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Restructuring and insolvency law in Japan sets out the legal framework used when individuals or companies cannot meet their debt obligations. The main national statutes are the Bankruptcy Act, the Civil Rehabilitation Act, and the Corporate Reorganization Act. These laws apply across Japan, including Shizuoka Prefecture, and are administered by the local courts. In Shizuoka most formal insolvency cases will be handled through the Shizuoka District Court and its branches.
Practical insolvency work includes out-of-court workouts and negotiated debt re-profilings, formal court-supervised proceedings such as civil rehabilitation - where a debtor often stays in control while a repayment plan is approved - and bankruptcy or liquidation, where a trustee is appointed to sell assets and distribute proceeds to creditors. Insolvency matters frequently involve creditors, secured parties such as banks, employees, tax authorities, and other stakeholders. Local financial institutions, business support organizations, and the prefectural government are often involved when a business in Shizuoka faces financial distress.
Insolvency and restructuring are legally and factually complex. You may need a lawyer if you are facing any of the following situations -
- You cannot pay debts as they fall due and want to understand legal options for repayment, restructuring, or discharge.
- A creditor threatens or starts enforcement actions such as bank account seizures, property seizures, or foreclosure.
- Your company is insolvent or approaching insolvency and you need to manage director duties and potential liability risks.
- Employees are owed wages or severance and you need to address labor law obligations and priority claims.
- You are a creditor seeking recovery, want to file a claim in formal proceedings, or need to understand your secured rights.
- You want to negotiate an out-of-court workout with lenders, trade creditors, or the main bank and need assistance drafting proposals and documentation.
- Cross-border creditors, foreign claims, or foreign-affiliated companies are involved and you need coordination with foreign counsel.
- You need to prepare or respond to petitions for civil rehabilitation, corporate reorganization, or bankruptcy and manage timelines, hearings, and creditor meetings.
Lawyers experienced in restructuring and insolvency help protect legal rights, prepare filings, negotiate with creditors, manage communications, and reduce the risk of personal liability for company officers. Early legal advice can preserve options that may be lost through delay or unilateral action.
Key legal elements and processes that are particularly relevant in Shizuoka are the same as in the rest of Japan, but local practice and institutions matter when you need to proceed locally. The essential points are -
- Types of proceedings - Bankruptcy is liquidation under the Bankruptcy Act. Civil rehabilitation is a debtor-centered reorganization that aims to preserve going-concern value and confirm a repayment plan. Corporate reorganization is a court-led reorganization for larger companies, where a trustee typically takes control. Special liquidation under the Companies Act is another route to wind up a company with creditor involvement.
- Who manages proceedings - Courts appoint trustees or rehabilitation supervisors. Trustees are often qualified lawyers or certified accountants. In civil rehabilitation the debtor often remains in control unless the court appoints a supervisor. In corporate reorganization the court typically appoints a trustee who manages or replaces management.
- Automatic effects and interim protection - Commencing civil rehabilitation or corporate reorganization generally stops many creditor enforcement actions if the court accepts the petition or grants protective measures. Bankruptcy filings also have effects on enforcement, but practical protection depends on the timing of court orders. Out-of-court workouts do not automatically stop enforcement without creditor agreement.
- Priority of claims - Secured creditors generally have priority over proceeds of their security. Unsecured creditors are paid from remaining assets, with statutory priority for certain claims such as employee wages up to set limits and certain taxes. The exact order of distribution is fixed by statute and determined by the trustee and court.
- Avoidance powers - Trustees may challenge and undo certain preferential payments or fraudulent transfers made before the insolvency if they unfairly favored some creditors at the expense of others.
- Director liability - Company officers need to take care when the company is insolvent. Acts that unlawfully deplete assets or give preference to related parties can lead to civil liability, and in some cases criminal exposure under Japanese law. Directors should seek counsel when insolvency risks arise.
- Local practice - The Shizuoka District Court and its clerk’s office determine local filing requirements, hearing schedules, and creditor meeting arrangements. Local banks, the Shizuoka Tax Office, and labor authorities will also interact with insolvency proceedings to file claims or enforce statutory rights.
Bankruptcy generally means liquidation - a trustee sells assets and distributes proceeds to creditors. Civil rehabilitation aims to enable a debtor to continue operating while a court-approved repayment plan restructures obligations. Corporate reorganization is a more formal court-driven process used for larger companies - a trustee may take over management and prepare a reorganization plan. Choice of procedure depends on company size, business continuity prospects, and the parties involved.
You start by filing a petition at the competent court - typically the Shizuoka District Court or its branch that has jurisdiction. A lawyer can prepare the petition, required documents, and evidence of insolvency or inability to pay debts. For out-of-court workouts you start by negotiating with creditors, often with lawyer-led proposals and confidentiality arrangements.
