Act on Mutual Relief System for the Prevention of Bankruptcies of Small and Medium-sized Enterprises

The purpose of this Act is, in order to prevent the occurrence of situations such as small and medium-sized enterprises going bankrupt under the influence of the bankruptcy of their business partner companies, to establish, based on the spirit of mutual aid among small and medium-sized enterprises, a system of mutual aid for the prevention of bankruptcy of small and medium-sized enterprises funded by their contributions, and thereby to contribute to the stability of the management of small and medium-sized enterprises.

①In this Act, a "small and medium-sized enterprise" means a person who falls under any of the following items:

②In this Act, a "mutual aid contract" means a contract under which a small and medium-sized enterprise promises to pay premiums to the Organization for Small and Medium Enterprises and Regional Innovation, JAPAN (hereinafter referred to as the "Organization"), and the Organization promises to lend mutual aid benefits, as provided for in this Act, in relation to the occurrence of a situation falling under any of the following items (hereinafter referred to as "bankruptcy") with respect to a business operator that is a counterparty to the transactions of that small and medium-sized enterprise.

③In this Act, a "mutual aid policyholder" means a party to a mutual aid contract other than the Organization.

④In this Act, an "early repayment allowance" means an allowance that the Organization pays, pursuant to Article 10, paragraph (6), to a mutual aid policyholder who has completed repayment of the mutual aid benefits lent to them before the time limit by which repayment is to be completed, and has repaid the full amount of those mutual aid benefits by the repayment date.

⑤In this Act, a "temporary loan" means funds that the Organization lends, pursuant to Article 10-2, paragraph (1), to a mutual aid policyholder who temporarily needs business funds.

⑥In this Act, a "cancellation refund" means an allowance that the Organization pays, pursuant to Article 11, paragraph (1), to a person who has cancelled a mutual aid contract.

⑦In this Act, a "full repayment allowance" means an allowance that the Organization pays, pursuant to Article 11-2, paragraph (1), to a mutual aid policyholder who has repaid the full amount of the mutual aid benefits lent to them by the repayment date.

①A mutual aid contract may not be concluded by anyone other than a small and medium-sized enterprise that has continuously carried on business for one year or more.

②A small and medium-sized enterprise that is currently a mutual aid policyholder may not conclude a new mutual aid contract.

③The Organization must not refuse to conclude a mutual aid contract except in the following cases:

①A mutual aid contract is to be concluded by specifying the monthly premium.

②The monthly premium is to be 5,000 yen or more and an amount obtained by multiplying 5,000 yen by an integer; provided, however, that it must not exceed an amount equivalent to one-fortieth of the amount equivalent to one-tenth of the amount specified by Cabinet Order in the proviso to Article 9, paragraph (2) (hereinafter referred to as the "premium payment limit").

An application for a mutual aid contract must be made by clarifying the monthly premium.

A mutual aid contract is deemed to have been formed on the date of the application when the Organization accepts the application, and takes effect from that date.

①The Organization may not cancel a mutual aid contract except in the case prescribed in the following paragraph.

②The Organization must cancel a mutual aid contract in the following cases:

③A mutual aid policyholder may cancel a mutual aid contract at any time.

④Where a mutual aid policyholder dies, is dissolved, splits (limited to a split under which the whole of its business is succeeded to; the same applies hereinafter in this paragraph and Article 12, paragraph (1)), or transfers the whole of its business, and there has been no succession under Article 12, paragraph (1), the mutual aid contract relating to that mutual aid policyholder is deemed to have been cancelled at the time of that death, dissolution, split or transfer of the whole of its business.

⑤The cancellation of a mutual aid contract takes effect only prospectively.

①When a mutual aid policyholder applies to increase the monthly premium, the Organization must accept the application.

②With regard to an application from a mutual aid policyholder to decrease the monthly premium, the Organization must not accept it, except in cases specified by Order of the Ministry of Economy, Trade and Industry.

③An application under the preceding two paragraphs must be made by clarifying the monthly premium after the increase or decrease.

④The provisions of Article 6 apply mutatis mutandis to an increase or decrease in the monthly premium.

