Bankruptcy Act

The purpose of this Act is to appropriately coordinate the interests of creditors and other interested persons and the relationships of rights between debtors and creditors, with the aim of ensuring proper and fair liquidation of debtors' property, etc. and securing the opportunity for revitalization of their economic life, by specifying proceedings for liquidation of property held by debtors that are unable to pay debts or are insolvent, etc.

The term "bankruptcy proceedings" as used in this Act means the procedure for liquidating a debtor's property, inherited property or trust property as provided for in the following Chapters (excluding Chapter XII).

The term "bankruptcy case" as used in this Act means a case related to bankruptcy proceedings.

The term "bankruptcy court" as used in this Act means a district court before which a bankruptcy case is pending.

The term "bankrupt" as used in this Act means a debtor against whom an order commencing bankruptcy proceedings has been made pursuant to the provisions of Article 30, paragraph (1).

The term "bankruptcy claim" as used in this Act means a claim on property arising against the bankrupt from a cause that has occurred before the commencement of bankruptcy proceedings (including the claims stated in the items of Article 97), which does not fall within the scope of claims on the estate.

The term "bankruptcy creditor" as used in this Act means a creditor that holds a bankruptcy claim.

The term "claim on the estate" as used in this Act means a claim which may be paid from the bankruptcy estate at any time without going through bankruptcy proceedings.

The term "holder of claim on the estate" as used in this Act means a creditor that holds a claim on the estate.

The term "right of separate satisfaction" as used in this Act means a right that a person that holds a special statutory lien, pledge or mortgage against property that belongs to the bankruptcy estate, may exercise at the time of commencement of bankruptcy proceedings, pursuant to the provisions of Article 65, paragraph (1), against the property that is the subject matter of these rights.

The term "holder of a right of separate satisfaction" as used in this Act means a person that holds a right of separate satisfaction.

The term "unable to pay debts" as used in this Act means the condition in which a debtor is generally and continuously unable to pay debts as they become due, due to the lack of ability to pay (in the case of bankruptcy of the trust property, the condition in which the trustee is generally and continuously unable to pay obligation covered by the trust property due to the lack of ability to pay with the trust property (meaning obligations covered by the trust property as prescribed in Article 2, paragraph (9) of the Trust Act (Act No. 108 of 2006); the same applies below) as they become due).

The term "bankruptcy trustee" as used in this Act means a person that has a right to administer and dispose of property that belongs to the bankruptcy estate in bankruptcy proceedings.

The term "temporary administrator" as used in this Act means a person that is ordered to administer a debtor's property pursuant to the provisions of Article 91, paragraph (1).

The term "bankruptcy estate" as used in this Act means a bankrupt's property, inherited property, or trust property for which a bankruptcy trustee has an exclusive right to administer and dispose of in bankruptcy proceedings.

A foreign national or foreign corporation has the same status as a Japanese national or Japanese corporation, with respect to bankruptcy proceedings, discharge proceedings under the provisions of Chapter XII, Section 1 (referred to below as "discharge proceedings") and proceedings for release from restrictions under the provisions of Section 2 of that Chapter (collectively referred to below as "bankruptcy proceedings, etc." in this Chapter).

A petition to commence bankruptcy proceedings under the provisions of this Act may be filed only if the debtor who is an individual has a business office, domicile, residence, or property in Japan, or if the debtor that is a corporation or any other association or foundation has a business office or other office or property in Japan.

A claim for which demand by litigation may be made pursuant to the provisions of the Code of Civil Procedure (Act No. 109 of 1996) is deemed to exist in Japan.

A bankruptcy case is subject to the jurisdiction of the district court that has jurisdiction over: if the debtor engages in business, the locality of the debtor's principal business office; if the debtor engages in business and has a principal business office in a foreign state, the locality of the debtor's principal business office in Japan; if the debtor does not engage in business, or engages in business, but does not have any business office, the locality of the debtor's general venue.

If there is no court with jurisdiction under the provisions of the preceding paragraph, a bankruptcy case is subject to the jurisdiction of the district court that has jurisdiction over the locality of the debtor's property (in the case of a claim, the place where demand by litigation may be made).

