Japan's Enterprise Value Charge: What the New Floating Charge-Like Security Interest Means for Foreign Businesses

Introduction

On May 25, 2026, Japan will implement one of the most significant reforms to its secured transactions law in over 120 years. The Act on the Promotion of Cash Flow-Based Lending (事業性融資の推進等に関する法律, Jigyōsei Yūshi no Suishin-tō ni Kansuru Hōritsu), enacted on June 7, 2024, creates an entirely new property right called the Enterprise Value Charge (企業価値担保権, Kigyō Kachi Tanpo-ken) — Japan's first all-asset security interest.

For foreign businesses operating in or entering Japan, this is a watershed moment. Until now, securing financing in Japan typically required real estate collateral or personal guarantees from company directors — barriers that disproportionately affected asset-light businesses such as tech startups, service companies, and foreign-invested ventures without extensive property holdings in Japan. The Enterprise Value Charge changes that equation fundamentally.

This article explains the new regime, compares it with international equivalents, and outlines what your business needs to do to take advantage of it.

What Is the Enterprise Value Charge?

The Enterprise Value Charge (EVC) is a security interest over the entire value of a business — not just specific assets. It covers:

Tangible assets: Real estate, machinery, equipment, inventory
Intangible assets: Intellectual property, brand value, customer relationships, contractual rights
Future cash flows: Anticipated revenue streams and business goodwill
All present and after-acquired property: Assets the company acquires after the EVC is created

This is a radical departure from traditional Japanese secured lending, which required lenders to take separate security interests on each asset class — real estate mortgages, chattel pledges, receivable assignments, and IP pledges — each with its own registration system and enforcement procedures. Taking security over "all assets" was technically possible but practically cumbersome and expensive.

The EVC eliminates this fragmentation. A single security interest now covers everything.

How the Trust Structure Works

Unlike a conventional pledge or mortgage, the EVC operates through a mandatory trust arrangement. This is one of its most distinctive features.

The Key Players

Settlor (委託者, Itakusha): The borrowing company that grants the EVC over its business
Trustee (受託者, Jutakusha): A licensed Enterprise Value Charge Trust Company (企業価値担保権信託会社) that holds and administers the security interest
Specified Secured Creditors (特定被担保債権者): Lenders whose claims are explicitly covered by the EVC
Unspecified Secured Creditors (不特定被担保債権者): General creditors who may participate in enforcement distributions

How It Works in Practice

The borrower and a licensed Trust Company execute an Enterprise Value Charge Trust Agreement
The EVC is registered in the commercial registry (商業登記簿, Shōgyō Tōkibo) of the debtor company
The borrower continues to use, benefit from, and dispose of its assets in the ordinary course of business — no day-to-day interference from the lender
Transactions outside ordinary business operations require consent from the EVC trustee
There is no maximum amount requirement for secured claims, though the parties may agree on caps

The trust structure serves a critical purpose: it provides a neutral intermediary between borrowers and lenders, and ensures that enforcement is conducted professionally and fairly — particularly important when the collateral is an entire going concern rather than a discrete asset.

How It Compares with UK Floating Charges and US UCC

Foreign lenders and investors will recognize the EVC as Japan's answer to security mechanisms that have existed in common law jurisdictions for decades.

UK Floating Charges

The EVC most closely resembles the English floating charge, which allows a company to grant security over all its present and future assets while retaining freedom to deal with those assets in the ordinary course of business. Key similarities include:

All-asset coverage without specifying individual items
Freedom to deal with charged assets until crystallization (or enforcement)
Priority ranking based on registration date
Business transfer as the preferred enforcement mechanism (rather than piecemeal liquidation)

A key difference: the EVC requires a licensed trust company as intermediary, whereas UK floating charges are held directly by the lender. This adds a layer of cost and complexity but also provides borrower protections that the UK system achieves through different mechanisms (such as the administrator's duty to act in the interests of all creditors).

US UCC Article 9

The US Uniform Commercial Code allows blanket liens covering all present and after-acquired personal property through a single UCC-1 financing statement. The EVC achieves a similar result for Japan but goes further by:

Covering real property as well (UCC Article 9 excludes real estate)
Including goodwill and future cash flows explicitly in the collateral package
Requiring a trust structure rather than direct lender-held security

Comparison at a Glance

Feature	Japan EVC	UK Floating Charge	US UCC Blanket Lien
Covers all asset types	Yes (including real estate)	Yes (including real estate)	Personal property only
Freedom to deal	Yes, in ordinary course	Yes, until crystallization	Yes, unless restricted
Registration	Commercial registry	Companies House	State UCC filing
Intermediary required	Licensed Trust Company	No	No
Enforcement method	Business transfer (court-supervised)	Administration or receivership	Self-help or judicial
Covers future assets	Yes	Yes	Yes

Four Key Use Cases

The Japanese government envisions the EVC being used in four primary scenarios — all of which are highly relevant to foreign businesses.

