Will Japan's new civil rehab law work?

A new law in Japan aims to help, rather than punish, troubled companies, which should promote entrepreneurial behavior.

Japan has quietly been improving its legal infrastructure to aid economic recovery and establish a new legal foundation for the 21st century. One major area of legal reform is the country's aging insolvency system, and the government has introduced the Civil Rehabilitation Law CRL to address this.

It focuses on facilitating and expediting the rehabilitation of viable businesses that have run into financial difficulties. In so doing, the CRL borrows from some of the concepts in the business rehabilitation statute in the US, known as Chapter 11.

There is a tendency to underestimate the value of business rehabilitation systems such as the CRL and Chapter 11. Where such laws are in...

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