SAKURA KYODO LAW OFFICES
KOJI TAKEUCHI*YO ONOZAWAYOSHIMASA HIRUMATOMOFUMI IMAIKAZUKI SATOYUMIKO FUJITAKEITARO MISHIMA
KOJI YAMAWAKISHIRO ABE
CHIHARU MARIKO
AKIKO YANO
KAZUHIRO MUROTANIDAIJYU HIRAYAMAKOICHIRO UEDAKEIGO YONEDAMISAKI FUJISAWAYUUSUKE KIN
YU NAMIKI
TOM CHAN** Admitted in Japan and New York, U.S.A.

HIROYUKI KAWAIKUNIHIKO NISHIMURA
JUN-ICHI ARATAKEYO CHIHARAKIYOTAKA MATSUI
MASAYUKI TOMARISHINSUKE MATSUO
MASAYUKI OHYAMAMASATO MATSUMURA
HIROYUKI TAKANONIKKO HAKUKAZUYA WATANABECHIE GOTO
NAOKO OHIWANAOKI UEDAKENTARO KOBAYASHINBF HIBIYA BUILDING 16F
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TOKYO, 100-0011 JAPAN
TEL:+81-3-5511-4400
FAX:+81-3-5511-4411* FOREIGN COUNSELINTRENATIONAL INSOLVENCY INSTITUTE
11th ANNUAL CONFERENCENEW YORK, NEW YORKJUNE 13-14, 2011

Sale of Business in Bankruptcy Context in Japan
Koji Takeuchi
Attorney at Law
Tokyo, JAPANI.
1.

Sale of Business under the Law of Corporations
The sale or lease of business is inherently within the jurisdiction of the Law ofCorporations, Kabushiki Kaisha Ho1. Part 2 of the Law governs the Kabushiki
Kaisha entity (“KK”) , a stock company limited by shares. The sale of businessas an asset sale of a KK, whether wholly with respect to all of the KK’s
businesses or partially with respect to its significant business(es) is subject to ashareholder resolution by an affirmative vote of two-thirds of the shareholders inattendance that comprise a majority in number of the outstanding shareholders2.

2.

The sale of a business appears to be a clear cut transaction easily to be
distinguishable from other types of corporate transactions; however, in actual

The Law No. 86 of 2005.
The Law of Corporations, Sections 309(2)(sub11), 467(1)(2). Sale to a purchaser which the seller
controls by owning 90% or more voting shares is exempt from the shareholder resolution requirement.
The purchaser corporation is also subject to its shareholder resolution for purchase of business undersimilar voting requirements, unless the purchased business is valued to be at 20% or less than thecorporate net asset value of the purchaser corporation.
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practice it is not so simple. The line of demarcation between the sale of abusiness and a sale of several assets comprising essential components of thesubject business is always blurred. A transaction termed as a sale of several
assets enjoys, if the form supersedes the substance, the benefits of relaxed
requirements dispensing with shareholder participation, and may effectivelytransfer a business which transfers some thing more than the total of such
named assets3. Also, a sale of shares, a type of asset representing a beneficial
ownership in a company that carries out a business or that is newly formulated
for the transfer of a business purpose may effectively and beneficially cause asale of the business to take place. Other forms of reorganization transactions,such as, for example, a corporate spin-off or split-up, which require shareholders’approval, may also serve the same purpose as the sale of the business4. For ourpresent discussion purposes, we will only address and cover those transactions
that are named as a sale of business. We exclude a disguised sale of business thatis fashioned as a sale of assets. This exclusion is made based on recognizedassumptions that those doubtful transactions or differently tailored transactions
will be scrutinized and recharacterized as sale of business, and consequently
made subject to the rules applicable to the sale of a business. How often andunder what circumstances this recharacterization will occur is not certain. In
some cases, the court will allow the original characterization to remain intact
and unchanged. Also, we exclude those transactions in bankruptcy context thatare named as reorganizations under the corporate law, which will be subject to adifferent bankruptcy regime than that applicable to the sale of business. With
these qualifications and caveats in mind, we proceed to discuss a sale of businessin bankruptcy context below.

