The enterprise value charge: Japan’s new floating charge-like security interest

On 7 June 2024, the National Diet of Japan enacted the Act on the Promotion of Cash Flow-Based Lending. The effective date of the Act will be separately determined within two and half years from its promulgation on 14 June 2024. The Act will bring into effect a new type of security interest called the “enterprise value charge”, by which the entire assets (including future assets) of a corporate debtor can be collateralised. This article provides a brief overview of the new charge, which is anticipated to have a significant impact on both financing and debt restructuring in Japan.