English・French Archive

In our effort to provide services that can help fulfill effectively the needs of our client, our firm believes it is important to create and cultivate connections with attorneys across the globe. By creating such connections, we can introduce these firms to our clients and also facilitate communication between our clients and these overseas attorneys in matters involving foreign jurisdictions.

In a previous blog article, we mentioned how India has become a key destination for foreign investment in our brief overview of the laws on foreign investment in India (available at http://www.ailaw.co.jp/blog/archives/93). One law firm that may be able to assist companies and individuals wishing to invest in India is the law firm Fox Mandal Little.

Fox Mandal Little is the product of the merger in 2006 between the law firm of Fox Mandal, established in 1896, and Little and Co, India’s oldest law firm, established in 1856. This large law firm, with 50 partners and 400 lawyers, has 11 offices located throughout India, including the major cities of New Delhi, Mumbai and Bangalore, and international offices in the UK and Bangladesh.

This full service legal firm can offer clients legal services in a wide variety of practice areas, from corporate matters, employment, intellectual property, litigation and taxation, amongst others. Capable of assisting clients at all stages of a foreign investment project, Fox Mandal Little has won numerous awards from noted publications and societies for their services. In 2008, the firm was named best national law firm in India at the International Legal Alliance Summit & Awards, held in Paris, France.

Our firm has had the pleasure of directly meeting with one of the partners of Fox Mandal Little, Mr. Shuva Mandal. Mr. Mandal is a warm and friendly individual, while at the same time being intelligent and experienced. He can provide competent assistance to companies and individuals wishing to operate in the Indian market. Although our two firms are not related, and we cannot guarantee the services of the firm, we would be glad to introduce and liaise with Mr. Mandal and his firm for our clients who desire experienced and friendly assistance in matters involving Indian law.  Please feel free to visit Fox Mandal’s website at http://www.foxmandallittle.com/ and contact us or Fox Mandal Little if you have any questions.

 Creating and fostering relationships with attorneys across the globe, so that we can more effectively serve our clients by being able to introduce them to capable attorneys who can assist them in foreign jurisdictions, is of key importance to our firm. Who one knows is often more important than what you know, when assisting clients in the global economy. Motivated by such a purpose, one of our firms partners, Mr. Shinji Sumida, recently attended the Stage International Program, organized by the Paris Bar Association in Paris, France.

 This program brought together attorneys from 35 different countries worldwide to engage in a program of cultural and legal exchange. This diverse group of attorneys included attendees from the following countries:

Algeria	Argentina	Armenia	Australia
Burundi	Croatia	Czech Republic	Estonia
Greece	Germany	Hungry	Ireland
Italy	Latvia	Lebanon	Madagascar
Morocco	Mauritania	Norway	New Zealand
Peru	Poland	Romania	Russia
Spain	Serbia	Tunisia

 Such attorneys, we believe, were motivated to attend such a program by a desire to cultivate relationships with other attorneys across the globe and to understand legal systems worldwide to better assist their clients in a globalized world. Attending such a program in Paris isn’t without some costs, showing perhaps that such attorneys felt it important to invest in such an opportunity of cultural and legal exchange. With these attorneys working closely together throughout this program, our partner was able to develop strong bonds with a number of these attorneys and learn of diverse legal systems.

 Such motivated and internationally orientated attorneys as the attendees of this program, we believe, would be more than capable of assisting our clients in legal jurisdictions in multiple continents. Our firm hopes to continue to foster the relationships that were formed during this program in Paris, and would be more than glad to introduce such attorneys to our client. Although we cannot guarantee results from these attorneys, we believe them to be reliable and stable attorneys who we hope to maintain close bonds with for the years to come.

Article paru dans la Lettre Mensuelle, Points juridiques, Juillet 2009, CCIFJ, Tokyo, Japon.