II. Sale of Business under the Bankruptcy Laws
1.

We should mention that two bankruptcy proceedings are available for a KK
striving to avoid liquidation;
Civil Rehabilitation

Law 5 ,

i) a Civil Rehabilitation proceeding under theand ii) the Corporate Reorganization proceeding

Sale of assets for a KK is subject only to a board resolution if the asset is of significance, otherwise it
is left to the discretionary decision by its representative director or CEO. The Law of Corporations,section 362(2)(sub1).
4 The Law of Corporations, sections 757, 762.
5 The Law No.225 of 1999.
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under the Corporate Reorganization Law.6 A sale of business under each ofthese two proceedings, whether of the whole or part of it, is treated almost
identically, making the sale of a business available either under a plenary planor a pre-and-out-of-plan, with slight differences emanating from the difference inthe extent to which exceptions are provided relieving each proceeding from thecorporate law requirements otherwise controlling.
2.

We begin with a sale of business under the Civil Rehabilitation Law.

Anydebtor can be the debtor: an individual, a small business or a large business are
all equally eligible for protection under the Law, notwithstanding that originally
the Law’s intended beneficiaries were financially distressed individuals andsmall businesses7. In other words, the Law’s structure is simple and framed
lightly to meet the needs for speedy debt resolutions on debts of smaller sizes.
One salient point of the Law is that secured claim holders and priority claim
holders are placed out of the proceedings (namely, not subject to a stay at any
time, except for minor exceptions) 8 .

Consequently, the secured claims are

expected to be paid in full, but only to the value of the collateral9, and with thepriority claims to be paid at any time10. It follows therefore that only unsecured
claims are impaired to varying degrees as appropriate and approved under aplan of rehabilitation11.

The capital structure remains normally unchanged

from pre-petition, except where a change of control may be effected by theissuance of new shares, and the writing off, if necessary, of the previous paid-in
capital, all with the approval of the court12. Other forms of reorganization, suchas mergers, spin-offs, demergers and so on, may be carried out where all the
corporate law requirements have been duly and separately satisfied out-of-planof rehabilitation, preferably immediately prior to or after the time when a plan ofrehabilitation is presented for approval by the unsecured claims holders13. Suchcorporate actions if taken should be referred to in the plan.
The Law No. 154 of 2002.
Civil Rehabilitation Law, section 21.
8 Idem., sections 84, 85, 53. Nonetheless, secured claim holders are required each to file a proof ofclaim to provide information on secured obligations and collateral, and may become subject to a stayorder for a designated period, if a stay is in the best interests of the unsecured claim holders. Idem.,
sections 94(2), 31.
9 Idem., section 88.
10 Idem., sections 121, 122.
11 Idem., section 154.
12 Idem., sections 154(3), 166, 166-2,
13 The Law is silent on whether these reorganizations may be undertaken. The majority of the views
will support such corporate actions if taken in association with a plan, but not under a plan.
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3.

With the foregoing general background of the Civil Rehabilitation Law, we
discuss firstly a sale of business outside of a plan for rehabilitation as the most
expedient means of effecting a sale of business, which sale is available only
post-commencement and pre-plan of rehabilitation 14 . Commencement of theproceedings comes always after a petition has been filed, and reviewed by thejudge for grounds of commencement15. How soon such order comes depends onthe circumstances of each case, but it is not unusual for it to take up to several
weeks. During the interim, a preservation order is issued to keep the statusquo, or to save the business from deteriorating before the commencement16. No
sale of the business may be made before commencement after petition.

4.