①When a bankruptcy occurs with respect to a business operator that is a counterparty to the transactions of a mutual aid policyholder, the Organization lends mutual aid benefits to the mutual aid policyholder at its request, except where the period from the date on which the mutual aid contract took effect to the date of occurrence of the bankruptcy is less than six months and where the number of months in which premiums were paid up to the date of occurrence of the bankruptcy is less than six months; provided, however, that this does not apply where the mutual aid policyholder does not fall under a small and medium-sized enterprise at the time of the request or in the cases set out in the following items.

②The loan amount of mutual aid benefits under the preceding paragraph is the amount requested by the mutual aid policyholder within the range of the lesser of the amount equivalent to ten times the amount obtained by deducting the total amount of the amounts set out in the following items from the total amount of premiums paid as of the date on which the request for the loan was made, and the amount of those accounts receivable and other claims specified by Order of the Ministry of Economy, Trade and Industry against the business operator that is the counterparty to the transaction relating to the bankruptcy (hereinafter referred to as "accounts receivable, etc.") that have become difficult to collect (where the transactional relationship between the mutual aid policyholder and the business operator that is its counterparty to transactions falls under the requirements specified by Order of the Ministry of Economy, Trade and Industry, the total amount of that amount and the amount calculated, as specified by Order of the Ministry of Economy, Trade and Industry, as the amount of funds urgently needed to mitigate the impact of changes in the mutual aid policyholder's transactional relationships; the same applies hereinafter); provided, however, that the total amount of that loan amount and the amount obtained by deducting the amount of mutual aid benefits already repaid from the amount of mutual aid benefits already lent or to be lent as of the date of the request must not exceed the amount specified by Cabinet Order.

③The amount specified by Cabinet Order in the proviso to the preceding paragraph is to be determined taking into consideration the amount of funds with which, by receiving the loan, most small and medium-sized enterprises are expected to be able to avoid situations such as becoming bankrupt owing to the effects of the bankruptcy of their business partner companies, and other such matters.

④The Organization may decline to lend all or part of the mutual aid benefits where a mutual aid policyholder who has requested a loan of mutual aid benefits has neglected to repay mutual aid benefits already lent, or where it is found that the mutual aid policyholder acted in bad faith or with gross negligence in coming to hold the accounts receivable, etc. in question or in their becoming difficult to collect.

⑤Where the Organization is to lend mutual aid benefits to a mutual aid policyholder and there is a temporary loan to be repaid, or interest or a penalty under Article 10-2, paragraph (5) to be paid, the Organization may deduct the total amount of the amounts set out in the following items from the loan amount of those mutual aid benefits:

①Mutual aid benefits are to be interest-free, and the repayment period is to be a period specified by Cabinet Order, according to the loan amount, within a period not exceeding 10 years (including any grace period).

②Except in cases specified by Order of the Ministry of Economy, Trade and Industry, the Organization is not to require security (including a guarantee by a guarantor) to be provided for a loan of mutual aid benefits.

③Where a person who has received a loan of mutual aid benefits has not repaid the mutual aid benefits by the repayment date, the Organization may have that person pay a penalty, within the amount calculated on the overdue amount at the rate of 14.6 percent per annum for the number of days from the day following the repayment date to the day preceding the date of repayment.

④Where the Organization finds that a person who has received a loan of mutual aid benefits is unable to repay the mutual aid benefits by the repayment date owing to a disaster or other unavoidable grounds, it may postpone the repayment date.

⑤Where, after a period specified by Order of the Ministry of Economy, Trade and Industry has elapsed from the repayment date of mutual aid benefits, there are still mutual aid benefits to be repaid or penalties to be paid, the Organization may apply the premiums paid to the repayment of those mutual aid benefits or the payment of those penalties.

⑥Where a mutual aid policyholder has completed repayment before the time limit by which repayment was to be completed as of the time the mutual aid policyholder received the loan of mutual aid benefits (where that time limit has been extended by the postponement of the repayment date pursuant to paragraph (4), that extended time limit), and has repaid the full amount of those mutual aid benefits by the repayment date, the Organization may, as specified by Order of the Ministry of Economy, Trade and Industry, pay the mutual aid policyholder an early repayment allowance in the amount specified by Order of the Ministry of Economy, Trade and Industry.