La crise financière aux Etats-Unis, déclenchant la récession de l’économie mondiale actuelle, a sérieusement dégradé la situation de nombreuses sociétés, domestiques comme internationales. Aussi ces sociétés sont-elles contraintes, face à la nouvelle conjoncture, de restructurer leurs activités et de procéder à des réductions d’effectifs.

Afin de survivre, les sociétés domestiques engagent des procédures de « réhabilitation civile » (« Minji Saisei ») ou de « réorgnaisation des sociétés » (« Kaisha Kosei »), prévues par les lois en vigueur. En effet, la récession est telle que la mise en oeuvre de ces procédures n’a plus, en termes d’image et de réputation, l’impact négatif qui la caractérisait auparavant. Les sociétés privilégient souvent par ailleurs le recours à la procédure de sauvegarde (pratique empruntée au système du Debtor In Possession de droit américain, « DIP ») qui, assurant un dénouement plus rapide, permet surtout à leurs responsables de demeurer en poste. A cet égard, il faut rappeler que récemment, le Tribunal de Grande Instance de Tokyo a commencé à permettre l’application du système de DIP dans le cadre de la procédure de réorganisation des sociétés.

Les sociétés étrangères quant à elles, choisissent souvent d’autres voies. En effet, les PME étrangères préfèrent souvent procéder à une liquidation volontaire (« Seisan », non soumise au contrôle judiciaire) de leurs filiales japonaises – dont elles sont souvent l’unique actionnaire. Au demeurant, lorsque l’actif apparaît manifestement insuffisant pour honorer le passif ou que commence à poindre un doute quant à sa solvabilité, la société a l’obligation de convertir sa liquidation volontaire en procédure de faillite (« Hasan ») ou de liquidation spéciale (« Tokubetsu Seisan »), soumises au contrôle judiciaire.

A l’exception d’un retrait complet du Japon, une société peut envisager de changer de statut, de celui de K.K (« Kabushiki Kaisha ») par exemple, en bureau de représentation ou en succursale, ce qui implique juridiquement de liquider la K.K, et d’établir un bureau de représentation ou une succursale.

Ce processus comporte cependant les inconvénients suivants :

- les sociétés étrangères, pour pouvoir faire durablement des transactions commerciales au Japon, doivent disposer au moins d’un représentant résidant au Japon et être immatriculées au registre du commerce (articles 817 et 818 de la Loi sur les Sociétés – « Kaisha Ho ») ;

- les nouvelles entités doivent parfois demander à nouveau auprès des autorités japonaises les autorisations ou permis qui avaient été précédemment octroyés à la K.K;

- il existe un risque de réputation, les anciens partenaires pouvant être moins disposés à travailler avec l’entité nouvellement créée.

Il s’agira en somme, afin d’éviter ces écueils, de recueillir les conseils d’un expert.

Il s’agit par ailleurs de considérer avec attention la question du statut des employés. La liquidation de l’entreprise apparaît en effet comme un motif légitime de licenciement. Cependant, si le Tribunal juge qu’il s’agit uniquement d’un prétexte pour licencier, il pourrait se prononcer en faveur des employés.

En effet, les mesures de licenciement doivent reposer sur des fondements objectivement raisonnables (Article 16 de la Loi sur le contrat de travail – « Rodo Keyaku Ho ») et tenir compte des critères jurisprudentiels suivants :

1. La réduction du nombre d’employés doit être nécessaire ;

2. La société doit s’efforcer d’éviter de licencier ;

3. La sélection des personnes appelées à faire l’objet de mesures de licenciement doit correspondre à des critères raisonnables et objectifs ;

4. La procédure de licenciement doit être adéquate

(cf. par exemple, la décision du 29.10.1979 de la Cour d’Appel de Tokyo).

Ainsi, s’il s’agit seulement de réduire les effectifs et de continuer à faire des transactions au Japon, il est préférable d’éviter la mise en oeuvre de mesures draconiennes puisque les difficultés occasionnées sont généralement supérieures aux avantages escomptés.

