JAPAN Trends and Developments Contributed by: Satoshi Inoue, Yuki Kohmaru, Hikaru Naganuma and Masahiro Yamamoto, Anderson Mori & Tomotsune
allowing a trust company licensed under the Trust Business Act of Japan to act as a secu- rity trustee that is permitted to hold a security interest securing claims held by lenders. Under a security trust, no individual transfer and per- fection procedures are necessary in respect of a security interest when a secured creditor assigns its secured claims. This is because the security holder will continue to be the security trustee even in the event of any change in the holder of the secured claims. However, in practice, security trust schemes are frequently used for syndicated loan transactions in Japan. This is presumably, to some extent, due to the lack of conformity of the security trust system with other relevant laws and practices in Japan, including the registration procedures required for real estate mortgages. The fact that a large part of syndicated loans are “club deals” (as opposed to “general syndications” ) may be another factor contributing to the infrequent use of security trusts. Another alternative is a debt structure under which a security agent holds a security interest securing a debt owed by the borrower to the security agent, where the security interest is cre- ated in parallel with the actual debts owed by the borrower to the lenders. Debt structures of this kind may be common in some jurisdictions, especially where a security trustee structure is not available. With that being said, this structure has only been employed in the Japanese mar- ket in cases where parallel debt structures are governed by the law of a jurisdiction other than Japan (such as English law or New York law). However, the use of the parallel debt structure in Japan could be boosted by the amendments to the Civil Code that came into effect in April 2020, which explicitly introduced the concept of
joint and several claims among multiple creditors created by a contract with features similar to a parallel debt structure. Although it was generally understood even before the Civil Code amend - ments that joint and several claims of this kind could be validly created, the amendments have prompted discussion of the feasibility of a paral- lel debt structure under Japanese law. In light of these developments, it is anticipated that the Civil Code amendments will soon be used in practice as the legal basis for a parallel debt structure in future transactions. Discussion concerning business floating charge Under Japanese law, there is no concept of a blanket security interest over all assets of a per- son or entity, such as a floating charge. Accord- ingly, a security interest needs to be created individually over every secured asset. In light of this, discussions on the establish- ment of a new regime of business growth charge ( jigyou seichou tampo ken ) to create a float- ing charge over all assets, including intangible assets (such as goodwill), have been ongoing within the Financial System Council (a working group within the Financial Services Agency of Japan) since 2022. The main purpose of the business growth charge is to facilitate smooth fundraising for small and medium-sized enter- prises and start-ups that do not possess sub- stantial tangible assets. However, it also presents the possibility of a new security regime for acquisition finance. Accord- ing to the report published by the Financial Sys- tem Council in February 2023, the chargee in a business growth charge is contemplated to be a security trustee specifically granted with a spe-
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