⑦Where the Organization is to pay an early repayment allowance to a mutual aid policyholder and there are mutual aid benefits or temporary loans to be repaid for which the repayment date has passed, interest to be paid for which the payment due date has passed, penalties to be paid pursuant to paragraph (3) of this Article or paragraph (5) of the following Article, or mutual aid benefits, temporary loans, early repayment allowances, cancellation refunds or full repayment allowances to be returned pursuant to Article 13, the Organization may deduct those amounts from the amount of that early repayment allowance.

①When a mutual aid policyholder temporarily needs business funds, the Organization lends a temporary loan to the mutual aid policyholder at its request; provided, however, that this does not apply where the amount of the temporary loan to be lent is small and does not reach the amount specified by Order of the Ministry of Economy, Trade and Industry.

②The loan amount of the temporary loan under the preceding paragraph is limited to the amount specified by Order of the Ministry of Economy, Trade and Industry, within the range of the amount of the cancellation refund that would be payable on the assumption that the mutual aid contract had been cancelled at the time of the request.

③Interest is to be charged on a temporary loan at a rate specified by Order of the Ministry of Economy, Trade and Industry, taking into consideration the expenses necessary for the lending, and the repayment period is to be a period specified by Order of the Ministry of Economy, Trade and Industry within a period not exceeding two years.

④The Organization is not to require security (including a guarantee by a guarantor) to be provided for the lending of a temporary loan.

⑤Where a person who has received a temporary loan has not repaid the temporary loan by the repayment date, the Organization may have that person pay a penalty, within the amount calculated on the overdue amount at the rate of 14.6 percent per annum for the number of days from the day following the repayment date to the day preceding the date of repayment.

⑥The provisions of paragraph (5) of the preceding Article apply mutatis mutandis where, after a period specified by Order of the Ministry of Economy, Trade and Industry has elapsed from the repayment date of a temporary loan, there are still temporary loans to be repaid or interest or penalties to be paid.

①Where a mutual aid contract has been cancelled and the number of months in which premiums were paid is 12 or more, the Organization pays a cancellation refund to the mutual aid policyholder.

②Where a mutual aid contract has been cancelled pursuant to Article 7, paragraph (2), item (ii), notwithstanding the preceding paragraph, no cancellation refund is paid; provided, however, that this does not apply where there are special circumstances specified by Order of the Ministry of Economy, Trade and Industry.

③The amount of the cancellation refund is the amount obtained by multiplying the total premium amount calculated pursuant to the following paragraph by a ratio specified by Cabinet Order on the basis of the number of months in which premiums were paid, the grounds for the cancellation of the mutual aid contract, and other such matters.

④The total premium amount is the amount obtained by deducting, from the total amount of premiums paid at the time of the cancellation of the mutual aid contract, the total amount of an amount equivalent to one-tenth of the amount of mutual aid benefits already lent or to be lent and the amount already applied to repayment or payment pursuant to Article 10, paragraph (5) (including as applied mutatis mutandis pursuant to paragraph (6) of the preceding Article).

⑤Where the Organization is to pay a cancellation refund to a mutual aid policyholder and there are mutual aid benefits or temporary loans to be repaid, interest to be paid or penalties under Article 10, paragraph (3) or paragraph (5) of the preceding Article to be paid, or mutual aid benefits, temporary loans, early repayment allowances, cancellation refunds or full repayment allowances to be returned pursuant to Article 13, the Organization may deduct those amounts from the amount of that cancellation refund.

①Where, in light of the state of revenue and expenditure of the small and medium-sized enterprise bankruptcy prevention mutual aid business and the outlook for its revenue and expenditure, it is found that its revenue and expenditure can be kept in balance into the future and that surplus funds still arise, the Organization may, as specified by Order of the Ministry of Economy, Trade and Industry, pay a full repayment allowance to a mutual aid policyholder who has repaid, by the repayment date, the full amount of the mutual aid benefits lent to the policyholder in the amount prescribed in paragraph (3).