1. Startup Financing

Startups typically lack the tangible assets that traditional Japanese lenders require. The EVC allows banks to lend against a startup's technology, IP portfolio, customer pipeline, and projected cash flows. This could open new debt financing channels alongside equity investment — particularly valuable for startups that want to avoid excessive dilution.

2. Regional SME Lending

Many small and medium enterprises in Japan have strong businesses but limited real estate holdings. The EVC enables regional banks to lend based on business fundamentals rather than property values — a shift that aligns with the Financial Services Agency's (FSA, 金融庁) long-standing push for relationship banking (リレーションシップバンキング).

3. Business Succession and Restructuring

Japan faces an acute business succession crisis (事業承継問題, Jigyō Shōkei Mondai), with hundreds of thousands of profitable SMEs at risk of closure because aging owners cannot find successors. The EVC facilitates succession financing by allowing acquirers to borrow against the target's entire enterprise value rather than needing separate collateral packages.

4. M&A and Project Finance

For foreign acquirers, the EVC offers a streamlined way to secure acquisition financing. Instead of negotiating multiple security interests across different asset classes — each with its own legal requirements — a single EVC can cover the entire target business. This is particularly advantageous in leveraged buyouts and project finance structures.

Enforcement and Insolvency

Understanding how the EVC works when things go wrong is critical for any lender or borrower.

Enforcement Process

The EVC trustee files a petition with the court to commence enforcement
The court appoints an Enforcement Trustee (実行受託者, Jikkō Jutakusha) with exclusive authority to manage the debtor's assets
The Enforcement Trustee's primary objective is to transfer the business as a going concern — not to liquidate assets piecemeal
Court approval is required after stakeholder consultation
Distribution follows a statutory hierarchy:
- Administrative expenses and labor claims
- Tax claims and Specified Secured Claims
- Subordinated secured claims
- Reserved portions for general creditors

Interaction with Insolvency Proceedings

Corporate reorganization (会社更生, Kaisha Kōsei): Suspends EVC enforcement — the reorganization takes priority
Civil rehabilitation (民事再生, Minji Saisei): Suspended during EVC enforcement — the EVC process takes priority
The Enforcement Trustee may petition for bankruptcy if balance sheet insolvency is discovered during enforcement

This framework is designed to preserve going-concern value wherever possible — a principle that aligns with international best practices in insolvency law.

What This Means for Foreign Businesses

If You Are Seeking Financing in Japan

The EVC opens new possibilities for foreign-invested companies that previously struggled to obtain secured lending in Japan due to lack of real estate or unwillingness to provide personal guarantees. Asset-light businesses — technology companies, consulting firms, SaaS providers — stand to benefit the most.

However, the EVC is not automatic. You will need to:

Engage a licensed Enterprise Value Charge Trust Company (the FSA will publish a list of licensed entities)
Demonstrate that your business has assessable enterprise value — this means having clear financial records, documented IP, and quantifiable customer relationships
Accept that the EVC covers your entire business — you cannot carve out specific assets

If You Are Lending into Japan

Foreign banks and financial institutions can now participate in Japanese secured lending with a single, comprehensive security interest rather than navigating multiple asset-specific regimes. The EVC provides a familiar all-asset security concept adapted to Japanese law.

If You Are Acquiring Japanese Companies

The EVC simplifies acquisition finance structures significantly. Instead of cobbling together separate security packages, a single EVC can secure the entire acquisition facility. This reduces transaction costs, legal complexity, and closing timelines.

Preparing for the Enterprise Value Charge: A Practical Checklist

With the May 25, 2026 effective date approaching, businesses should begin preparing now:

Assess your financing needs — Determine whether the EVC could replace or supplement existing security arrangements
Review your asset documentation — Ensure your IP portfolio, customer contracts, and financial projections are well-documented and auditable
Identify licensed Trust Companies — Monitor FSA announcements for the list of authorized Enterprise Value Charge Trust Companies
Consult with Japanese legal counsel — The EVC's trust structure and enforcement mechanisms require specialized advice
Evaluate your existing security arrangements — Consider whether consolidating multiple security interests into a single EVC would reduce costs and complexity
Understand the implications for existing creditors — If your company already has secured creditors, adding an EVC will affect priority rankings
Monitor FSA guidelines — The Financial Services Agency is expected to issue detailed implementation guidelines and standard trust agreement templates

Looking Ahead

The Enterprise Value Charge represents Japan's recognition that modern businesses are built on intangible value — ideas, relationships, technology, and human capital — not just factories and land. By creating a legal framework that captures this reality, Japan is positioning itself as a more attractive destination for innovative, asset-light businesses from around the world.

For foreign businesses, the message is clear: financing in Japan just became significantly more accessible. The question is no longer whether you have enough real estate to pledge, but whether your business has enough value to support the loan.

This article is intended for general informational purposes only and does not constitute legal, financial, or tax advice. The Enterprise Value Charge regime is new and evolving — specific transactions should be discussed with qualified Japanese legal and financial advisors. Japan Gateway Services can help connect you with appropriate professionals.