Organic changes such as mergers and company splits may become inevitable choices for any type of corporation, even a small company. Yet conflict with creditors frequently arises. This article examines the effectiveness of applying business trusts to this field. Compared with a statutory trust in the U.S., which has juridical personality, a Japanese business trust is set up by a contract between a settlor and trustee. Several clauses of trust law are similar to the features of a corporation. Specifically,I refer to the Special Exception to Limited Liability Trust and the Trust Issuing Beneficiary Certificates. There are many cases where a company split may be prejudicial to creditors. To judge whether or not a split is prejudicial, the rationality of the transaction and the preservation of the asset value are both crucial issues to consider. This means that the value of the asset transferred is equivalent to the value of the debt, and that the value of the share exchange retained by the splitting company is secured against the distortion of cashflow and/or dilution by a capital increase. A Japanese business trust provides a possible solution to the above said problems. First, a Limited Liability Trust requires an equivalent balance of transferred asset and debt because the trustee must repay the debt only with the cashflow of the asset. Second, the clause on revocation of a fraudulent trust can circumvent a prejudicial scheme to a creditor of a splitting company. Because a creditor can request a court regardless of whether trustee has known the fact or not. Third, the duty of care requires the trustee to strictly administer the transferred asset, which contributes to the increase in the total value for the repayment service. Besides this article, I raise the idea that a trust in which a settlor himself acts as trustee is applicable to a company split. I focus on the features of a trust such as asset protection, the bankruptcy remote of the settlor and the fiduciary duty of the trustee. A trust can also supervise asset management better than a usual corporate scheme.A trust may be another feasible choice for a creditor and investor.