②Whether the surplus funds under the preceding paragraph have arisen and the amount of those surplus funds must be calculated as specified by Order of the Ministry of Economy, Trade and Industry.

③The amount of the full repayment allowance is the amount obtained by multiplying an amount equivalent to one-tenth of the amount of mutual aid benefits repaid by a ratio specified by Cabinet Order on the basis of the amount of the surplus funds under paragraph (1), the forecast of the proportion of mutual aid policyholders who will receive a loan of mutual aid benefits and of the proportion of those mutual aid benefits that will be repaid by the repayment date, and other such matters.

④Where the Organization is to pay a full repayment allowance to a mutual aid policyholder and there are mutual aid benefits or temporary loans to be repaid for which the repayment date has passed, interest to be paid for which the payment due date has passed, penalties to be paid pursuant to Article 10, paragraph (3) or Article 10-2, paragraph (5), or mutual aid benefits, temporary loans, early repayment allowances, cancellation refunds or full repayment allowances to be returned pursuant to Article 13, the Organization may deduct those amounts from the amount of that full repayment allowance.

①Where, with respect to a mutual aid policyholder, there has been inheritance, merger or split, or transfer of the whole of its business, its universal successor or the transferee of the whole of its business (hereinafter referred to as the "successor, etc.") may, by making an application to the Organization within the period specified by Order of the Ministry of Economy, Trade and Industry and obtaining its consent, succeed to the position held by that mutual aid policyholder.

②The Organization must not refuse the consent under the preceding paragraph, except in the following cases:

③Where the monthly premium of a mutual aid policyholder who has succeeded pursuant to paragraph (1) would exceed an amount equivalent to one-fortieth of the premium payment limit, the monthly premium is to be an amount equivalent to one-fortieth of the premium payment limit.

④Where the total premium amount of a mutual aid policyholder who has succeeded pursuant to paragraph (1), calculated in the same manner as under the provisions of Article 11, paragraph (4), would exceed the premium payment limit, the total premium amount is to be the premium payment limit, and the Organization returns the amount by which it would exceed to that person.

⑤In the case referred to in the preceding paragraph, the Organization may deduct the total amount of the amounts set out in the following items from the amount to be returned:

⑥Beyond what is provided for in the preceding three paragraphs, matters necessary for succession are specified by Cabinet Order.

Where there is a person who has received a loan of mutual aid benefits or a temporary loan, or payment of an early repayment allowance, cancellation refund or full repayment allowance, by deception or other wrongful act, the Organization may have that person return those mutual aid benefits, temporary loan, early repayment allowance, cancellation refund or full repayment allowance.

①Except in the cases prescribed in paragraphs (3) through (6), a mutual aid policyholder must pay premiums for each month from the month containing the date on which the mutual aid contract took effect to the month containing the date on which the mutual aid contract was cancelled, based on the monthly premium as of the last day of that month (for the month containing the date of cancellation, the date of cancellation), by the last day of that month (for the premiums for the month containing the date on which the mutual aid contract took effect and the following month, by the last day of the second month after the month containing the date on which the mutual aid contract took effect).

②Premiums may not be paid in installments.

③Where payment of premiums would cause the total premium amount calculated in the same manner as under the provisions of Article 11, paragraph (4) to exceed the premium payment limit, a mutual aid policyholder may not pay premiums for the amount by which it would exceed.

④A mutual aid policyholder whose total premium amount calculated in the same manner as under the provisions of Article 11, paragraph (4) has reached an amount equivalent to 40 times the monthly premium (where the monthly premium has been increased or decreased, the monthly premium after the increase or decrease) may, as specified by Order of the Ministry of Economy, Trade and Industry, notify the Organization and refrain from paying premiums.

⑤A mutual aid policyholder who has received, or is to receive, a loan of mutual aid benefits pursuant to Article 9, paragraph (1) may, with the consent of the Organization, refrain from paying premiums only for a period within the grace period for the repayment of those mutual aid benefits. In this case, the Organization is to give that consent only where it finds that there are unavoidable circumstances for not paying.

