Ten years of learning the challenges of an attorney

This December will mark 17 years since I was admitted to the bar. In my first year as an attorney (2008), the world was in the midst of the Lehman Shock, where even publicly listed companies were struggling with cash flow and facing bankruptcy.

During this time, I had the opportunity to learn the practicalities of corporate bankruptcy alongside my supervising attorney. I experienced multiple failures and moments of fear while dealing with bankruptcies. A single mistake in a statement or document could potentially lead to the company's closure. If that were to happen, many employees would lose their jobs, and numerous business partners would suffer significant losses.

Back then, I felt a level of pressure that I had never experienced before in my life. Despite this, I was able to engage with many business owners and employees in the corporate restructuring process and also meet with representatives from banks striving to assist the debtors.

The role of an attorney in corporate restructuring

In typical civil litigation, the plaintiff and defendant each make their arguments and provide evidence accordingly, with the court ultimately making the final judgment in an adversarial structure. However, in corporate restructuring, creditors such as banks and debtors are not necessarily in a confrontational relationship. Instead, they can collaborate toward the common goal of rebuilding the company.

The attorney handling a corporate restructuring case acts as an intermediary between the two sides. In negotiations with creditors, I emphasize the importance of never telling lies and always disclosing information as required. The work of presenting a clear path to recovery for the client company based on honest and transparent information and persuading the banks offers a unique and interesting challenge that is different from ordinary litigation.

Meeting a respectable business owner

Around my 15th year as an attorney, I was consulted by a local department store that was struggling with cash flow about the possibility of corporate restructuring. This department store was the only one of its kind in that region, and it had annual sales exceeding 16 billion yen and employed nearly 500 people during its peak.

However, after 2000, it began operating in the red, and its business performance continued to deteriorate. Despite this, around 2011, the company's management and employees came together as one, receiving support from banks and eventually returning to profitability, thereby achieving a temporary restructuring of the business.

However, the business once again fell into decline due to the necessity for large-scale capital investments arising from the aging of the facilities, coupled with the aging customer base and the rise of online shopping. Under these circumstances, I formed a team with the department store's management to determine the company's future direction.

Fortunately, the department store had highly competent staff in accounting and general affairs, so we had a relatively clear understanding of the company's future cash flow. There was also a strong possibility that if the repayment of bank loans was temporarily halted, the business could continue without a cash shortage. However, with the aging facilities, it was unclear when critical equipment, such as escalators, might break down. If that were to happen, the time and cost required for repairs could prevent payments to business partners and employees, creating a significant risk. After multiple discussions, the department store ultimately decided to close its doors while still having sufficient funds.

The department store had over 1,000 business partners, so a sudden and unexpected collapse could have caused the downstream bankruptcies of many small business partners. Moreover, by taking more than six months to close the store, the 200 employees had sufficient time to find new jobs. Most importantly, as a beloved community department store, there was a desire to recover some of the store's former bustle, even if only for a short time, by holding closing sales before ending operations. Some may believe that it is virtuous for a business owner to keep fighting until the very end. However, I was deeply moved by the decision made by the management of this department store.

Preparing to close the department store

The first step in preparing for the department store's closure was to explain the situation to the banks and seek their cooperation, as that closure was almost synonymous with the company's bankruptcy. The local banks understood the situation and agreed to cooperate until the store's closure, even halting the repayment of loans.

However, despite an agreement to defer repayments, one bank froze the department store's account, disrupting the cooperation among the banks. Even then, the store's management remained calm by continuing their rounds with business partners, explaining the situation to employees, and preparing for the final closing sale.

When the store's closure was made public, an explanatory meeting was held for the employees. While the meeting concluded without significant backlash, I vividly remember one female employee who tearfully appealed to one of the company executives after the meeting.

Thanks to the cooperation of the employees and business partners, the closing sale of the department store was a great success, drawing a large crowd of visitors. On the final day, many people gathered in front of the store to bid it farewell. Together, the management team and the employees waved to the customers as they closed the shutters. I had repeatedly advised one of the management team members to start searching for a new job before the closure. However, this person consistently replied that he would be the last to go and that he would begin the job search once all the employees had secured their next jobs. He prioritized the transition of their employees until the very end.

In closing

If I ever find myself in a similar situation where I must handle a company's bankruptcy, I do not know if I could respond in the same way as the business owners I have encountered. Nonetheless, I am proud of the opportunity to have worked with such remarkable business leaders and representatives of banks. If my work has in any way contributed to society, that brings me immense joy.

I believe the work of an attorney--standing by the client, sharing in their struggles, taking action together, and experiencing both sorrow and joy--is truly rewarding. I hope that many young people will aim for a career in law. Moving forward, I would like to continue sharing stories of my encounters with amazing people with as many people as possible.

Naoyoshi Hara／Attorney

1980: Born in Fukuoka Prefecture.
March 2004: Graduated from the Faculty of Law, Chuo University.
March 2006: Completed the doctoral program at Chuo University Law School.
December 2007: Admitted to the bar (60th term) and began practicing at a law firm in Tokyo.
April 2017: Joined Yamashita & Watanabe Law Office as a partner attorney.

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