Statement of GS

Statement: New Bankruptcy Law passed

25 May 2004
Tadayoshi Kusano
General Secretary
  1. The House of Representatives unanimously passed today the bill to revise parts of the Insolvency Law and other bankruptchy-related laws. The new Law would make overall revisions of the Insolvency Law which is a basis of the liquidation-type bankruptcy procedures and of the Bankruptcy Substantial Law which is a common basis of various bankruptcy laws.

  2. Major features of the revisions are: 1) simplification and rationalisation of procedures to investigate and decide on claims and to arrange dividends; 2) expansion of competent courts; 3) expansion of systems to protect obligors’ properties before commencing bankruptcy procedures; 4) expansion of scope of free properties not to belong to bankruptcy estates; 5) review of the order of priority of claims in bankruptcy procedures; and 6) improvement of non-recognition systems.

  3. Rengo has been asserting that workers’ claims, such as outstanding wages and retirement allowances, should have a lien on mortgages. In parallel, workers’ claims should be raised from the status of “priority claims” to that of “claims to be guaranteed by guarantee institutions” which is ranked the same as tax liability. And tax liability, as it is considered as an obstacle to protecting workers’ claims, should be given a lower priority than workers’ claims. A system should be established for those in difficulty without getting paid wages to be reimbursed whenever the need arises even during the bankruptcy procedures. Furthermore, trade unions should be given a means to reflect their opinions in bankruptcy procedures, according to the Corporate Reorganisation Law.

  4. Consequently, the new law would give priority to payment of wages due for the three months before a court decides to initiate bankruptcy procedures as well as the payment of retirement allowances equivalent to three months’ salary. This is a significant step towards to full compliance with the ILO Convention No. 173 concerning the Protection of Workers’ Claims.

    Other significant advancements resulting from accommodating Rengo’s opinions are: that bankruptcy administrators’ responsibility to make an every possible effort in providing creditors of workers’ claims with relevant information is embodied into the text of the Law; that a system is established for at-all-time reimbursement of wages; and that consultation with trade unions is made compulsory at transfer of business and at transition from rehabilitation or reorganisation.

  5. The enactment of the new Bankruptcy Law has completed the first stage of revisions of bankruptcy laws which started with the revision of the Civil Rehabilitation Law in 1999, while special liquidation is still to be reviewed. The launch of an official notice of movables and the review of the Special Assignment Law, both of which would have a great impact on the protection of workers’ claims, are drawing near. Rengo is working on the establishment of a special lien on mortgages and is enhancing efforts to this end within and outside the Legislative Council of the Ministry of Justice.