Aussi, si l’on souhaite réduire les effectifs d’une K.K, peut-on raisonner comme suit :

On pense souvent que les licenciements sont la seule manière de réduire les coûts. Cependant, comme en France, leur projet engendre de longs et laborieux conflits avec les salariés. Avant de prendre des mesures aussi radicales, il est préférable d’envisager des étapes intermédiaire ou transitoires, qui doivent être progressivement mises en oeuvre. Au Japon, les administrateurs sont censés faire preuve d’une conduite exemplaire qui leur impose de réduire d’abord leurs propres rémunération, voire de reverser leurs bonus à la société. Ce sacrifice est en effet susceptible de créer une atmosphère qui permettra aux cadres de réaliser des réductions de coûts.

Il va sans dire qu’au préalable, les dépenses de fonctionnement de la société auront été examinées et réduites en excluant les dépenses moins inutiles ou somptuaires parmi les frais généraux (déplacements, représentations…). Si nécessaire, il s’agira ensuite de limiter le nombre d’heures supplémentaires conventionnelles, le nombre d’heures travaillées la nuit, et les jours de congés.

Dans le cas où ces efforts s’avèreraient insuffisants, la réduction de la rémunération peut-être envisagée. Ainsi, si les bonus (« Shoyo ») ne sont pas considérés comme faisant partie du salaire (« Chingin ») en vertu d’une convention collective (« Roushi Kyotei »), d’un règlement intérieur (« Shugyo Kisoku ») ou d’un contrat de travail (« Rodo Keyaku »), leur montant peut être réduit. Dans le cas contraire, une réduction éventuelle des bonus est soumise au respect de certaines procédures.

Plus encore, et si nécessaire, une réduction raisonnable du salaire est envisageable après avoir obtenu le consentement des employés, amendé le règlement intérieur ou la convention collective, à condition que le salaire ne tombe pas en deçà du minimum national. De même, il doit bien entendu demeurer moralement acceptable pour les employés afin de permettre le maintien de l’activité de la société. La réduction de salaire est la pratique la plus courante dans la mesure où, conscients des difficultés que leur société peut traverser et de la difficulté prévisible à retrouver un emploi, les employés préfèrent généralement, à l’hypothèse d’un licenciement, accepter une réduction de leur salaire.

Les mesures prises par la société peuvent ainsi laisser entrevoir aux employés le risque d’un licenciement, et inciter les moins fidèles d’entre eux à quitter volontairement l’entreprise. Aussi, lorsque celle-ci souhaite procéder à des licenciements, les avocats conseillent-ils généralement de procéder à un appel à des départs volontaires (« Kibotaishoku no Boshu ») auprès de l’ensemble des salariés, ce qui réduit réellement le poids des procédures à engager. Au demeurant, dans les petites entreprises, un tel appel à la démission comporte le risque de voire des personnes clefs quitter leur poste et désorganiser ainsi considérablement l’entreprise. Aussi faut-il envisager, dans ce cas et sous certaines conditions, davantage de démarches individuelles de départ volontaire (« Taishoku Kansho »).

Pour autant, les incitations individuelles au départ volontaire ne peuvent dépasser certaines limites. En effet, une entreprise ne saurait inciter excessivement ses employés à démissionner ni harceler ses employés réticents. La Cour Suprême a en effet invalidé les « démissions volontaires » résultant de méthodes de persuasion excessives, les employés pouvant désormais solliciter des dommages intérêts en invoquant le comportement fautif de leur société (Cour Suprême, décision 10.7.1980).

Le licenciement intervient en dernier recours. Le licenciement pour raison économique demande la réunion des quatre conditions mentionnées supra. Au demeurant, l’appréciation de la réunion de ces éléments est délicate. Aussi vaut-il mieux consulter un expert, et ceci afin de surmonter les difficultés rencontrées dans le cadre d’une négociation, de procédures de résolution alternative des différends (Alternative Dispute Resolution, « Saibangai Funso Kaiketsu Tetsuzuki ») ou devant les jurisdictions compétentes, ce d’autant plus qu’on ne maîtrise pas le japonais.

