Advisory Case on Recovering Receivables from a Counterparty Expected to Enter Individual Rehabilitation and Minimizing Risk

1. The Client's Situation

The client obtained information that a company it was doing business with was preparing for individual rehabilitation due to financial difficulties, and sought to secure as much recovery as possible of its uncollected claims while still at the stage before rehabilitation proceedings commenced. It requested a review of the possibility of provisional attachment over assets that could be included in the rehabilitation estate, such as bank accounts, card sales receivables, and real estate, as well as the legal effect of obtaining a priority-repayment confirmation letter from the representative.

Your Legal Team first explained the difference in the effect of provisional attachment before and after the individual rehabilitation proceedings, and advised that even a provisional attachment made before the commencement of rehabilitation carried a high likelihood of the court ordering a stay of the proceedings. We also advised that, although a priority-repayment confirmation letter prepared by the representative could be voided as a preferential act after the commencement of rehabilitation proceedings, it could be used as evidence confirming the existence of the debt if rehabilitation were denied or discontinued. In addition, we specifically reviewed the legal risks, such as the possibility of an avoidance power being exercised if a security interest were established within a certain period before rehabilitation, and presented a response strategy taking into account timing and procedure.

The client did not proceed with unnecessary provisional attachment procedures before the commencement of rehabilitation, clarified the claim relationship by receiving a priority-repayment confirmation letter from the representative, and was able to minimize future avoidance-power risk by adjusting the timing and procedure of establishing a security interest. Through this, a strategic response was possible that maximized the possibility of claim recovery while reducing the burden of legal costs.