The Law requires the pre-plan sale of a business to be approved by the court17.
The approval of the sale is made as regards the sale to a particular purchaser fora particular price. The Law provides no procedural rules for selecting apurchaser, nor does the court issue any orders, general or otherwise, or
instructions concerning how a purchaser or sale price shall be determined.
Notwithstanding the fact that there are no restrictions on a debtor withinitiative to conduct an auction, a majority of the sales of a business inrehabilitation proceedings is conducted without auction. Issues of fairness andappropriateness are examined solely by the court. There shall be no notice or
hearing with lively discussions in the court on the proposed sale of a business.
The approval is given ex-parte, except that limited notice to undefined claim
holders (usually not exceeding several of the biggest claim holders) and a simple
notice to the labor union are given to solicit their opinions18. The documents
and information concerning the approval process are a matter of public record;
however, the court may issue a prohibitive order denying access to such records
by a third party19. The validity of this provision is suspect. Shareholders who
are normally the only decision making organ in KKs in their out of court sale of abusiness have no voice or right in rehabilitation proceedings for the sale process
where the debtor’s liabilities exceed assets, which is often common. In thesesituations, in lieu of the shareholders the court grants authorization for the saleIdem., section 42.
Idem., section 22.
16 Idem., sections 26 through31, 79.
17 Idem., section 42(1).
18 Idem., section 42(2)(3).
19 Idem., section 17(1).
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of a business20. You will note however, that it is actually no simple task to evendetermine whether the debtor has more debts than assets, an seemingly simple
and easy question. If a balance sheet test on its face may be taken, the task
would indeed be easy. But, once you are to evaluate the assets of the debtor atfair market value, which is regarded to be the rightful standard for this type ofvalue determination, or by other generally recognized commercial standards, thetask of making such determination becomes a formidable one which may invite
serious objections and even litigation if not resolved beforehand. The approvalin lieu of the shareholders meeting is subject to appeal by dissatisfied
shareholders21. The sale of a business by auction may well allow the debtor to
avoid this litigation risk or reversal risk, but at a cost which may not well
warrant the methodology.
5.

The sale of a business under a plan of rehabilitation is the second method ofeffectuating a sale of business. This sale under a plan of rehabilitation is not
statutorily provided for, but interpreted widely to be available and supported byauthoritative opinions. The plan shall provide for the sale of business at aparticular price, which sale price constitutes the distribution funds to thevarious claim holders, including where necessary secured parties or priority
claim holders.

For a KK debtor, a sale of business under a rehabilitation planis still subject to the corporate law requirements, to wit, the approval of theshareholders, or the approval of the court in lieu thereof as in cases of the debtor
having more debts than assets.

The confirmation of the plan following theapproval by the claim holders must be made in order for the plan and the sale ofbusiness thereunder to become effective22. However, the confirmation is subject
to appeal by dissatisfied interested parties, which may delay the effective date of
the confirmation23.
6.

Now we move onto a sale of business under the Corporate Reorganization Law. A
KK is the sole entity eligible for protection under this Law24, and economicallythe Law’s intended beneficiaries were and are financially distressed big
businesses. The Law’s structure is complex and burdensome in order to satisfy
the needs for resolutions of large scale debts. The Law is applicable to all

Idem., section 43.(1).
Idem., section 43(6).
22 Idem., section 176.
23 Idem., section 175.
20
21

24

Corporate Reorganization Law, sections 1, 17.

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stakeholders of the debtor; namely, holders of secured claims, unsecured claims,
priority claims, including tax claims, and equity interests (shares)25.

These

entities are fully drawn into the proceedings as they are made subject to a stay of
all actions against the debtor at any time, excepting only those administrative
priority claims (kyoeki-saiken) 26 . Every significant corporate actions byshareholders that may affect its financial structure is only within the ambit of
the plan27. The claims except for kyoeki-saiken, are susceptible to impairmentsfor purposes of reorganization in accordance with the priority rules establishedin the relevant substantive laws as approved in the Law.28 The debtor’s capital
structure shall normally be restructured under the priority rules that
subordinate shares as against claims, thus no distribution including the statusquo, to shareholders is permissible if claims are impaired29. Other forms ofreorganization, such as mergers, spin-off, demergers and so on, may be carriedout in the reorganization proceedings only under a plan with all of the relevant
corporate law requirements are to be exempt for efficiency and speedy
resolution30. The debtor will be managed by a court appointed trustee who is adisinterested person.