Lorsqu’on entend licencier, on souhaite en général éviter d’avoir à mener les procédures laborieuses et délicates évoquées ci-dessus, et mettre en oeuvre des solutions plus rapides. Certaines sociétés envisagent ainsi de mettre en oeuvre une scission ou une fusion acquisition afin de contourner ces procédures. Il y a cependant toujours le risque que le Tribunal invalide ces tentatives. Une société ne peut en effet traverser cette période de crise sans créer un climat de confiance en son sein : une ferme résolution à sauver l’entreprise et une attitude honnête sont des éléments indispensables à une transition réussie.

Pour plus d’information à ce sujet, vous pouvez contacter :

Maître Shinji SUMIDA, Avocat au Barreau de Tokyo

AKASAKA INTERNATIONAL LAW, PATENT & ACCOUNTING OFFICE

NISHIKAN HONTEN BLDG 5

1-1-10 KYOBASHI, CHUO-KU, TOKYO

104-0031, JAPON

TEL : (81) 3 – 3548 – 2702

FAX : (81) 3 – 3548 – 2703

E-MAIL : ailaw-info@ailaw.co.jp

Site internet : www.ailaw.co.jp

How to Invest in Glasgow (Week 3)

How long should it take to start a new business?

It takes at least 13 days to set up a business in the UK, but this is still a relatively short period of time compared with the European average of 32 days. Many companies use the UK as the gateway to Europe.

How much will it cost to establish a company and open an office?

The following assumes the opening of a small city centre office with a Japanese manager, a local office manager and a local secretary.

1) Opening an Office

Deposit – Two Month’s Rent – 2,500 Great British Pounds (GBP)
Average Annual Rent – 30 GBP per Square Foot – Small Office 500 Square Feet – 15,000 GBP per Annum
Purchasing Basic Office Furnishings and Equipment – 4,000 GBP
Office Monthly Overheads:
Annual Business Rates – 10 GBP per Square Foot
Annual Service Charge – 5 GBP per Square Foot
Total Overheads – 7,500 GBP per Annum

2) Apartment

Deposit – 2 month’s rent – 1200 GBP
Average Monthly Rent – 600 GBP per month
Purchasing Basic Furnishings – 2000 GBP
Monthly Utilities, Council Tax – 100 GBP per month – 1,200 GBP per Annum

3) Obtaining Visas

Application Fee – 230 GBP
Professional Fees – 750 GBP+

4) Employing Local Staff

i) Manager

Recruiting Agency Fee – 8,000 GBP
Monthly Salary – 40,000 GBP per Annum

ii) Secretary

Recruiting Agency Fee – 4,000 GBP
Monthly Salary – 20,000 GBP per Annum

5) Registering a Company

Registration Fee Online – 15 GBP

Approximate Total Cost for the First Year (not including the Japanese manager’s salary) 114,000 GBP+

The final cost will vary considerably depending on the size of the office and the nature of the business.

What other procedures are required when starting a new business?

There will be various government departments to contact when setting up the business. In the UK, most businesses must register for Value Added Tax (VAT) which is similar to Japanese consumption tax. It is also necessary to contact HM Revenue and Customs in relation to income and corporation tax and also National Insurance Contributions, which companies and employees must pay to be entitled to pensions and other benefits. Business rates are a local tax paid to the local authority.

If you need any further information about investing or setting up a business in Glasgow or any other part of the UK, please contact us.

Please note that the information contained in Week 1 – Week 3 of this Article is subject to change at any time and up-to-date legal advice should always be sought from a legal adviser.

How to Invest in Glasgow (Week 2)

This is the second in a series of articles about investing in Glasgow. This week we will consider how to invest by looking at some of the laws affecting investing.

How?