⑥Where the total amount of the amount obtained by deducting the amount of mutual aid benefits already repaid from the amount of mutual aid benefits already lent or to be lent, and an amount equivalent to ten times the total premium amount calculated in the same manner as under the provisions of Article 11, paragraph (4), has reached the amount specified by Cabinet Order in the proviso to Article 9, paragraph (2), a mutual aid policyholder may, by applying to the Organization, refrain from paying premiums only for the period until that total amount falls below that amount specified by Cabinet Order.

①Where a mutual aid policyholder has paid premiums on or before the last day of the month preceding the month in which they are to be paid (hereinafter referred to as "advance payment of premiums"), the Organization may reduce the amount of those premiums as specified by Order of the Ministry of Economy, Trade and Industry.

②With regard to premiums for which advance payment of premiums has been made, the premiums for each month are deemed to have been paid when the first day of each month in which they are to be paid arrives.

Where a mutual aid policyholder has not paid premiums by the payment due date, the Organization may have that person pay a surcharge, within the amount calculated on the overdue amount at the rate of 14.6 percent per annum for the number of days from the day following the payment due date to the day preceding the date of payment.

Where the Organization finds that a mutual aid policyholder is unable to pay premiums by the payment due date owing to a disaster or other unavoidable grounds, it may extend the payment due date.

①A person entitled to receive payment of a cancellation refund or full repayment allowance has the right to be paid, in preference to other creditors, out of the property of the Organization, in the case of a cancellation refund, the amount of the cancellation refund prescribed in Article 11, paragraph (3) (where there is money that the Organization may deduct from the amount of that cancellation refund pursuant to paragraph (5) of that Article, the remainder after deducting the amount of that money from the amount of that cancellation refund), and in the case of a full repayment allowance, the amount of the full repayment allowance prescribed in Article 11-2, paragraph (3) (where there is money that the Organization may deduct from the amount of that full repayment allowance pursuant to paragraph (4) of that Article, the remainder after deducting the amount of that money from the amount of that full repayment allowance).

②With regard to the calculation of the amount of the cancellation refund prescribed in the preceding paragraph, Article 11, paragraph (4) applies with the phrase "mutual aid benefits already lent or to be lent" in that paragraph deemed to be replaced with "mutual aid benefits already lent".

③The order of precedence of the statutory lien under paragraph (1) ranks next after the general statutory liens under the provisions of the Civil Code (Act No. 89 of 1896).

The right to receive payment of a cancellation refund or full repayment allowance is extinguished by prescription if not exercised for five years from the time when it can be exercised, and the right to receive payment of premiums is extinguished by prescription if not exercised for two years from the time when it can be exercised.

When calculating a period relating to a request for a loan of mutual aid benefits or for payment of an early repayment allowance, cancellation refund or full repayment allowance, where the request was made by mail, or by a general correspondence delivery provider prescribed in Article 2, paragraph (6) of the Act on Correspondence Delivery by Private Business Operators (Act No. 99 of 2002) or a specified correspondence delivery provider prescribed in paragraph (9) of that Article, by correspondence delivery prescribed in paragraph (2) of that Article, the number of days required for sending is not counted in that period.

With regard to a mutual aid policyholder who has paid premiums under the provisions of this Act, special measures are to be taken for the imposition of corporation tax or income tax, as provided for by the Act on Special Measures Concerning Taxation (Act No. 26 of 1957).

Where an order is established, amended or abolished under the provisions of this Act, necessary transitional measures may be provided for by that order within the scope judged reasonably necessary in connection with that establishment, amendment or abolition.

Fundamental matters concerning the system of mutual aid for the prevention of bankruptcy of small and medium-sized enterprises, such as the amount of premiums and the loan amount of mutual aid benefits, are to be reviewed at least every five years on the basis of the trends in and forecasts of the revenue and expenditure situation and the usage situation of the small and medium-sized enterprise bankruptcy prevention mutual aid business.