In Japan, the main legal grounds for a company filing for insolvency are similar e.g. to Germany and include (i) insolvency (i.e. the debtor is generally and on a permanent basis not able to pay its debts at the due date) and (ii) excess of debts over assets.
However, no strict legal obligation for the management of a company to file for insolvency or reorganization procedures exists in Japan. This is why a company in Japan, even if continuously over-indebted, may still continue to exist as long as it can honour at least some of its debts.
It is also important to note that on the shareholders’ level no strict legal obligation to provide additional funds to the company exists in Japan. The most common approach of the management in a corporate crisis in Japan is to negotiate with the company’s creditors to accept either a debt cut or at least a prolongation of the payment due date.
Exceptions to filing for insolvency due to the COVID-19 outbreak have not (yet) been introduced in Japan.