Company Ownership and Control

The UK has no law specifically preventing or controlling investment by foreign companies. There is little discrimination between UK citizens and foreign nationals in the establishment or running of companies. One director of a British registered company must be resident in the UK. It is often possible to get a work permit for a foreign manager if requirements on ability and work experience are met.

The UK subscribes to the OECD Committee on Investment and Multinational Enterprises’ (CIME) National Treatment Instrument and the OECD Code on Capital Movements and Invisible Transactions (CMIT). In law, foreign companies should receive the same treatment as British companies.

The Companies Act of 2006 replaced the 1985 Act, simplifying and modernizing existing rules rather than making any dramatic shift in the company law regime. Some industries are controlled by British government ministries. Research is needed before investing in some industries like banking, airlines, insurance, defense, shipping, transport and energy. Laws on monopolies and mergers might apply when acquiring a big UK company. The Department for Business, Enterprise and Regulatory Reform (BERR) evaluates bids and mergers for possible referral to the Competition Commission.

Real Estate

There are not many restrictions on foreign ownership of property. There are sometimes restrictions on the use of property in the title deeds, planning laws and building regulations.

Foreign Exchange

There are now no exchange controls affecting foreign direct investment.

Expropriation

Expropriation of assets or nationalization of an industry are now uncommon and require a special Act of the British Parliament.

Disputes

The UK is a member of the International Center for Settlement of Investment Disputes so accepts binding international arbitration between the UK government and foreign investors.

The UK is also a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 allowing local enforcement of arbitration judgments in other signatory countries.

Incentives

Regional Selective Assistance (RSA) is one of a range of incentives for companies, domestic or foreign, locating in depressed regions of the country and generating employment.

Tax

Locally-owned and foreign-owned companies are taxed the same.

Intellectual Property Rights

The British legal system gives good intellectual property rights (IPR) protection. There are plenty enforcement mechanisms. The UK is a member of the World Intellectual Property Organization (WIPO). The UK is also a member of the major intellectual property protection agreements such as the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty. The UK has signed and, through various EU Directives, implemented both the WIPO Copyright Treaty (WCT) and WIPO Performance and Phonograms Treaty (WPPT)

Employment Law

Historically the UK has had a more flexible labor market than many other EU countries. EU regulations and directives on employment matters are starting to make the law less flexible though the British government is sometimes able to opt out of provisions and retain this greater flexibility.

How to Invest in Glasgow (Week 1)

The next three weeks we will have a series of articles about investing in Glasgow. In this first part we will ask why, where what to do and when.

Why?

Glasgow was once known as the “Second City of the British Empire”, a nickname which gives some indication of its early importance as a global hub of business and commerce.  Although some of the heavy industry which the city was once famous for, especially ship-building, has moved elsewhere, Glasgow still remains a major commercial centre, the third largest city in the UK, ranked second after London in the league of the most livable cities in the UK. The Mercer Index puts Glasgow in the safest 50 cities in the world and Lonely Planet considers it one of the world’s top ten tourist cities. Glasgow is considered one of Europe’s major financial centers.

In 2006, private sector investment in the city reached £4.2 billion pounds ($6.6 billion dollars.)  In Scotland, Foreign Direct Investment is worth £41 billion pounds ($64 billion dollars) per year. So where does a company invest in Glasgow?

Where?

The best place to locate depends on what business you are in. If you are in financial services, the International Financial Services District (IFSD) to the Western edge of the city center is one of the UK’s largest financial quarters.

If you are in the retail business, in the city centre Argyle Street, Buchanan Street and Sauchiehall Street are the main shopping streets.

If you are in the IT sector, Glasgow is the Western part of the “Silicon Glen”, the nickname of the IT industry in Scotland.

For living, the West end of Glasgow has a lot of beautiful old apartments and provides easy access to the city centre.

What?

There are various governmental bodies which will assist businesses starting up or expanding in Glasgow. Glasgow City Council is the city government. Scottish Enterprise is mainly funded by the Scottish Government to promote business. Scottish Development International is another organization promoting inward investment. The Glasgow Chamber of Commerce can also provide advice to businesses looking to invest in the city.

