(a) What is the underlying philosophy of the insolvency law of this economy? (For example is it distributive, rehabilitative or penal?)

Bankruptcy Law: fair and orderly distribution among creditors

Corporate Reorganization: to rehabilitate a stock company in financial difficulties but with possibility of rehabilitation, adjusting interests of relevant parties. (Article 1)

(b) Are there elements of more than one philosophy present in the insolvency law of this economy?

Yes.

(c) Briefly describe the relevant elements, and if applicable, any penal sanctions available.

The main purpose of liquidation procedures such as bankruptcy is fair and orderly distribution among creditors. The main purpose of rehabilitation procedures is to rehabilitate the corporate borrower and to realise more beneficial distribution to creditors than in the case of immediate liquidation.

(a) In which judicial category is insolvency law classified in the legal system of this economy? (For example civil, commercial or administrative.)

Civil and commercial

(b) Which Courts, tribunals or administrative bodies in this economy are competent to exercise jurisdiction in insolvency matters?

Courts

(c) Are any limitations placed on the jurisdiction of any of these bodies?

he court located in the area of the principal place of business of the corporate debtor has its jurisdiction (Bankruptcy law Article 105, Composition Law Article 3 and Corporate Reorganisation Law 6 ).

(a) What types of insolvency procedure are available in the legal system of this economy for the administration of corporate debtors in financial difficulty? (For example bankruptcy, liquidation (winding up), receivership, restructuring or other forms of administration.)

Bankruptcy

Special Liquidation under Commercial Code Composition

Corporate Reorganization

Company Arrangement (Reorganization of company) under Commercial Code

(b) Briefly describe the main features of each type of insolvency procedure for corporate debtors: including, for example the manner in which each procedure is initiated and administered, and the aims of each procedure.

Bankruptcy:

Liquidation procedures of insolvent companies and individuals. The procedure is initiated voluntarily or by a creditor. The liquidation is administered by the bankruptcy administrator appointed by the court. The aim of the procedure is to collect assets of the bankrupt and distribute them among creditors in a fair and orderly manner.

Special Liquidation:

Applicable only to a stock company called "Kabusiki Kaisha". The aim of the procedure is to provide less rigid liquidation than bankrupcy. The procedure is commenced voluntarily and a special liquidator preparesthe liquidation plan and obtains approval from the creditors and the court. If it is approved, the special liquidator proceeds liquidation in accordance with the plan.

Composition:

Rehabilitation procedures of insolvent companies and individuals. The aim of the procedure is to rehabilitate insolvent persons. The procedure is a debtor-driven one although a supervisor is appointed by the court. The debtor submits a composition plan to creditors. If certain majority creditors and the court approve the plan, it will bind all unsecured creditors.

Corporate Reorganization:

Applicable only to a stock company. The aim is as mentioned in I1(a). The procedure is initiated voluntarily but in practice all directors and shareholders are removed. The procedure binds secured creditors. The reorganization procedure is managed by the administrator appointed by the court. The administrator prepares a reorganisation plan and obtain approval from each class of creditors and the court. The rehabilitationproceeds in accordance with the reorganisation plan and the court supervises

performance of the plan.

Corporate Arrangement:

Applicable only to a stock company. The aim of the procedure is to rehabilitate stock companies in a less rigid manner. This procedure is classified as debtor-driven rehabilitation like compositions. The main future of the procedure is that the debtor company must obtain almost all creditor's consent as to the rehabilitation plan.

However this procedure provides for an application of stay on execution of secured creditors' right and gives the debtor company a stronger weapon which is not available in compositions.

(c) Identify the relevant legislation governing each type of insolvency procedure available for corporate debtors.

Bankruptcy: Bankruptcy Law

Special Liquidation: Commercial Code

Composition: Composition Law

Corporate Reorganization : Corporate Reorganization Law

Corporate Arrangement: Commercial Code

(a) Is it usual or customary in respect of a corporate debtor which is insolvent to attempt to negotiate an informal administration before formal insolvency procedures are commenced?

Yes.

(b) In relation to each type of insolvency procedure available in the legal system of this economy, who may commence the procedure? (For example the corporate debtor, secured creditors, unsecured creditors, directors, shareholders, the State.)

Bankruptcy : By the debtor or a creditor (Article 132). A director is also entitled in case of stock companies. (Article 133)

Special Liquidation: By a creditor, a normal liquidator, auditor or a shareholder (Article 431).

Composition: By the debtor (Article 12)

Corporate Reorganisation: By the corporate debtor or certain creditor or certain shareholder (Article30).

Corporate Arrangement: By a director, auditor, certain shareholder orcertain creditor (Article 381).

(c) On what basis may each type of insolvency procedure be commenced, or what requirements must be satisfied before the procedure may be commenced? (For example non-payment of debts; balance sheet/cash flow insolvency; trading losses; resolution by directors to enter insolvency procedure.)

Bankruptcy: Insolvency or balance sheet insolvency (Articles 126, 127). If voluntary, the resolution by the board of directors is also necessary.

Special Liquidation: Circumstances which seriously impede the carrying out of the liquidation or suspicio of balance sheet insolvency (Article 431).

Composition: Same as the Bankruptcy (Article 12).

Corporate Reorganisation: Circumstances close to insolvency. (See Article 30)

Corporate Arrangement: Possibility of insolvency or balance sheet insolvency (Article 381)

(d) How is each type of insolvency procedure commenced? (For example by application to the Court, by administrative act, by written notice to the business organization.)

Application to the court.

(e) What is the usual time period between the commencement of formal insolvency proceedings and the declaration or imposition of a formal administration on the corporate debtor?

It depends on the case.

(f) How effective is the judicial or court system (or administrative system) in relation to the handling of formal insolvency proceedings?

The court system for formal insolvency proceedings is effective. More effective rehabilitation procedures are being sought.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what is the effect on the corporate debtor, its constituent parts and its business relationships of initiation of the relevant insolvency procedure?

If a corporate debtor is declared as bankrupt, the powers of management of the debtor will be transferred to the bankruptcy administrator and the interests of shareholders will not be considered. As such all relationships with the debtor will be substituted with the bankruptcy administrator in principle (Article 7).

The above is almost applicable to the corporate reorganisation.

In other insolvency procedures the corporate debtor does not lose its control of the company's affairs in principle although the court supervises the debtor company.

 

(b) If another insolvency procedure has already been initiated in relation to the corporate debtor, how does the initiation of a second procedure affect the first?

A second procedure is not allowed to commence while one procedure is pending.