Companies Act

Creditors who hold agreement claims (hereinafter in this Section referred to as "agreement claim creditors") may not effect set-offs in the cases set forth below:

if the creditors assumed debts owed to the liquidating stock company after the commencement of special liquidation;

if the creditor assumed debts owed to the liquidating stock company after the liquidating stock company became unable to pay its debts (meaning the status under which, due to its lack of capacity to pay, the liquidating stock company is generally and continuously unable to pay debts that are due; hereinafter the same applies in this Subsection) by entering into contracts with the liquidating stock company under which assets of the liquidating stock company are to be disposed of for the purpose of offsetting obligations the creditors assume under the contract exclusively against the agreement claims or by entering into contracts under which the creditors assume obligations of a person who owes the obligations to the liquidating stock company, and creditors had the knowledge at the time of executing relevant contracts that the liquidating stock company was unable to pay debts;

if they assumed debts after suspension of payment, and they had the knowledge at the time of relevant assumption of debt that payments had been suspended; provided, however, that this does not apply if the liquidating stock company was not insolvent at the time of relevant suspension of payments; or

if the creditors assumed debts after the commencement of special liquidation, and they had the knowledge at the time of the assumption that the petition for commencement of special liquidation had been filed.

The provisions of item (ii) through item (iv) of the preceding paragraph do not apply if the assumption of debt pursuant to the provisions of those provisions is based on any of the causes set forth below:

statutory causes;

causes in existence before the agreement claim creditors acquired the knowledge that the liquidating stock company was unable to pay debts, or the petition for suspension of payments or commencement of special liquidation had been filed; or

causes that accrued one year or more before the petition for the commencement of special liquidation was filed.

Creditors who owe debts to a liquidating stock company cannot effect the set-off in the cases set forth below:

if the creditors acquired agreement claims of others after the commencement of special liquidation;

if the creditors acquired agreement claims after liquidating stock company became unable to pay debts, and they had the knowledge that the liquidating stock company was unable to pay debts at the time of the acquisition of the agreement claims;

if the creditors acquired agreement claims after the suspension of payment, and they had the knowledge that there was suspension of payment at the time of the acquisition of the same; provided, however, that this does not apply if the liquidating stock company was not unable to pay debts at the time of relevant suspension of payment;

if the creditors acquired agreement claims after the petition for commencement of special liquidation, and they had the knowledge that the commencement of special liquidation had been filed at the time of the acquisition of the agreement claims.

The provisions under items (ii) through (iv) of the preceding paragraph do not apply if the acquisition of the agreement claims provided for in those provisions is based on any of the causes set forth below:

statutory causes;

causes in existence before the persons who assumed debts owed to the liquidating stock company acquired the knowledge that the liquidating stock company was unable to pay debts, or that a petition for suspension of payments or commencement of special liquidation was filed; or

causes that accrued one year or more before the petition for the commencement of special liquidation was filed; or

contracts between the persons who assume debts owed to the liquidating stock company and the liquidating stock company.

In order to participate in special liquidation procedures based on a claim in respect of foreign taxes subject to mutual assistance, an agreement claim creditor holding such a claim must obtain a decision to implement mutual assistance as prescribed in Article 11, paragraph (1) of the Act on Special Provisions for the Enforcement of Tax Treaties.

If an order to commence special liquidation is issued, the liquidation of the liquidating stock company is subject to supervisions by the court.

If the court finds it necessary, it may seek a statement of opinion with respect to procedures for the special liquidation of relevant liquidating stock company from the government agency that supervises the business of the liquidating stock company, or entrust the investigations to the same.

The government agency under the preceding paragraph may state its opinion with respect to the procedures for special liquidation of relevant liquidating stock company to the court.

The court may at any time order a liquidating stock company to report the status of its administration of the liquidation and assets, or otherwise conduct investigations that are necessary for the supervision of the liquidation.

If an order to commence special liquidation is issued, the liquidating stock company must, without delay after the approval under Article 492, paragraph (3) is given, submit the inventory of property (meaning the inventory of property provided for in that paragraph; hereinafter the same applies in this Article); provided, however, that, if the inventory of property has been prepared as an electronic or magnetic record, a document showing the information recorded in that electronic or magnetic record must be submitted to the court.

If the court finds it necessary after the commencement of special liquidation considering the status of the assets of a liquidating stock company, it may effect the disposition ordering that the matters set forth below be investigated by investigators (hereinafter in Article 533 referred to as "investigation order") in response to a petition by liquidators, company auditors, creditors who have claims equivalent to one tenth or more of the total amount of the claims of creditors that have stated their claims and other creditors known to the liquidating stock company, or shareholders who have held, for the consecutive period of past six months or more (or, if a shorter period is provided for in the articles of incorporation, that period), not less than three hundredths of the voting rights of all shareholders (excluding the shareholders that cannot exercise voting rights on all matters on which resolutions can be passed at the shareholders meeting; or, if any proportion less than that is provided for in the articles of incorporation, that proportion) or shareholders who have held, for the consecutive period of past six months or more (or, if a shorter period is provided for in the articles of incorporation, that period), not less than three hundredths of the issued shares (excluding treasury shares; or, if a lower proportion is provided for in the articles of incorporation, the proportion) or ex officio:

circumstances that resulted in the commencement of special liquidation;

status of the business and assets of the liquidating stock company;

whether or not it is necessary to issue the provisional order pursuant to the provisions of Article 540, paragraph (1); or

whether or not it is necessary to issue the provisional order pursuant to the provisions of Article 542, paragraph (1);

whether or not it is necessary to make the ruling evaluating subject officers' liability provided for in Article 545, paragraph (1); or

other matters necessary for special liquidation specified by the court.

The amounts of the claims in relation to which creditors who hold security interest (limited to special liens, pledges, mortgages or rights of retention provided for in the provisions of this Act or Commercial Code) with respect to the assets of a liquidating stock company are entitled to payment by exercising those security interests are not included in the amount of the claims under the preceding paragraph.

For the purpose of the application of the provisions of paragraph (1) to liquidating stock companies that are not public companies, the phrase "have held, for the consecutive period of six months or more (or, if a shorter period is provided for in the articles of incorporation, that period)", in that paragraph is deemed to be replaced with "hold".

If special liquidation is commenced, liquidators assume the duty to perform the liquidation administration in fairness and good faith in relation to creditors, the liquidating stock company and shareholders.

The court may dismiss liquidators in response to the petition by creditors or shareholders or ex officio if the liquidators do not perform the liquidation administration properly or there otherwise are significant grounds to do so.

The court appoints liquidators if there is any vacancy in the office of liquidator.

Even if there are liquidators in office, the court may appoint additional liquidators if the court finds it necessary.

If necessary, liquidators may appoint one or more liquidators' agents at their own responsibility to cause them perform the duties of the liquidators.

Permission of the court must be obtained with respect to the appointment of agents of liquidators under the preceding paragraph.