For anywhere in the UK, UK Trade & Investment (UKTI) is the UK Government’s inward investment agency which can help companies with research, building contacts, choosing a location, setting up an office and growing a business.

When?

In recent years, the British pound has become less strong against many other international currencies, including the Japanese Yen, so now is an excellent time to take advantage of the favorable exchange rate. Property prices in Glasgow, like many parts of the UK, went down in the recent recession and so now is a good time to purchase real estate and other assets at a discount price.

(to be continued next week)

How to Downsize Your Company: Legal Issues to Consider

After the financial crisis in the United States, the world-wide economic recession caused serious damage to many companies, both international and domestic. Many companies were trying to survive the crisis by restructuring their businesses by mergers and acquisitions, staff layoffs, etc.

For domestic Japanese corporations, one of the solutions to survive a recession is to file for Civil Organization (“Minji Saisei”) or Corporate Reorganization (“Kaisha Kosei”) under the applicable laws. Since the last recession was so serious, filing such procedures usually caused less reputational damage to companies during the recession than before it. Currently, Debtor in Possession (DIP) is one of the main procedures used because the managers usually prefer to stay in their positions and the procedure can be expedited. Please note, the Tokyo District Court recently changed the practice of Corporate Reorganization (usually used for large company’s rehabilitation) to allow the courts to order discretionary implementation of DIP.

On the other hand, foreign corporations tend to choose different paths from domestic companies. Generally speaking, many small or medium-size foreign corporations are sole shareholders of their subsidiaries in Japan. Such corporations often prefer Voluntary Liquidation (“Seisan”), which in principle is not subject to court supervision. On the other hand, if it becomes clear that the assets of the company being liquidated are not sufficient to pay off its debts, or when it becomes apparent that the company is insolvent, the company has to convert the liquidation to Bankruptcy (“Hasan”) or Special Liquidation (“Tokubeisu Seisan”) which is subject to court supervision.

Except in cases of complete retreat from Japan, the company might consider transforming from a “Kabushiki Kaisha” (K.K.) into a representative office or branch office. Usually, a K.K. may be liquidated and a representative office or branch office established in Japan.

But the following potential drawbacks should be kept in mind:

- In order to continue conducting transactions in Japan, a foreign company must be registered in the Commercial Registry, and have at least one of its representatives residing in Japan (under Articles 817 and 818 of the Companies Act – “Kaisha Ho”).

- The new offices sometimes need to obtain new permits from the government even though the Japanese K.K. had already obtained them.

-Reputational risk, e.g. prior business partners might be reluctant to work with the company.

If a company wants to understand such disadvantages in detail, the company should seek the advice of experts.

In addition, the status of the company’s employees has to be taken into consideration. Generally speaking, liquidation sounds like a good justification for laying off employees. However, if the court finds that the liquidation is merely a pretext for laying off employees, then the court could judge in favor of the employees, if they take court action against the company.

Therefore, there must be objectively reasonable grounds for laying off employees (The Labor Contract Act (“Rodo Keyaku Ho”), Article 16), and the following factors, that the courts have applied in such cases, must be considered:-

1. The reduction of the number of employees must be necessary;

2. The company must make best efforts to avoid the layoff(s);

3. The selection of the employee(s) to be laid off must be objective and reasonable; and

4. The layoff procedure must be appropriate. (See, for example, Tokyo Court of Appeal decision S54.10.29, October 29, 1979.)

At any rate, if the only aim is to reduce the number of employees, and the company wishes to continue to conduct transactions in Japan, such drastic measures as liquidation are not recommended, because the drawbacks usually outweigh the benefits in terms of cost-savings.

