Japan

Japan has taken steps towards making itself more attractive to foreign investment. Progress on the legal front is to be applauded. Notable are the first significant amendments to the Commercial Code since 1997. M transactions are easier to undertake and guidance on business combinations and spin-offs has been instituted. The new Civil Rehabilitation Code is another welcome change that will accelerate restructurings. Mirroring the US Chapter 11 process, this code provides a legal basis for debtor-in-possession financing and pre-packaged bankruptcies. Foreign investors into the Japanese distressed assets market have previously used the tokumei kumiai (TK) arrangement. A TK arrangement, if properly implemented and monitored, can provide investors with an effective means of expanding their Japanese businesses and implementing other domestic Japanese tax techniques.