Bankruptcy Act

The provisions of paragraph (1), item (i) of the preceding Article do not apply when a person that has received payment of a negotiable instrument from the bankrupt would lose their right on the negotiable instrument against one or more debtors on the negotiable instrument unless the person receives the payment.

In the case referred to in the preceding paragraph, if the final obligor for reimbursement or the person that had entrusted the drawing of the negotiable instrument had known or was negligent in not knowing, at the time of drawing, the fact that suspension of payments, etc. had taken place, a bankruptcy trustee may have these persons redeem the money paid by the bankrupt to them.

The provisions of paragraph (1) of the preceding Article do not apply to the act concerning the provision of security or extinguishment of debt, which is conducted by the bankrupt with regard to a claim for tax, etc. (excluding a claim for a foreign tax subject to mutual assistance) or a claim for a fine, etc. for the person that has the authority to collect the claim.

When an act necessary to assert the establishment, transfer, or modification of a right against a third party (including a provisional registration) was conducted after suspension of payments, etc. took place, if the act was conducted after 15 days had elapsed from the date of establishment, transfer, or modification of the right, knowing that suspension of payments, etc. had taken place, the act may be avoided in the interest of the bankruptcy estate after the commencement of bankruptcy proceedings; provided, however, that this does not apply to a definitive registration based on the above or other provisional registration.

The provisions of the preceding paragraph apply mutatis mutandis to a registration that makes the acquisition of a right effective.

The exercise of a right of avoidance is not precluded even when an act to be avoided is accompanied by an enforceable title of obligation or is based on an act of enforcement.

An act conducted not less than one year before the date of filing of a petition to commence bankruptcy proceedings (excluding the act prescribed in Article 160, paragraph (3)) may not be avoided by the reason that the act was conducted after the suspension of payments had taken place or while knowing the fact of suspension of payments.

The exercise of a right of avoidance restores the bankruptcy estate to its original state.

When the act prescribed in Article 160, paragraph (3) is avoided, if the other party did not know that suspension of payments, etc. had taken place nor that the act would prejudice a bankruptcy creditor at the time of the act, it is sufficient for the other party to reimburse the benefit that have actually received.

When an act prescribed in Article 160, paragraph (1) or (3), or Article 161, paragraph (1) is avoided, the other party may exercise the right specified in each of the following items in accordance with the category stated in the respective items:

when the counter-performance received by the bankrupt actually exists within the bankruptcy estate:the right to claim the return of the counter-performance; or

when the counter-performance received by the bankrupt does not actually exist within the bankruptcy estate:the right to claim , the reimbursement of the value of the counter-performance as a holder of claim on the estate.

Notwithstanding the provisions of item (ii) of the preceding paragraph, in the cases stated in that item, if the bankrupt had the intention to conceal or carry out other disposal of the property that they received as a value for the act and the other party knew that the bankrupt had the intention at the time when the act in question was conducted, the other party may exercise the right specified in each of the following items in accordance with the category stated in the respective items:

when the enrichment arising from the counter-performance received by the bankrupt actually exists in whole within the bankruptcy estate:the right to claim the return of the actual enrichment as a holder of the claim on the estate;

when the enrichment arising from the counter-performance received by the bankrupt does not actually exist within the bankruptcy estate:the right to claim, the reimbursement of the value of the counter-performance as a bankruptcy creditor; or

when the enrichment arising from the counter-performance received by the bankrupt actually exists in part within the bankruptcy estate:the right to claim the return of the actual enrichment as a holder of claim on the estate, and the right to claim the reimbursement of any difference between the counter-performance and the actual enrichment as a bankruptcy creditor.

For the purpose of application of the provisions of the preceding paragraph, if the other party to the act in question is any of the persons stated in the items of Article 161, paragraph (2), the other party is presumed to have known that the bankrupt had the intention to conceal or carry out other disposal referred to in the preceding paragraph at the time of the act.

A bankruptcy trustee may request the other party to reimburse the amount obtained by deducting the amount that is included in the scope of claims on the estate pursuant to the provisions of the preceding three paragraphs (in the case stated in paragraph (1), item (i), the value of the counter-performance received by the bankrupt) from the value of the property to be returned when seeking to avoid an act prescribed in Article 160, paragraph (1) or (3), or Article 161, paragraph (1), in lieu of requesting the return of the property that should be returned to the bankruptcy estate pursuant to the provisions of paragraph (1) of the preceding Article,.

