A new tool for business restructuring in Japan - Early Business Recovery Act

29 October 2026

Japan will soon have a new tool for out-of-court business restructuring: the Act on Financial Debt Adjustment Procedures for Enterprises to Facilitate Business Recovery (the Early Business Recovery Act or the Act).

Prior to the introduction of the Act, Japan has long had two principal routes for corporate debt restructuring: formal court-supervised insolvency proceedings such as Civil Rehabilitation Proceedings, and out-of-court workouts such as the Turnaround ADR. The latter requires the unanimous consent of all participating creditors. As a result, even where a substantial majority of creditors support a rational restructuring plan, the opposition of a single dissenting creditor can force the debtor out of the consensual workout and into formal insolvency proceedings - often diminishing corporate value in the process.

The Act was enacted to address this problem and will come into force on 11 December 2026. Under the Act, a business operator at risk of falling into financial distress may, with the involvement of a neutral third-party organisation designated by the Ministry of Economy, Trade and Industry (METI) and the court, bind dissenting financial creditors to an adjustment of financial debt by super-majority vote (in most cases, a resolution carrying at least three-quarters in value of total voting rights).

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