Changes to business regulations and special tax breaks will be considered to help ailing companies avoid bankruptcy and get back on their feet, according to government draft guidelines released Tuesday.
According to the draft, prepared by the Ministry of Economy, Trade and Industry, issues to be looked at include tax breaks for mergers and acquisitions and corporate revival funds. Also proposed is the relaxation of market listing rules so that filing for corporate rehabilitation would not mandate that a firm be delisted.
The guidelines, which are to be formally released Thursday, outline steps that both the public and private sector can take to create a framework for salvaging companies more quickly. There have been many recent cases in which firms have had to be liquidated because they waited too long to file for corporate rehabilitation.
According to METI, of the roughly 20,000 companies that filed for bankruptcy in 2002, 95 percent ended up being liquidated. Experts say that this is one reason behind the high jobless rate and the huge amount of defaulted loans.
Under the ministry’s draft guidelines, rehabilitation strategies are separated into two types — one aimed at swiftly rehabilitating companies that have a negative net worth, and another targeted at preventing companies’ liabilities from exceeding their assets.
In the first case, the ministry urges revision of current listing rules — which state that firms must delist if they file for rehabilitation — so that a firm could remain listed if such things as its restructuring plan and market capitalization are deemed adequate. It also calls for more flexibility when banks rank companies according to their creditworthiness, because a “bankrupt borrower” classification makes it difficult for such firms to secure fresh funds.
To prevent firms from going under, the guidelines call for steps to reduce the burden on company owners, who are often required to guarantee a portion of their firm’s liabilities. The establishment of the guidelines was included in a basic blueprint for corporate and industrial revival endorsed by the government in December.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.