When an act prescribed in Article 162, paragraph (1) is avoided, if the other party returns the performance received or reimburses the value of the performance, the other party's claim restores to its original state.

In the cases stated in the following items, a right of avoidance may also be exercised against subsequent acquirers specified in the respective item if there are grounds for avoidance against the other party to the act to be avoided; provided, however, that if the relevant subsequent acquirer acquired the subject matter from another subsequent acquirer, this is limited to cases in which there were grounds for avoidance against all subsequent acquirers that acquired the subject matter before the relevant subsequent acquirer acquired the subject matter:

when a subsequent acquirer had known that the act of the bankrupt would prejudice the bankruptcy creditors at the time of acquisition;

when a subsequent acquirer is any of the persons stated in the items of Article 161, paragraph (2); provided, however, that this does not apply if the subsequent acquirers did not know that the act of the bankrupt would prejudice the bankruptcy creditors at the time of acquisition; and

when a subsequent acquirer acquired the subject matter by a gratuitous act or by an onerous act that should be deemed to be equivalent to that act.

The provisions of Article 167, paragraph (2) apply mutatis mutandis when a right of avoidance is exercised pursuant to the provisions of item (iii) of the preceding paragraph.

If an act conducted by the bankrupt referred to in the provisions of Article 160, paragraph (1) or paragraph (3) or Article 161, paragraph (1) was avoided by the exercise of a right of avoidance against a subsequent acquirer, the subsequent acquirer may exercise the rights prescribed in the items of Article 168, paragraph (1) in accordance with the category stated in the respective item; provided, however, that in the case stated in item (i) of that paragraph, if the value of the counter-performance received by the bankrupt exceeds the value of the counter-performance by the subsequent acquirer or the value of the extinguished claims of the subsequent acquirer referred to in paragraph (4), the subsequent acquirer may exercise the right to make a claim for reimbursement of the value of the counter-performance received by the bankrupt as a holder of a claim on the estate.

Notwithstanding the provisions of the preceding paragraph, in the case stated in Article 168, paragraph (1), item (ii), at the time when the act in question was conducted, if the bankrupt had the intention to conceal or carry out other disposal of the property received as value for the act, and the other party knew that the bankrupt had the intention, the subsequent acquirer may exercise the rights specified in each item of paragraph (2) of that Article in accordance with the category stated in the respective item.

For the purpose of application of the provisions of the preceding paragraph, if the other party to the act in question is any of the persons stated in the items of Article 161, paragraph (2), the other party is presumed to have known, at the time of the act, that the bankrupt had the intention to conceal or carry out other disposal referred to in the preceding paragraph.

The exercise of rights under the provisions of paragraph (1) and (2) is limited to the value of the counter-performance by the subsequent acquirer in order to acquire the property from the predecessor or the value of the claim that was extinguished as a result of the acquisition of the property by the subsequent acquirer from the predecessor.

When seeking to avoid an act prescribed in paragraph (1) by exercising a right of avoidance against the subsequent acquirer in lieu of requesting return of the property that should be returned to the bankruptcy estate pursuant to the provisions of Article 167, paragraph (1), a bankruptcy trustee may request the subsequent acquirer to reimburse the amount obtained by deducting the amount that is included in the scope of claims on the estate pursuant to the provisions of the preceding four paragraphs (in the case stated in Article 168, paragraph (1), item (i) (excluding cases filing under the proviso of paragraph (1)), the value of the counter-performance received by the bankrupt) from the value of the property to be returned.

If an act conducted by the bankrupt prescribed in Article 162, paragraph (1) is avoided through the exercise of a right of avoidance against a subsequent acquirer and the subsequent acquirer returns the performance received or reimburses the value of the performance, the subsequent acquirer may exercise the claim of the other party to be restored to its original state pursuant to the provisions of Article 169 if that act is avoided through the exercise of a right of avoidance against the other party. In this case, the provisions of paragraph (4) of the preceding Article apply mutatis mutandis.