Companies Act

Unless the parties otherwise manifest their intention, a company which transferred its business (hereinafter in this Chapter referred to as "transferor company") may not carry out the same line of business within the area of the same city, town or village (including special wards, and ward or administratively consolidated ward of the cities designated under Article 252-19 paragraph (1) of the Local Autonomy Act (Act No. 67 of 1947); hereinafter the same applies in this paragraph), or within the area of any of its neighboring cities, towns or villages for twenty years from the day of the transfer of the business.

If the transferor company agreed to special provisions to the effect that it will not carry out the same line of the business, the effectiveness of the special provision is limited to the period of thirty years from the day of the transfer of the business.

Notwithstanding the provisions of the preceding two paragraphs, the transferor company may not carry out the same line of business with the purpose of unfair competition.

If any company to which any business is transferred (hereinafter in this Chapter referred to as "transferee company") continues to use the trade name of the transferor company, the transferee company is also liable for the performance of any obligations having arisen from the business of the transferor company.

The provisions of the preceding paragraph do not apply if the transferee company registers, at the location of its head office, without delay after it has accepted the transfer of the business, a statement to the effect that it will not be liable for the performance of the obligations of the transferor company. If the transferee company and transferor company give notice to the above effect to any third party without delay after the transfer of the business, the same applies to the third party who receives that notice.

If the transferee company is liable for the performance of the obligations of the transferor company pursuant to the provisions of paragraph (1), the liability of the transferor company is extinguished upon lapse of two years after the day of the transfer of the business to any obligee who does not demand the performance, or does not give an advance notice of the demand, within that period.

In cases provided for in paragraph (1), any performance made to the transferee company with respect to any claim arising from the business of the transferor company remains effective if the performing party has acted in good faith and without gross negligence.

Even if a transferee company does not continue to use the trade name of the transferor company, if it advertises to the effect that it will assume the obligations that have arisen from the business of the transferor company, the obligees of the transferor company may demand the performance against the transferee company.

If the transferee company is liable for the performance of the obligations of the transferor company pursuant to the provisions of the preceding paragraph, the liability of the transferor company is extinguished upon lapse of two years after the day of the advertisement under that paragraph regarding any obligee who does not demand the performance, or does not give an advance notice of the demand, within that period.

If a transferor company transfers business, with the knowledge that it harms creditors of the obligations that are not succeeded by the transferee company (hereinafter the creditors are referred to as "remaining creditor" in this Article), the remaining creditor may demand from the transferee company the performance of obligations up to the value of the succeeding properties; provided, however, that this does not apply to cases where the transferee company has no knowledge that it harms remaining creditor when the transfer of business becomes effective.

If a transferor company is liable to performance of obligations referred to in the preceding paragraph pursuant to that paragraph, relevant liability for a remaining creditor, who does not demand or give an advance notice of the demand within two years from when the transferee company transferred business with the knowledge that it harms the remaining creditor, extinguishes when that period elapses. The same applies when ten years have elapsed from the day when the transfer of business comes into effect.

When an order of commencement of bankruptcy proceedings, order of commencement of rehabilitation proceedings, or order of commencement of reorganization proceedings is made against the transferor company, the remaining creditor may not exercise the right to demand pursuant to the provisions of paragraph (1) from the transferee company.

If a company transfers its business to a merchant, relevant company is deemed to be the transferee provided for in Article 16, paragraph (1) of the Commercial Code, and the provisions of Articles 17 through 18-2 of the Code apply. In this case, the phrase "or an order of commencement of rehabilitation proceedings" in paragraph (3) of the same Article is deemed to be replaced with "an order of commencement of rehabilitation proceedings or order of commencement of reorganization proceedings".

If a company accepts transfer of the enterprise of any merchant, relevant merchant is deemed to be the transferor company, and the provisions of the preceding three articles apply. In this case, the phrase ", order of commencement of rehabilitation proceedings or order of commencement of reorganization proceedings" in paragraph (3) of the preceding Article is deemed to be replaced with "or an order of commencement of rehabilitation proceedings".