, also known as Business Revitalization ADR, is a process increasingly used by companies in

Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...

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 is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...

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 (ADR), or external dispute resolution (EDR), typically denotes a wide range of dispute resolution processes and techniques that parties can use to settle disputes with the help of a third party. They are used for ...

title, Turnaround ADR is not a procedure for resolving disputes. Rather, it offers a way for financially stressed companies to reassess and restructure debts.

Features

When a Turnaround ADR is applied, the

debtor A debtor or debitor is a legal entity (legal person) that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this ...

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 The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

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 A justice ministry, ministry of justice, or department of justice, is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...

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.

References

{{reflist Japanese business law Finance in Japan