The recent practice, however, has seen several

pre-petition directors appointed as the “trustee” (the Law requires the office oftrustee appointed, instead of authorization for directors to manage without atrustee) in a new attempt to allow a Debtor In Possession regime.
7.

With the foregoing general background of the Corporate Reorganization Law, we
discuss firstly a sale of business outside of a plan for reorganization. A sale ofbusiness outside of a plan for reorganization is now a feature of the early stage ofthe bankruptcy reorganization proceedings. As the most expedient andinexpensive means of effectuating a sale of business, this type of a sale ofbusiness is available only post-commencement and pre-plan31. Similar to thecounterpart in the Rehabilitation Law, as commencement of the proceedings
comes only after review of the petition has been completed, which review
requires up to a few to several weeks32, this type of sale is only available afterIdem., sections 47, 16, 166.
Idem., section 132.
27 Idem., section 45.
28 Idem., section 168.
29 Idem., section 168(1).
30 Idem., section 45, 167.
31 Idem., section 46.
32 Idem., section 41.
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that delay, although recent practice has seen a number of expedited
commencements within one week of the petition filing. During the interim, apreservation order delegating the management power to a preservative trustee isissued to keep the status quo of the business, or to save the business fromdeteriorating before the commencement33.
8.

The Corporate Reorganization Law also requires that a pre-plan sale of businessbe approved by the court34. The court approval takes the form of an approval of a
proposed sale to a particular purchaser for a particular price. The Law provides
no procedural rules for selecting a purchaser, nor are there any orders issuingfrom the court on how an auction shall be processed and how the purchaser andsale price shall be determined, let alone whether a stalk-horse arrangement orother competitive arrangement can be made or what conditions it may contain.
This state of the Law is no different from the rehabilitation proceedings.
Nonetheless, as contrasted with the practice under the rehabilitation
proceedings, a sale of business in the corporate reorganization proceedings inmost cases is conducted differently or with more sophistication in mega size or
relatively large scale reorganizations. The debtor will employ financial advisors
or turnaround managers to search for prospective purchasers of the businesses,
and to organize an auction to select a prospective purchaser. Terms andconditions for the auction process and approval of the final purchaser are valid,
not because they are in compliance with rules or orders as no rules exist, but
simply because bidders agree to them as presented or simply comply with them.
The terms and conditions of the auction and approval process are fixed on a caseby case basis and are made known only to the bidders. Typically, the debtor, byshowing general terms and requesting submission of several documents, will
invite expression of interests or first stage offers from bidders with a proposedbusiness plan following the purchase, a specified price or specified range for the
price together with its computation formula, along with other information on thebidder. Based upon these first stage offers, the debtor will narrow down thenumber of second stage bidders to a smaller group. A non-disclosure agreement
is submitted to the debtor by this narrowed group of bidders, when the debtor
allows due diligence to be undertaken by the selected bidders. The debtor will
thereafter solicit second stage offers from the narrowed group of bidders

33
34

Idem., sections 24 through 34.
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accompanied by a business plan for post purchase, a specified purchase price,which may be modified, upward or downward, from the amount provided in thefirst stage offer, together with its supporting computation formula, and otherdocumentation. Generally, the debtor maintains full discretion to decide on who
the final and winning purchaser shall be, including the power to discontinue theauction wholly or partly at any time. The debtor also proclaims that the highest
or best offer will not necessarily be the winner of the bidding, and that the debtor
will not give reasons for such decision35. There shall be no notice or a hearing
with lively discussions in the court on the determination of the winning bidder.
The approval is given ex-parte, except that limited notice to undefined claim
holders, secured and unsecured (usually not to exceed several of the biggest
claim holders) and a simple notice to the labor union are given, to solicit theiropinions36. Shareholders that are normally the only decision making organ in
KKs in an out of court sale of the business, have no voice or right in the
reorganization proceedings for the sale process, except that (1) shareholders arenotified of certain terms of the proposed sale of business, such as the purchaser,
sale price and when the sale will take place, and (2) shareholders may stop thesale from being made if one-third of all shareholders file an objection 37 .
However, this right to receive notice and cast objection is rejected when the
debtor’s debts exceed its assets, which is not unusual38. In such cases, the court
will simply give authorization for the sale of business, with all the corporate law
requirements to be disregarded39. The documents and information concerning
the approval process are public records.

