Civil Rehabilitation Act (Minji Saisei Hō)
The Civil Rehabilitation Act (Minji Saisei Hō) provides a debtor in possession restructuring procedure for small and medium-sized enterprises in Japan. Enacted in 2000, the Act was designed to provide a more accessible and faster alternative to the Corporate Reorganisation Act. It allows distressed businesses to continue operating while restructuring their debts with creditor approval. The Act introduced a flexible framework for debt restructuring and business rehabilitation.
Legal area: Law governing the resolution of debtor insolvency and business restructuring.
Year enacted: 2000
Full text: https://elaws.e-gov.go.jp/document?lawid=japan-civil-rehabilitation-act
Key Provisions
- Part I: General provisions (eligibility, jurisdiction)
- Part II: Commencement of rehabilitation proceedings
- Part III: Rehabilitation plan (proposal, voting, confirmation)
- Part IV: Debtor’s duties and powers during proceedings
- Part V: Creditors’ rights and participation
- Article 41: Commencement of proceedings (debtor’s petition)
- Article 121: Confirmation of rehabilitation plan
Significance
The Civil Rehabilitation Act created a more accessible restructuring mechanism than the Corporate Reorganisation Act. It has become the most commonly used restructuring procedure for Japanese SMEs. The Act’s debtor in possession model allows business continuity during restructuring. The rehabilitation plan process requires creditor approval by majority in number and majority in amount of voting rights. The Act has contributed to improving Japan’s insolvency framework and is seen as an important tool for business recovery.