JAPAN Law and Practice Contributed by: Akira Matsushita, Norihito Sato, Hideki Ben and Nobuhiko Suzuki, Mori Hamada
3.4 Competition Law and Antitrust Japanese merger control regulations may apply to the establishment of JVs. For example, a JV partner is required to submit a filing to the JFTC 30 days before the acquisition and is prohibited from acquiring shares in the JV company within 30 days after the JFTC’s receipt of the filing if: • the JV partner intends to acquire shares in the JV company, and the voting rights that will be held by the JV partner and its group companies after the acquisition will newly exceed 20% or 50% of the total voting rights; • the total sales in Japan of such JV partner and its group companies exceed JPY20 billion; and • the total sales in Japan of the JV company and its subsidiaries exceed JPY5 billion. The JFTC will examine the transaction during such 30-day period, and may shorten or extend the period if necessary. Unlike merger control regimes in some jurisdictions, Japan has not adopted the “joint control” concept with respect to the filing requirements. The Antimonopoly Act of Japan also prohibits the unreasonable restraint of trade. This may give rise to issues if, in the course of managing or operating the JV, JV partners who are competitors exchange their sensitive information that may affect competition. 3.5 Listed Companies and Market Disclosure Rules A listed party may be required to make a public announcement under a stock exchange’s Securities Listing Regulations and other regulations as well as under the Financial Instruments and Exchange Act (FIEA) when the listed party’s decision-making body (typically the board of directors or executive officers) decides to participate in a JV. For further details, see 5.2 Disclosure Obligations . 3.6 Transparency and Ownership Disclosure As explained in 3.5 Listed Companies and Market Disclosure Rules , information relating to the JV may need to be publicly disclosed pursuant to the Securi - ties Listing Regulations if one of the JV partners is a listed company. If a public announcement is required, certain details of the JV company and/or the JV part -
ners – such as its/their name(s) and major sharehold - ers – may need to be publicly disclosed. In addition, when a JV partner is a foreign investor and the JV company engages in one of the Sensitive Businesses, such foreign JV partner will be required to make a notification to the relevant authorities prior to its investment in the JV company (see 3.3 Sanctions, National Security and Foreign Investment Controls for further details). In the prior notification, the foreign JV partner is required to disclose information about its ultimate owner. However, the prior notification will not be made public. If the JV company is a listed company, shareholders holding more than 5% of the shares of the listed com - pany must submit a large shareholding report, which will be publicly disclosed, pursuant to the FIEA. In the large shareholding report, the shareholder must disclose information such as: • its identity; • the purpose of the shareholding; • material agreements relating to the shares; and • regarding shares held by certain affiliated parties and other shareholders with whom the reporting shareholder has an agreement with respect to the acquisition or disposition of the shares or the exer - cise of voting rights. 4. Legal Developments 4.1 Notable Recent Decisions or Statutory Developments In 2020, there was a major amendment to the FEFTA, which expanded the scope of Sensitive Businesses (see 3.3 Sanctions, National Security and Foreign Investment Controls ). In addition, over the past sev - eral years, the Japanese government has tightened its review of FDI. Against this backdrop, foreign JV partners are recommended to analyse the implica - tions of the FEFTA process at the outset of a potential JV transaction in Japan, especially if the JV partner is from China, Russia or other countries with which Japan has tensions, or if it is funded or otherwise closely related to any foreign government.
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