Bankruptcy Act

A petition to commence bankruptcy proceedings pursuant to the provisions of this Act against trust property may be filed only if property that belongs to the trust property or the trustee's address is in Japan.

A bankruptcy case relating to trust property is subject to the jurisdiction of the district court that has jurisdiction over the trustee's domicile (if there are two or more trustees, the domicile of any of the trustees).

If there is no court with jurisdiction pursuant to the provisions of the preceding paragraph, the bankruptcy case relating to the trust property is subject to the jurisdiction of the district court that has jurisdiction over the locality of the property that belongs to the trust property (for a claim, the place in which demand by litigation may be made).

For the purpose of application of the provisions of Article 5, paragraphs (8) and (9), and Article 7, item (v) to a bankruptcy case relating to the trust property, the term "paragraphs (1) and (2)" in Article 5, paragraphs (8) and (9) is deemed to be replaced with "Article 244-2, paragraphs (2) and (3)", and the term "paragraph (1) or (2) of that Article" in Article 7, item (v) is deemed to be replaced with "Article 244-2, paragraph (2) or (3)".

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

For the purpose of application of Article 15, paragraph (1) to trust property, the term "unable to pay debts" in Article 15, paragraph (1) is deemed to be replaced with "unable to pay debts or insolvent (meaning the condition in which the trustee is unable to make full payment on the obligation covered by the trust property with property that comes under trust property)."

In addition to a person that holds a trust claim (meaning a trust claim prescribed in Article 21, paragraph (2), item (ii) of the Trust Act; the same applies in item (i) of the following paragraph and Article 244-7) or a beneficiary, the trustee, or the administrator of trust property, the incorporated trust property administrator, or the administrator referred to in Article 170, paragraph (1) of that Act (hereinafter collectively referred to as the "trustee, etc.") may file a petition to commence bankruptcy proceedings against the trust property.

When a person stated in each of the following items files a petition to commence bankruptcy proceedings against trust property, they must make a prima facie showing of the fact specified in the respective items:

a person that holds a trust claim or a beneficiary:the existence of the trust claim or beneficial claim held by a person and the fact constituting the cause for the commencement of bankruptcy proceedings against the trust property; and

the trustee, etc.:the fact constituting the cause for the commencement of bankruptcy proceedings against the trust property.

The provisions of item (ii) of the preceding paragraph do not apply when there is only one trustee, etc. or when there are two or more trustees, etc. and the petition to commence bankruptcy proceedings is filed by all of the trustees, etc.

Even after the termination of the trust, a petition to commence bankruptcy proceedings may be filed against the trust property until the distribution of its residual assets is completed.

If an order commencing bankruptcy proceedings is issued against trust property, any and all of the property that comes under trust property at the time of commencement of bankruptcy proceedings (irrespective of whether it exists in Japan) is to constitute the bankruptcy estate.

If an order commencing bankruptcy proceedings is issued against trust property, the following persons must give necessary explanation concerning bankruptcy upon a request of a bankruptcy trustee or creditors' committee, or a request based on a resolution at a creditors' meeting,:

a trustee, etc.; and

an accounting auditor (meaning an accounting auditor prescribed in Article 248, paragraph (1) or (2) of the Trust Act; hereinafter the same applies in this Chapter).

The provisions of the preceding paragraph apply mutatis mutandis to a person that was the person stated in items of that paragraph.

The provisions of Article 37 and Article 38 apply mutatis mutandis to a trustee, etc. (limited to a trustee, etc. who is an individual) if an order commencing bankruptcy proceedings is made against the trust property.

The provisions of Article 41 apply mutatis mutandis to a trustee, etc. if an order commencing bankruptcy proceedings is issued against the trust property.

If an order commencing bankruptcy proceedings is issued against trust property, even when an order commencing bankruptcy proceedings is issued against the trustee, a person that holds a trust claim and a beneficiary may participate in the bankruptcy proceedings with regard to the entire amount of the claim that each of them holds at the time of commencement of bankruptcy proceedings.

If an order commencing bankruptcy proceedings is issued against the trust property, a trust claim has precedence over a beneficial claim.

A beneficial claim and a consensually-subordinated bankruptcy claim have the same priority; provided, however, that a consensually-subordinated bankruptcy claim may be given preference over a beneficial claim by the provisions of the terms of trust.

