Tokyo High Court, 29 March 1983

29 March 1983, 1079 Hanrei Jiho 92 (1983)

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Tokyo High Court, 29 March 1983

Japan Court of Appeals
29 March 1983, 1079 Hanrei Jiho 92 (1983)

Facts

Market competition caused a recycled-tire manufacturer (the company) to experience financial distress. A director (the director) (defendant) with the power to represent the company began manipulating the company’s corporate accounting to make the company appear more viable to buy time to rectify the situation by, among other things, exporting recycled tires to South Korea and the Philippines. The company invested considerable sums, mostly borrowed from a bank, to build a new factory. By the time the factory was complete and started operation, the economy had changed, making exporting more difficult. The banks declined to extend further credit, so the director sought and obtained high-interest loans. Other directors of the company objected to the high-interest-loan strategy, but the director maintained his course of high-interest borrowing and the manipulation of the corporate accounting to make the company appear to be in good financial standing when the company had been losing money for several years. Ultimately, the charade collapsed, and the company was forced into bankruptcy. A supplier of the company that provided rubber and light metals sued the director for the funds owed to the supplier by the company. The district court entered judgment in favor of the supplier, and the director appealed to the Tokyo High Court.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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