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  5. Cabinet Decision on the Bill for the Act for Partial Revision of the Act on Facilitation of Management Succession of Small and Medium Sized Enterprises for Promotion of Business Succession of Small and Medium Sized Enterprises and Other Acts (“Bill for the SMEs Growth Promotion Act”)

Cabinet Decision on the Bill for the Act for Partial Revision of the Act on Facilitation of Management Succession of Small and Medium Sized Enterprises for Promotion of Business Succession of Small and Medium Sized Enterprises and Other Acts (“Bill for the SMEs Growth Promotion Act”)

March 10, 2020

A Cabinet Decision was made on the Bill for the Act for Partial Revision of the Act on Facilitation of Management Succession of Small and Medium Sized Enterprises for Promotion of Business Succession of Small and Medium Sized Enterprises and Other Acts (“Bill for the SMEs Growth Promotion Act”; hereinafter referred to as the “bill”). The bill will be submitted to the ongoing ordinary session of the Diet.

1. Purpose of the bill

As an increasing number of aging SME business operators have been approaching retirement age in recent years, personal liability guarantees required of business operators are causing some challenges to smooth succession. For example, successor candidates are rejecting business succession because of this personal guarantee.

Aiming to prevent SMEs from closing and to develop an environment in which SMEs are able to proactively develop business and grow, the Ministry of Economy, Trade and Industry (METI) will take necessary measures, including supporting SMEs in lifting personal guarantee requirements of business operators and special treatment for organizations deemed to be SMEs, streamlining systems involving SMEs’ submission of business plans and supporting SMEs in developing business overseas.

2. Outline of the bill

The major measures under the bill are as follows:

(1) Supporting SMEs in lifting personal guarantees of business operators

The revised Acts are to additionally inaugurate a credit guarantee syste m in which SMEs, facing difficulties in smooth business succession because of the existence of personal guarantees of business operators, are not required to render personal guarantees when they intend to raise refinancing for their debts with no personal guarantees in advancing their business succession.

They are also to improve the credit guarantee system so that SMEs are able to raise funds, e.g., for M&A, with no personal guarantees of business operators when they intend to advance business succession by obtaining business assets from third party businesses (“third party succession”).

(2) Developing an environment in which mid-ranking  enterprises can grow

Aiming to encourage SMEs to smoothly expand their business, the revised Acts are to provide special treatments in which SMEs, who are advancing approved “leading projects for invigorating regional economies”, are eligible to continue to enjoy support measures defined in the plan during the period stipulated, even after they are no longer the SMEs that satisfy SME category requirements due to the expansion of their business scale.

(3) Streamlining measure systems from the standpoints of SMEs

Aiming to simplify similar plans and improve the friendliness for SMEs, the revised Acts are to streamline and integrate the existing systems for approving plans targeting SME s, i.e., the plan for cultivating new projects in collaboration with other industries, the plan for specified research and development and other initiatives, and the plan for developing projects making use of regional industrial resources. As a result, new measures will be categorized into three main plans, i.e., the plan for enhancing business management power, the plan for business management innovations, and the plan for leading projects for invigorating regional economies.

(4) Enhancing measures for supporting SMEs in developing business overseas

Aiming to encourage SMEs to further dynamically develop business overseas, the revised Acts are to take special treatments in which if an SME has received approvals of the plan for business management innovations, the plan for enhancing business management power and the plan for leading projects for invigorating regional economies, an overseas subsidiary of the SME is eligible to enjoy direct funding from the Japan Finance Corporation.

(5) Other measures

In line with the measures shown in (1) to (4) above, the revised Acts are to provide necessary measures involving services provided by approved support organizations and the Organization for Small & Medium Enterprises and Regional Innovation, JAPAN, aiming to develop an effective system to support SMEs in completing smooth business succession.

Division in Charge

Policy Planning Division, Business Environment Department, Small and Medium Enterprise Agency