A right held by a trustee pursuant to the provisions of Article 49, paragraph (1) of the Trust Act (including as applied mutatis mutandis pursuant to Article 53, paragraph (2) and Article 54, paragraph (4) of that Act) is deemed to be a monetary claim in its relation to bankruptcy proceedings against trust property.

If an order commencing bankruptcy proceedings is made against trust property, a person holding claims pertaining to the obligation covered only by the trustee's own property, etc. (meaning obligation covered only by the trustee's own property, etc. as prescribed in Article 22, paragraph (1) of the Trust Act) may not exercise their rights as bankruptcy creditors.

For the purpose of application of the provisions of Chapter VI, Section 2, if an order commencing bankruptcy proceedings is issued against trust property, an act conducted by a trustee, etc. with respect to the trust property is deemed to have been conducted by the bankrupt.

For the purpose of application of the provisions of Article 161, paragraph (1) in the case referred to in the preceding paragraph, if the other party to the act is a trustee, etc. or an accounting auditor, at the time of the act, that other party is presumed to have known that the trustee, etc. had the intention of concealing or carrying out other disposal referred to in Article 161, paragraph (1), item (ii).

For the purpose of application of the provisions of Article 162, paragraph (1), item (i) in the case referred to in paragraph (1), if the creditor is a trustee, etc. or an accounting auditor, the creditor is presumed to have known the respective facts specified in sub-item (a) or (b) of Article 162, paragraph (1), item (i) in accordance with the category of cases stated in sub-item (a) or (b) (in the case stated in sub-item (a), both of the facts that the bankrupt was unable to pay debts and that the bankrupt suspended payments) at the time of the act stated in Article 162, paragraph (1), item (i).

For the purpose of application of the provisions of Article 168, paragraph (2) and Article 170-2, paragraph (2) in the case prescribed in paragraph (1), if the other party to the act is a trustee, etc. or an accounting auditor, the other party is presumed to have known that the trustee, etc. had the intention of concealing or carrying out other disposal prescribed in these provisions at the time of the act.

If an order commencing bankruptcy proceedings is issued against trust property, the following acts are conducted by a bankruptcy trustee:

exercising of the right to rescind under the provisions of Article 27, paragraph (1) or (2) of the Trust Act;

ratification under the provisions of Article 31, paragraph (5) of the Trust Act;

exercising of the right to rescind under the provisions of Article 31, paragraph (6) or (7) of the Trust Act;

exercising of the right under the provisions of Article 32, paragraph (4) of the Trust Act;

pursuing the liability under the provisions of Article 40 or Article 41 of the Trust Act; and

exemption from liability under the provisions of Article 42 of the Trust Act (including as applied mutatis mutandis pursuant to Article 254, paragraph (3) of that Act); and

pursuing the liability under the provisions of Article 226, paragraph (1), Article 228, paragraph (1), or Article 254, paragraph (1) of the Trust Act.

The provisions of the preceding paragraph apply mutatis mutandis to a temporary administrator.

The provisions of Article 177 apply mutatis mutandis to a provisional order on the property of a trustee, etc. or an accounting auditor if an order commencing bankruptcy proceedings is issued against the trust property, and the provisions of Articles 178 through 181 apply mutatis mutandis to an assessment of a claim for compensation for loss or for restoration based on the liability of the trustee, etc. or accounting auditor in the bankruptcy proceedings against the trust property.

For the purpose of application of the provisions of Chapter III, Section 2, if a petition to commence bankruptcy proceedings is filed against the trust property, the phrase "when a debtor (limited to a corporation; the same applies below in this Section, Article 148, paragraph (4), and Article 152, paragraph (2)) administers and disposes of its property" in Article 91, paragraph (1) and the term "the debtor's property" in Article 91, paragraph (1), Article 93, paragraph (1), and Article 96, paragraph (2) are deemed to be replaced with "property that comes under trust property".

A petition referred to in Article 218, paragraph (1) with regard to bankruptcy of trust property is filed by a trustee, etc.

If there are two or more trustees, etc., each trustee, etc. may file the petition referred to in the preceding paragraph.

When filing a petition referred to in paragraph (1) for bankruptcy of trust property, the petitioner must perform the procedure for maintaining the trust in advance by complying with the provisions concerning modification of a trust.