In relation to downsizing the K.K., if a company believes layoffs are the only way for that company to cut costs, it will probably face time-consuming conflicts with its employees. There are certain steps to be taken before resorting to such drastic methods as layoffs. Especially in Japan, directors are expected to be self-disciplined enough to reduce their own salaries first and sometimes even return their bonuses to the company. Such sacrifices will create an atmosphere which allows the manager to put some of the burden of cost-reduction on their staff such as by bonus cuts.

Needless to say, companies should consider reviewing the office systems in detail to identify non-essential expenses (for example, travel expense or entertainment and socializing expense) or waste and reduce such expenses. Then, if it is concluded that such expenses cannot be cut any more, the workers’ overtime allowance, night-shift allowances, and holiday allowances should be reduced.

If such efforts do not significantly reduce the losses of the company, the cutting employee compensation should be considered. If bonuses (“Shoyo”) are not regarded as a portion of salary (“Chingin”) under the Labor Management Collective Agreement (“Roushi Kyotei”), the Rules of Employment (“Shugyo Kisoku”), or the Employment Contract (“Rodo Keyaku”), the company may usually reduce bonuses.  If bonuses are regarded as salary, the company must comply with specific procedures if the company wants to cut them.

If the reduction of bonuses does not ameliorate the losses, the company might reduce salaries by a reasonable amount after obtaining the employees’ consent, or amending the Rules of Employment or the Collective Labor Agreement, unless the reduction will cause the salaries to fall below the national minimum standard, or the employees’ morale will so deteriorate that the company cannot maintain its business. The degree of the deterioration of morale must be really severe because employees normally acknowledge that they have to bear some hardships because of their company’s losses and usually employees prefer reduction of salary to layoff due to the difficulty in finding a new job in a harsh economic climate.

After a  company has taken the actions mentioned above, an atmosphere in which the employees can foresee the risk of layoffs will probably be created, which might cause some employees who are less loyal to the company to leave the office of their own will. If the company needs to lay off someone, many attorneys will recommend giving all employees a Notice of Solicitation of Resignation from the Office (“Kibotaishoku No Boshu”).  It is true that the notice might reduce the risk of a finding of abuse of rights. However, if a small company gives such notice, it could cause many able people to leave, which could cause significant deterioration in the performance of the company. Thus, in a small company, the company may try Solicitation of Resignation of Individuals (“Taishoku Kansho”), under certain conditions.

The Solicitation of Resignation of Individuals must be done within reasonable limits. The company cannot persistently attempt to persuade specific employees to quit in an unreasonable way. The company cannot harass the employees who do not comply with the request. The Supreme Court has held that excessive persuasion and methods invalidate the “voluntary” resignation, and the employees may then seek damages for the company’s conduct.  (Supreme Court decision S55.9.10, July 10, 1980.)

Dismissals should be seen as a last resort. Dismissals for the purpose of reorganization require the four elements mentioned above (1.-4.)  It is very difficult to determine whether such conditions have been met. Thus, an expert’s advice should be sought. This is especially so if the manager cannot speak Japanese fluently with Japanese staff, because the manager will probably face difficulties in negotiations, in court, or in Alternative Dispute Resolution (“Saibangai Funso Kaiketsu Tetsuzuki”), etc.

Most companies probably want to avoid such troublesome procedures as are discussed above and instead pursue the easiest and shortest route for laying off employees. However, even if a company uses a complex scheme such as Corporate Division or M&A, without an honest and sincere attitude to employees, such a scheme is likely to worsen the relationship between the company and their employees. If the company cannot keep a trusting relationship with its employees, the company will probably not survive a bad recession anyway. Thus, it would seem a strong passion to save the company and an honest approach are key points to save a company.

This scope of this article is limited to just a few approaches; there are several available alternatives that may be more suitable to a particular business. For more information on this topic, please contact us.

Comment: The Japanese economy is much better than it was in the period after the collapse of Lehman Brothers. Thus, this advice will not probably need to be applied as often as last year. But unfortunately, downsizing is always a possibility, even in a better economy, so we hope this article will be useful for your reference.