Priority of Claims in Insolvency Proceedings and Their Modifiability
–Considering Equal and Equitable Treatment of Creditors–

To whom should limited property be distributed, and in what order?

My specialization is civil procedure, focusing on insolvency law. My primary research topic is “Priority Claims in Insolvency Proceedings and Their Modifiability.”

Insolvency is an economic situation in which an entity is unable to repay its debts. Insolvency proceedings, regulated by insolvency laws, consist in the processes of equally distributing the debtor’s remaining assets to the creditors. Since a bankrupt debtor’s assets are limited, it is impossible to pay the creditors in full. In insolvency proceedings, the property is evenly distributed between creditors according to the principle of the equality of creditors. However, in this context, “equality” only means equality among those who have claims of the same nature. For instance, creditors with security interests, employees with salary claims, taxes, etc. are given priority status under insolvency laws, and the law provides for their priority treatment over general creditors.

In this context, my research focuses on whether it is possible to prioritize or subordinate certain claims over others for reasons such as the fact that they are critical for the continuity of the debtor’s business. In doing so, it especially focuses on reorganizationproceedings aimed at business restructuring. Further, my research investigates whether it is possible to subordinate certain claims over others by prior agreement with creditors. Hence, is it possible to modify the order of precedence of claims established in the insolvency law, and what are the possibilities and limitations of such a modification? Since the priority of claims in insolvency proceedings often differs across countries due to the different factors that each country emphasizes, it is extremely interesting to conduct comparative law research. Moreover, I am actively participating in international conferences and exchanging information with researchers from various countries, which motivates me to conduct my own research.

Insolvency proceedings that can respond to social changes

I am also working on the realization of information technology (IT) for insolvency and civil court proceedings. Compared to other countries, Japan’s court proceedings are far behind regarding IT. All documents are exchanged and stored on paper and sent by post. With the societal spread of paperless and electronic contracts, court proceedings as a means of dispute resolution must also evolve to meet societal demands. Since 2017, I have been serving as a member of the “Study Group on IT for Court Proceedings” established in the Cabinet Secretariat, studying the implementation of IT for civil litigation procedures.

Additionally, I established a study group with insolvency lawyers and researchers on the computerization of insolvency proceedings, which is my specialty. As the chair of the study group, I am actively working toward the early realization of computerization. In some cases of large-scale insolvency, the number of creditors may exceed several hundreds of thousands. With the globalization of business, creditors are often located across the world, hindering the management of some insolvency cases through conventional procedures using paper documents and mailing them to all creditors. While conducting research on other countries where IT has already been adopted, we are examining the suitable use of IT for insolvency proceedings in Japan to achieve more user-friendly insolvency proceedings.

Profile

Junko SUGIMOTO

Junko SUGIMOTO is a Professor of Insolvency Law and Civil Procedure, Nihon University College of Law. She was an examiner of the Japanese Preliminary Bar Examination (Civil Procedure) from 2016 to 2017. She was also a member of the Committee considering Courts and IT in Japan, which was organized by the Cabinet Secretariat. She is a member of International Insolvency Institute NextGen Leadership Program. She has researched at William S. Richardson School of Law in Hawaii, and also at the Center for Bankruptcy Studies of St. John’s University School of Law in New York. She has published numerous articles on topics of insolvency law, secured transactions, and civil procedures. She was the first to be awarded the International Insolvency Institute Shinjiro Takagi Prize, which was established in 2008.

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