However, the court may issue aprohibitive order denying access to such records by a third party40. The validityof this provision is questionable.
9.

The sale of business under a plan of reorganization is the second way ofeffectuating a sale of business. This sale under a proposed plan is statutorily
provided for41. The plan shall provide for the sale of business for a particular
price and set forth other terms required in the provisions of the Law of

These terms and conditions are reproduced selectively from several sale sample documents used in
the Japan Air Lines cases.
36 Idem., section 46(3).
37 Idem., section 46(4) through (6).
38 Idem., section 46(8).
39 Idem., section 46(10).
40 Idem., section 12(1).
41 Idem., section 167(2).
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Corporations that would normally be presented to and approved by theshareholders. The confirmation of the plan following the approval by the claim
holders must be made in order for the plan, including the sale of a businessthereunder, to become effective. Once confirmed, the debtor is relieved from allof the requirements of the Law of Corporations for implementing the plan42.
However, the confirmation is again subject to appeal by dissatisfied interested
parties43.

III. Substantive Law Issues Concerning A Sale of Business Post-petition andPre-plan1.

We address now several substantive law considerations appurtenant to a sale ofbusiness post-petition and pre-plan in both a bankruptcy reorganization
proceeding and a rehabilitation proceeding; i.e. (1) treatment of liens in property,
real or personal, comprising the business to be transferred, (2) treatment ofcontractual relationships to be transferred, (3) treatment of liabilities to betransferred, and (4) preference issues related to a sale of business.
(1) Lien issues: Where a sale of a business out of a plan is designed, and theproperty comprising part of the business to be sold is encumbered by a lien as
expressly defined44, the sale of business may be consummated either subject
to or free of such lien. In the former case of sale subject to a lien, the parties
are in agreement with respect to the lien, and naturally all issues
surrounding the lien are resolved amicably with the purchaser to be
responsible for the secured obligation.

The assumed obligation will

constitute a valid consideration for the property. In the latter case of a salefree of lien, since no agreement is expected, both the Corporate
Reorganization Law45 and the Rehabilitation Law46 provide a mechanism
almost identical procedurally. The debtor shall first petition the court toauthorize the termination of any liens in the property by specifying the valueof the property. The approval order is then served upon the lien holders, who
4243

Idem., section 210.
Idem., section 201, 202.

The Civil Rehabilitation Law, sections 148, 53; The Corporate Reorganization Law, section 104.
The Corporate Reorganization Law, sections 104 through 112.
46 The Civil Rehabilitation Law, sections 148 through 153.
44
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may appeal the order in its entirety within two weeks. If the lien holders are
in disagreement only to the specified valuation, then they may each file an
objection and a request for price determination to the court within one month.
The court shall then give a fair valuation with assistance from a valuation
expert. Again, this valuation order is appealable within two weeks. When
uncontested or finalized, the order becomes binding upon all lien holders of
the property, and the valuation amount so determined shall be paid in to thecourt by the debtor, and upon such payment the lien is terminated. In thecase where the debtor has insufficient funds, and such funding is expectedfrom the sale of the business comprising the collateral, then the coordination
between the sale of the business comprising the property and the terminationof liens must be delicately maneuvered so that closing on the sale of thebusiness shall occur simultaneously with the payment of the valuation
amount to the court terminating the liens. In the reorganization proceedings,
the court will maintain the proceeds until a plan of reorganization is
confirmed, at which time the proceeds will be transferred back to the debtor
for distribution under the reorganization plan. The court may expedite there-transfer and pay the proceeds to the debtor for its cash needs before thereorganization plan confirmation if all of the lien holders consent or if there
shall be a surplus in the proceeds after deducting all payable portions to thelien holders. However, payment to the lien holders shall only be made inaccordance with the terms of the plan as the lien holders claims are to besatisfied under the plan. While in rehabilitation proceedings, the proceeds
will be distributed immediately by the court as though the proceeds
constituted the same of a foreclosure sale of the property.
Where a sale of business free of liens is presented under a plan ofrehabilitation, the sale is consummated in accordance with the terms of such
sale provisions in the plan as approved and confirmed, if previously or
simultaneously, (x) the shareholders’ approval or the court approval in lieu
thereof has been given, and (y) the termination process aforesaid regarding
the liens has been completed. On the other hand, where a sale of business freeof liens is presented under a plan of reorganization, the sale is consummatedin accordance with the terms of such sale provisions in the plan as approvedand confirmed, the plan being able to be carried out without any shareholder- 10 Sakura Kyodo Law Offices

