Turnaround ADR
Encyclopedia
, also known as Business Revitalization ADR, is a process increasingly used by companies in Japan
to adjust their debt. This out-of-court procedure was established in Japan in 2007 and is based on Japanese Law, specifically the Special Measures Law for Industrial Revitalization and Rebirth of Japan. It allows companies to forgo bankruptcy
proceedings and replaces previous voluntary debt adjustments under such as the "Guideline for Voluntary Debt Adjustment" (Shiteki Seiri Guideline).
Although the procedure is named using the generic Alternative Dispute Resolution
title, Turnaround ADR is not a procedure for resolving disputes. Rather, it offers a way for financially stressed companies
to reassess and restructure debts.
can maintain payment to business partners and customers. Only claims held by financial institutions participating in this procedure become subject to adjustment; if the relevant institutions reach consensus, the debts can be minimized.
Turnaround ADR is frequently misunderstood in the United States
and other Western nations because no equivalent procedure exists there. Applying for or initiating a Turnaround ADR is not considered a default
triggering event. Rather, adopting a Turnaround ADR is considered a preferable procedure for financially distressed companies as it provides breathing space for such companies to focus on revitalizing their business. Such space is gained by the alleviation of debts against relevant financial institutions without adversely affecting integral business relationships with partners and customers.
A private operator certified by the Minister of Justice
and the Minister of Economy, Trade and Industry
, provides mediation services in a Turnaround ADR. The Japanese Association of Turnaround Professionals (JATP) is the only private operator certified to provide mediation services for Turnaround ADR. In this role, JATP normally appoints a mediator
from a network of corporate turnaround professionals. This mediator is responsible for implementing the Turnaround ADR procedure fairly and objectively.
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
to adjust their debt. This out-of-court procedure was established in Japan in 2007 and is based on Japanese Law, specifically the Special Measures Law for Industrial Revitalization and Rebirth of Japan. It allows companies to forgo bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
proceedings and replaces previous voluntary debt adjustments under such as the "Guideline for Voluntary Debt Adjustment" (Shiteki Seiri Guideline).
Although the procedure is named using the generic Alternative Dispute Resolution
Alternative dispute resolution
Alternative Dispute Resolution includes dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation. ADR basically is an alternative to a formal court hearing or litigation...
title, Turnaround ADR is not a procedure for resolving disputes. Rather, it offers a way for financially stressed companies
Financial distress
Financial distress is a term in Corporate Finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. Sometimes financial distress can lead to bankruptcy...
to reassess and restructure debts.
Features
When a Turnaround ADR is applied, the debtorDebtor
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
can maintain payment to business partners and customers. Only claims held by financial institutions participating in this procedure become subject to adjustment; if the relevant institutions reach consensus, the debts can be minimized.
Turnaround ADR is frequently misunderstood in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and other Western nations because no equivalent procedure exists there. Applying for or initiating a Turnaround ADR is not considered a default
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...
triggering event. Rather, adopting a Turnaround ADR is considered a preferable procedure for financially distressed companies as it provides breathing space for such companies to focus on revitalizing their business. Such space is gained by the alleviation of debts against relevant financial institutions without adversely affecting integral business relationships with partners and customers.
A private operator certified by the Minister of Justice
Minister of Justice (Japan)
The is the member of the Cabinet of Japan in charge of the Ministry of Justice. The post has been held by Hideo Hiraoka since 2 September 2011.- Ministers of Justice :...
and the Minister of Economy, Trade and Industry
Minister of Economy, Trade and Industry (Japan)
The is the Cabinet of Japan member in charge of the Ministry of Economy, Trade and Industry . The current Minister is Banri Kaieda.-List of Ministers of Economy, Trade and Industry:...
, provides mediation services in a Turnaround ADR. The Japanese Association of Turnaround Professionals (JATP) is the only private operator certified to provide mediation services for Turnaround ADR. In this role, JATP normally appoints a mediator
Mediation
Mediation, as used in law, is a form of alternative dispute resolution , a way of resolving disputes between two or more parties. A third party, the mediator, assists the parties to negotiate their own settlement...
from a network of corporate turnaround professionals. This mediator is responsible for implementing the Turnaround ADR procedure fairly and objectively.