tends to be costly, so in practice measures are often taken to mitigate the registration tax. Real Property Lenders typically create mortgages ( teitou-ken ) over owned real property. Execution of a mortgage agreement is sufficient to create a mortgage and the registration of the mortgage is required in order to perfect the mort- gage against third parties. The mortgage agree- ment is typically drafted to create additional security interests over the proceeds from the real property. For example, a typical mortgage agree- ment creates a pledge over any future claim for fire insurance proceeds in connection with the real property. A registration tax of 0.4% of the amount of the secured claim is imposed when creating a mortgage over a real property asset, which tends to be costly, so measures are often taken in practice to mitigate the registration tax. Movable Assets Movable assets (including inventory) are typical- ly included in the security package by creating a security interest by way of assignment. Execution of an assignment agreement is suf- ficient to create a security interest by way of assignment. To perfect the assignment against third parties, the borrower must deliver posses- sion of the movable assets to the security inter- est holder, but the borrower can constructively deliver them by: • declaring its intention to keep possession of the assets for the security interest holder going forward ( senyu kaitei ); or
• instructing a third person who has direct possession of the movable assets to retain possession for the assignee going forward ( sashizu ni yoru senyu iten ). As an alternative, under the Registration Act, the security interest holder can perfect the assign- ment against third parties by registering the transfer with the competent legal affairs bureau. The lenders can perfect a security interest by way of assignment not only over particular assets but also over a group of movable assets (including future ones, such as inventory in a particular storehouse), provided that the scope of the movable assets subject to the security is clearly specified. In the case of movable assets, perfection is not sufficient to block a bona fide third party from obtaining the right to the movable asset from the borrower by statute ( sokuji shutoku ). To avoid this, the security interest holder should have a notice indicating the creation of the security interest attached to the movable assets. Enterprise Value Charge In 2024, a new enterprise value charge (EVC) was introduced pursuant to the Act on the Pro- motion of Cash Flow-Based Lending (Act No 52 of 2024). This new security interest will come into effect by the end of 2026. The Act is designed to address the limitations of traditional collateral frameworks, which necessitate individual secu- rity interests over each asset. One of the notable features of an EVC is its ability to encompass all of a corporate debtor’s assets, including intangible assets (eg, goodwill). Certain intangible assets are not generally cov- ered in traditional security interests, leading to an incomplete valuation of the enterprise in the
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