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or corporate law actions47, and the treatment or impairment of the liens
becoming effective as approved and confirmed, with the liens to be terminatedand the lien holders most likely to be paid with the cash proceeds48.
As contrasted to liens in property, general unsecured claims of a seller of theproperty, including tort claims generally, but excluding land or watercontamination claims, are not assumed by its buyer under the Civil Codeprinciples. Thus, subject to the preference or fraudulent conveyance analysis
stated below, the bankruptcy purchaser of a business acquires the businessand its component property without being exposed to the successor liability
claims or without concerns as to the seller’s unsecured claims. As this notion
is so firmly established, no provisions are found in the sale approval or theconfirmation of a plan relating to the purchaser’s rejection or conditioning of
unsecured claims. One admonition, however, should be worth mentioning:
The Law of Corporations will subject an unwary buyer of business to the debts
of his seller incurred before the sale of business, if he simply continues to use
the seller’s business name or trade name49. In the event that such continued
use of the seller’s business name or trade name is considered, the buyer may
insulate such exposure by simply registering in his corporate register adisclaimer of any successor liability50.

The Corporate Reorganization Law, sections 167(2), 174.
Idem., sections 203, 204.
49 The Law of Corporations, section 22(1).
50 Idem., section 22(2).
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SAKURA KYODO LAW OFFICES(2) Contract Transfers:

Contracts comprising the business to be sold aretransferred according to the terms of the sale of business. Transfer effectdoes not occur by virtue of the sale of business per se, it being the generalprinciple of the law of contracts that a transfer of a contractual relationship,
apart from an assignment of a claim earned or outstanding, becomes effective
only upon the consent of its counterparty. This is quite distinguishable fromthe automatic effect of transfer of a contractual relationship recognized in
non-bankruptcy reorganization techniques involving a corporation, such as amerger, spin-off, demerger, or other exchange transaction in equity or debt.
Incidentally, contractual terms restricting transfers of claims owed to thebankruptcy debtor arising from a contract are generally valid as against thepurchaser of the business51.
(3) Liabilities Transferred:

Liabilities owed by the seller of a business are

results of transactions made in reliance upon the financial conditions of theseller, and this reliance will not be defeated by an act of the seller transferring
the business which comprise these liabilities. Only upon the consent of thecreditors, may the debtor transfer his liabilities to a third party, it being thegeneral principle of the law of contracts that a transfer of liability, whether
isolated or otherwise, becomes effective only upon the consent of the creditor52.
This is again quite distinguishable from the automatic effect of transfer of
liabilities recognized in non-bankruptcy reorganization techniques involving a
corporation, such as a merger, spin-off, demerger or other exchangetransaction in equity or debt. However, similar purposes may be fulfilled
against a non-consenting creditor by the purchaser assuming the seller’s
performance obligation as between the seller and purchaser only, while thecreditor may enforce his claims against the seller, if needed but not required
against the purchaser in the rights of the seller.
(4) Fraudulent Transfer or Preference Issues: The parties to a sale of business
transaction should be vigilant to protect the transaction from avoidance
claims or avoidance issues as a preferential or fraudulent action conductedduring the bankruptcy proceedings.

