The Need for a Revamp of Corporations
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The Keiretsu model has failed:
- The central financing hub suffered a body blow as non-performing loans (NPLs) took off,
curtailing financing capacity, suitability, and appetite.
- Even the "zero-interest" rate policy of the Japanese government could not
provide the wholesale stimulus for the domestic economy. It served only to encourage money to
flow to other areas of the world, the much-touted "Yen carry trade."
- Both legislative and attitudinal shifts were needed in order to mitigate the stigma attached
to bankruptcy and restructuring.
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3 Types of Reorganization Plan
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Out-of-court workout
- Guidelines were established in 2001 with reference to INSOL (an international restructuring organization) principles.
Civil Rehabilitation
- The Civil Rehabilitation Law was enacted in 1999 to replace the outdated Composition Law of 1927.
Corporate Reorganization
- Major reforms were conducted in December 2002 to the earlier Corporate Reorganization Law of 1951.
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Shifts In Attitude
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Governmental reforms on their own would be insufficient if the stigma of bankruptcy still hung large in the air.
- The revamping of the various reorganization processes served to make such proceedings more palatable to the Japanese psyche.
- The transition of power (due to ageing) was shifting to those who had cut their teeth during the corporate torpor of the nineties.
This generation was less vested in the keiretsu ideals, and an acute sense of "adapt or die" began to emerge.
- The problem was so pervasive that there was no-one left on the proverbial „high horse‟ to wag a finger.
These forces combined spelled the way forward, and the effects are now beginning to be seen.
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