How the new Dip model works

Author: | Published: 1 Sep 2009

In January 2009, the Tokyo District Court launched a new model of the corporate reorganisation proceeding for companies in Japan, the Dip model. Dip is an abbreviation of debtor in possession, which describes the situation where the debtor remains in control of its business and assets during the reorganisation.

In the midst of this financial crisis, the number of companies filing for insolvency in Japan has surged since autumn 2008. And several companies have already started their corporate reorganisation under this new Dip model, which was launched in January 2009.

Some people have compared the launch of the Dip model to the opening of Pandora's box. The model will certainly change Japanese corporate insolvency practice. It might drive out other types of reorganisation proceedings, civil rehabilitation and the traditional third-party trustee model of corporate reorganisation, because it has both features of these proceedings: forceful protection and mechanisms for the debtor...