Notwithstanding the provisions of the preceding two paragraphs, if a corporation holds the majority of voting rights (excluding the voting rights of the shares of stock which may not be exercised for all matters that may be resolved at a shareholders meeting, and including the voting rights of the shares of stock for which the shareholder is deemed to have voting rights pursuant to the provisions of Article 879, paragraph (3) of the Companies Act (Act No. 86 of 2005); the same applies below in the following paragraph, Article 83, paragraph (2), item (ii) and paragraph (3) and Article 161, paragraph (2), item (ii), sub-item (a) and sub-item (b)) of all shareholders of a stock company, if a bankruptcy case, rehabilitation case, or reorganization case (referred to below as a "bankruptcy case, etc." in this Article) is pending against the corporation (referred to below as a "parent corporation" in this Article and Article 161, paragraph (2), item (ii), sub-item (b)), a petition to commence bankruptcy proceedings against the stock company (referred to below as a "subsidiary stock company" in this Article and Article 161, paragraph (2), item (ii), sub-item (b)) may also be filed with the district court before which the bankruptcy case, etc. against the parent corporation is pending, and if a bankruptcy case, etc. is pending against the subsidiary stock company, a petition to commence bankruptcy proceedings against the parent corporation may also be filed with the district court before which the bankruptcy case, etc. against the subsidiary stock company is pending.

If a subsidiary stock company independently holds, or a parent corporation and a subsidiary stock company jointly hold the majority of voting rights of all shareholders of another stock company, the provisions of the preceding paragraph are applied as if the other stock company is a subsidiary stock company of the parent corporation.

Notwithstanding the provisions of paragraph (1) and paragraph (2), if a stock company has prepared consolidated financial statements (meaning consolidated financial statements prescribed in paragraph (1) of that Article) for the most recent fiscal year with regard to the stock company itself and another corporation, and reported the contents of the statement at an annual shareholders meeting of the stock company as provided for by Article 444 of the Companies Act, if a bankruptcy case, etc. is pending against the stock company, a petition to commence bankruptcy proceedings against the other corporation may also be filed with the district court before which the bankruptcy case, etc. against the stock company is pending, and if a bankruptcy case, etc. is pending against the other corporation, a petition to commence bankruptcy proceedings against the stock company may also be filed with the district court before which the bankruptcy case, etc. against the other corporation is pending.

Notwithstanding the provisions of paragraph (1) and paragraph (2), if a bankruptcy case, etc. is pending against a corporation, a petition to commence bankruptcy proceedings against the representative person of the corporation may also be filed with the district court before which the bankruptcy case, etc. against the corporation is pending, and if a bankruptcy case or rehabilitation case is pending against the representative person of a corporation, a petition to commence bankruptcy proceedings against the corporation may also be filed with the district court before which the bankruptcy case or rehabilitation case against the representative person of the corporation is pending.

Notwithstanding the provisions of paragraph (1) and paragraph (2), if a bankruptcy case is pending against either one of the persons stated in each of the following items, a petition to commence bankruptcy proceedings against the other person stated in the respective items may also be filed with the district court before which the bankruptcy case is pending:

individual who is a joint and several obligor with each other;

individual one of whom is a principal obligor and the other is their guarantor; or

husband and wife.

Notwithstanding the provisions of paragraphs (1) and (2), if an order commencing bankruptcy proceedings is made and there are 500 or more creditors that hold claims that are supposed to be bankruptcy claims, a petition to commence bankruptcy proceedings may also be filed with the district court that has jurisdiction over the locality of the high court that has jurisdiction over the locality of the court with jurisdiction under these provisions.

Notwithstanding the provisions of paragraph (1) and paragraph (2), if there are 1,000 or more creditors prescribed in the preceding paragraph, a petition to commence bankruptcy proceedings may also be filed with the Tokyo District Court or the Osaka District Court.

If two or more district courts have jurisdiction over a bankruptcy case pursuant to the provisions of the preceding paragraphs, the bankruptcy case is subject to the jurisdiction of the district court with which the first petition to commence bankruptcy proceedings is filed.

The court jurisdiction prescribed in this Act is exclusive.

The court may transfer a bankruptcy case by its own authority (if the debtor involved in a bankruptcy case, or bankrupt files a petition for grant of discharge, or the bankruptcy case and the case related to the petition for grant of discharge) to any of the following district courts if the court finds it necessary to do so in order to avoid substantial detriment or delay:

the district court that has jurisdiction over the locality of the debtor's business office or other office other than the debtor's principal business office or other principal office;

the district court that has jurisdiction over the locality of the debtor's domicile or residence;

the district court prescribed in Article 5, paragraph (2);

any of the district courts listed in sub-items (a) through (c) below:

the district court prescribed in Article 5, paragraphs (3) through (7);

the district court prescribed in Article 5, paragraph (8) if an order commencing bankruptcy proceedings is made and there are 500 or more creditors that hold claims that are supposed to be bankruptcy claims order commencing (after an order commencing bankruptcy proceedings is issued, bankruptcy creditors; the same applies in sub-item (c));

the district court prescribed in Article 5, paragraph (9) if there are 1,000 or more creditors prescribed in sub-item (b); or

the district court prescribed in Article 5, paragraph (1) or (2) if the bankruptcy case is pending pursuant to the provisions of Article 5, paragraphs (3) through (9) at the district court prescribed in the respective provisions.