2003 JAPAN LAW: CORPORATE REVITALIZATION LAW
Keywords:  Corporate Revitalization, Bankruptcy, Rehabilitation
Copyright 2004. All rights reserved Attorney Roderick H. Seeman
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Instead of seeking relief under bankruptcy or rehabilitation laws, many corporations are instead turning the various tax and preferential financing schemes available under Corporate Revitalization Laws. If it presents a plan to the government for restructuring its profitability that is approved by the government ministry with jurisdiction over the industry, then it can avail of the benefits under the 1999 revitalization law (and extended until 2007 under the 2003 extension)  such as carrying forward losses on scrapping production equipment for seven years into the future instead of the usual five years. Low interest loans were available from the Japan Development Bank. With the revision of the law in 2003, preference is being given to firms that scrap such excess production capacity and work jointly with other companies to enhance productivity. Banks are also more likely to grant debt forgiveness if they have received approval for such plans from the government. Further assistance is available from the Industrial Revitalization Corporation which buys loans from such approved corporations from the banks. The corporation, starting in May 2003 will have 10 trillion yen for buying back such loans from banks. After the Industrial Revitalization Corporation buys such loans it is supposed to try and sell them after a couple of years. It will also be able to make loans on its own as well as make guarantees. One major beneficiary of this system was the Daiei Department Stores. Many critics however, claim that it is precisely the government backing presented by this kind of legislation that prevents the corporations from undertaking serious restructuring efforts.