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 (“Act”). 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” (“EVC”) by which the entire assets (including future assets) of a corporate debtor can be collateralised.

In this article we provide a brief overview of the EVC, which is anticipated to have a significant impact on both financing and debt restructuring in Japan.