If a sale of business, which is not

fraudulent in the sense that the value of assets transferred is equal to the
The Civil Code supports the validity of such restrictive terms limiting a transfer of claims, except
against a bona fide purchaser, section 466(2).
52 The Civil Code has no provision regulating an assumption of debts. But, no assumption of debt of athird party is effective unless consented to by the creditor.
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value of the transferred obligations or other valid considerations, a transfer of
only a part of the seller’s outstanding obligations thus entitling the creditorsof such obligations to full payment by the purchaser, while leaving othercreditors paid only partially on their claims, then the question arises whether
the transfer is a preference with regards to the favored and assumed creditors.
Likewise, if a sale of business, which is not fraudulent in the sense that thevalue of assets transferred is equal to the value of the obligations or othervalid considerations, does effect a transfer of real property and the saleproceeds are not used for rightful purposes including payments of the seller’s
debts, then the question arises whether the transfer is fraudulent against
creditors not paid in full.

Recently, in several cases on non-bankruptcy

corporatethereorganization,

courtshavenullifiedtheemployedreorganization techniques as fraudulent, where the facts of the cases showthat real property has been transferred in exchange for shares, and the seller
has delivered the controlling shares received in exchange to entities otherthan the creditors, for example, to an insider53. Notwithstanding the recent
revisions targeted at embellishing the avoidance rules, there is no guarantee
yet that a sale of business at a fair market value in which only several
liabilities are discriminately assumed will survive the preference accusations
or fraudulent transfer accusations if real property is involved and theproceeds are used for purposes other than due payments or disposition54.

IV. Sale of Business in Liquidation Bankruptcy
1.

Sale of business in the liquidation bankruptcy context deserves some discussion
here. A sale of business in liquidation bankruptcy is made only upon theapproval of the court55. The court shall notify the labor union soliciting theiropinion before issuing an approval 56 .

No corporate law proceedings orrequirements are applicable. No general orders or rules applicable to sales ofbusiness have been or is promulgated by the court.

As viewed within thegeneral power of the trustee to dispose of assets of the estate, the sale of a
One such case is the decision of Tokyo High Court of October 27, 2010, 1910 Kinpo 77 (2010).
The Corporate Reorganization Law, sections 86 though 86-3; The Civil Rehabilitation Law, sections
127 through 127-3; and The Liquidation Bankruptcy Law, sections 160 through 163.
55 The Law of Liquidation Bankruptcy (Hasan-ho), section 78(2)(sub3).
56 Idem., section 78(4).
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business is made under the broad and discretionary power of the trustee, and assuch the trustee may determine how to structure a sale of business as he deems
appropriate. Where any property comprising the business to be sold is subject
to a lien, the trustee may sell the business together with such property free of theliens, or subject to the liens as he/she sees fit. If the trustee elects a sale free ofthe lien, the trustee shall petition the court for an order authorizing such sale57.
Such petition shall specify the amount of the proceeds of the proposed sale andspecify the liens involved and attach a copy of the sales contract or its contents.
The lien holders may each still defeat such proposed sale of property of thebusiness free of a lien by either (x) enforcing within a month the lien in a
foreclosure action58, or (y) offering or having a third party offer to purchase theproperty at the price which is 5% more than the suggested sales proceeds59.
Absent such adversarial action, an order based upon the petition will issue, andthe suggested sale proceeds of the property of the business are to be paid into thecourt by the suggested purchaser60 .

If the suggested sale is defeated by aforeclosure action, the property is sold in an ensuing foreclosure sale. If thesuggested sale is defeated by a higher offeror, then the court will issue an orderauthorizing such offeror to purchase and he/she must pay the offered price to thecourt.61 No Credit bidding is permitted. Once the price is paid in, the lien
terminates and distributions to the lien holders by the court follow.
END

Idem., section 186.
Idem., section 187.
59 Idem., section 188.
60 Idem., sections 189(1)(sub1), 190.
61 Idem., sections 189(1)(sub2), 190.
57
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