JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
two or more different partners who can bring together different capabilities and resources in this challeng- ing market environment with both high potential and risks. In this context, it is becoming popular for major developers and investors to transfer a part of their businesses into a separate company and form a joint venture or platform with another partner(s) in order to further expand and diversify their investment in energy In the case of tax-qualified spin-offs, taxation on the dividend (or deemed dividend) at the divesting com- pany’s shareholder level will not apply, and the capi- tal gains tax at the divesting company level will be deferred. The specific requirements for tax-qualified spin-offs depend on the structure of the spin-off, but for spin- offs where the divesting company will not hold any shares in the spun-off company, the main require- ments are generally as follows. and infrastructure assets. 3.2 Tax Consequences • Shareholders of the divesting company must only receive shares issued by the spun-off company. • No single party may hold more than 50% of the divesting company before the spin-off, nor is any party expected to hold more than 50% of the spun-off company afterwards. • The spun-off company’s operations must remain unchanged after the spin-off in terms of assets, directors, and employees. In addition, to facilitate business carve-outs through spin-offs, the 2023 tax reform introduced provisions for partial spin-offs (where the divesting company retains some ownership in the spun-off company). Under certain requirements, taxation on the dividend (or deemed dividend) at shareholder level will not apply, and the capital gains tax at the divesting com- pany level will be deferred. 3.3 Spin-Off Followed by a Business Combination It would be technically possible to conduct a spin- off immediately followed by a business combination. However, in order for spin-offs where the divesting company will not hold any shares in the spun-off com-
pany to qualify as a tax-qualified spin-off, no person may own 50% or more of the spin-off company after the transaction. Therefore, for example, if the spun- off company is acquired by a third party immediately after the spin-off, and this acquisition was planned at the time of the spin-off, the spin-off is not considered a tax-qualified spin-off. 3.4 Timing and Tax Authority Ruling There is no typical timing for a spin-off. The parties are not required to obtain a ruling from a tax authority prior to completing a spin-off. However, if the divest- ing company is publicly listed, the spun-off company’s shares would generally be listed to ensure shareholder liquidity. In such cases, the entire process, including the preparation period for the IPO of the spun-off company’s shares, may take more than two years to complete. 4. Acquisitions of Public (Exchange- Listed) Energy and Infrastructure Companies 4.1 Stakebuilding It is not common to acquire a stake in a public com- pany in Japan prior to making an offer. However, buy- ers sometimes acquire a stake in a target in order to make a shareholder proposal to the target and exer- cise other shareholder rights. The Financial Instrument and Exchange Act of Japan (FIEA) imposes a reporting requirement on holders of more than 5% of the shares of a listed Japanese company. The reporting must be made to the rel- evant local finance bureau ( zaimu-kyoku ) within five business days of the 5% threshold being exceeded. Following the initial reporting, the shareholder must file an amendment whenever there is an increase or decrease in its shareholding ratio by 1% or more, or a change to the name, address or other material infor- mation in the previous reporting. In addition, if a foreign investor acquires 1% or more of the total issued shares of a listed company in Japan, the Foreign Exchange and Foreign Trade Act (FEFTA) apply to the transaction. The foreign investor is required to submit a prior notification to the relevant
246 CHAMBERS.COM
Powered by FlippingBook