Once a court accepts a petition and grants protective measures the most common enforcement actions are generally stayed. However, timing and scope differ by procedure and the debtor may need to request specific provisional relief. Out-of-court workouts do not grant automatic stays - a separate agreement with creditors is required to halt enforcement.
Directors have duties under statute and common law. If directors cause the company to make unlawful distributions, pay related parties preferentially, or continue business recklessly when insolvent, they can face civil liability for damages and in some rare cases criminal penalties. Directors should seek legal guidance early and document decisions carefully when insolvency risk appears.
Employees have priority claims for unpaid wages and certain employment-related payments, which are given special status in distribution. In a civil rehabilitation, the business may continue and employment may be preserved under negotiated terms. If the company is liquidated, employees may be dismissed and will have statutory claims in the bankruptcy. Labor standards offices in Shizuoka can also provide guidance and may coordinate with insolvency authorities.
Timelines vary. Bankruptcy liquidations often conclude in around 6 to 18 months depending on complexity. Civil rehabilitation can take several months to a few years depending on negotiation of plans and payment terms. Corporate reorganization is usually longer due to the court-led restructuring and larger creditor constituencies. Complexity, asset realization, and litigation extend timelines.
Costs include court fees, trustee fees, and professional fees for lawyers and accountants. Fees vary widely with case complexity. Initial consultations may be low cost or free through referral services, but full representation in formal proceedings can be significant. Always ask your lawyer for a written fee estimate and billing structure before engaging.
Yes. Many businesses pursue out-of-court workouts with lenders and major trade creditors to avoid the cost and publicity of court proceedings. Successful workouts require creditor consensus, clear restructuring proposals, and often third-party facilitation by banks, insolvency practitioners, or lawyers. Out-of-court solutions do not offer automatic legal protection from enforcement unless creditors agree to standstill terms.
Secured creditors have rights against the collateral that secures their loans. In insolvency they generally have priority over unsecured creditors with respect to proceeds from that collateral. The trustee or debtor may arrange for sale or realization of collateral, or propose buyout or cram-down solutions in rehabilitation plans. Secured creditors should assert and document their security interests early to protect priority.
Start with the Shizuoka Bar Association for referrals to lawyers experienced in restructuring and insolvency. The Japan Legal Support Center offers information and may assist with legal aid eligibility. Local courts, the Shizuoka Tax Office, labor bureaus, and chambers of commerce can provide procedural and practical guidance. Ask potential lawyers about relevant experience, fees, success with similar cases, and whether they work with accountants and trustees in insolvency work.
Helpful local and national organizations and institutions include -
- Shizuoka Bar Association - for lawyer referrals and ethics information.
- Shizuoka District Court clerk’s office - for filing procedures and court forms.
- Japan Legal Support Center (Houterasu) - for legal information and referral, and possible legal aid eligibility assessments.
- Shizuoka Prefectural Government - industry and small business support divisions for business recovery assistance.
- Shizuoka Chamber of Commerce and Industry - for local business guidance and networking with banks and advisors.
- SME Support, Japan and related regional SME support centers - for restructuring advice and support programs for small and medium enterprises.
- Shizuoka Tax Office - for tax claim procedures, tax deferral possibilities, and filing claims in insolvency.
- Local labor standards inspection office - for employee wage and employment claim matters.
- Local consumer affairs centers and municipal consultation services - for personal debt and consumer insolvency issues.
If you are facing insolvency or potential insolvency in Shizuoka follow these practical steps -
- Act early - seek legal advice as soon as you suspect you cannot pay debts. Early action preserves options and reduces personal liability risks.
- Gather documents - prepare financial statements, recent bank statements, loan agreements, security documents, tax filings, payroll records, and lists of creditors and assets. These items are essential for any meaningful analysis or filing.
- Contact a specialist - request a consultation with a lawyer experienced in restructuring and insolvency. Use the Shizuoka Bar Association or Japan Legal Support Center for referrals if you do not already have counsel.
- Discuss options - explore out-of-court workouts, negotiated standstills, formal civil rehabilitation, reorganization, or bankruptcy. Ask about expected timelines, costs, likely outcomes, and required creditor support.
- Preserve evidence and avoid risky transactions - do not make preferential payments to some creditors or dispose of assets without legal advice. Preserve records and document decision-making.
- Coordinate with advisors - involve accountants, tax advisers, and, where appropriate, financial institutions. Complex cases often require multi-disciplinary teams.
- Prepare for communication - plan clear communication to creditors, employees, and stakeholders under lawyer guidance to manage relationships and expectations.
This guide explains general concepts and local practicalities but does not replace tailored legal advice. Consult a qualified Shizuoka lawyer to evaluate your specific situation and to prepare the proper steps to protect your interests.
