JAPAN Trends and Developments Contributed by: Yasunari Sugiyama, Miki Tsubono, Kenya Suzuki and Mayu Okada, Nishimura & Asahi
However, the Cropland Act restricts the acquisition of cropland by enterprises operating in different indus- tries based on a traditional policy that cropland should be owned by an agricultural entity. In order for enter- prises in different industries to enter the agricultural field, it is necessary to examine the method of entry and business structure from both legal and practical perspectives. Enterprises seeking to enter the agricultural field gen- erally do so by means of purchase and sale, or lease, of cropland, in order to acquire the necessary land use rights. Article 3, paragraph 1 of the Cropland Act requires that these entities obtain permission from the Agricultural Commission prior to leasing or purchasing cropland. Entities wishing to obtain this permission must satisfy certain requirements, including: • efficient cultivation of cropland, using all the rel- evant cropland; • ongoing, constant engagement in necessary agri- cultural work; and • harmonisation of cropland collectivity and improve- ments in the efficiency of agricultural work. For enterprises, the most reliable method of entry is through purchasing cropland, but only “Corporations Qualified to Own Cropland” ( nouchi syoyu tekikaku houjin ) are permitted to acquire and own it. In order to qualify as a Corporation Qualified to Own Cropland, an entity must satisfy the following five requirements. • Corporate form requirement – it must exist in the form of a non-public stock company ( kabushiki kaisha ), an agricultural producers’ co-operative corporation ( nouji kumiai houjin ), or a membership company ( mochibun kaisha ). • Business requirement – agriculture must account for the majority of the entity’s sales. • Voting right requirement – a person who regularly engages in agricultural business ( jyoji jyuji - sha ), etc, must own the majority of the total voting rights in the entity. • Executive requirement – the majority of the entity’s directors must be company shareholders who regularly engage in agricultural business.
• Farmwork requirement – one or more of the execu- tives and important employees of the entity must be engaged in farmwork. It is obviously difficult for enterprises operating in other industries to meet the requirements to become a Corporation Qualified to Own Cropland. However, a land lessee does not need to satisfy the strict requirements of a Corporation Qualified to Own Cropland, and a general corporation, consisting of shareholders and officers, is permitted to lease crop- land. Therefore, cropland leases constitute the pri- mary means of corporate participation in agriculture. It is possible for corporate entities to obtain a lease of cropland based on a regional plan established by a cropland intermediary management institution, in place of permission under Article 3 of the Cropland Act. In this manner, corporations can obtain long-term leases on large amounts of land without engaging in individual negotiations or adjustments with cropland holders. Method of entry into agriculture: acquisition of shares in agricultural corporations As previously described, various constraints apply to an entrant that acquires the right to use cropland in its own capacity. In addition, it is common for enterprises to use their own technology, resources and networks to contribute to the maintenance and development of agricultural operations, and an entity acquiring crop- land in its own name to start an agribusiness from scratch is not necessarily the best way to generate synergies. For many entities, investing in or partially acquiring an existing company that holds cropland and quali- fies as a Corporation Qualified to Own Cropland is an effective method of accessing agribusiness. In this case, it is necessary to examine the deal and business structures to ensure the land-holding entity continues to meet the requirements for owning cropland. The requirements governing voting rights in Corpora- tions Qualified to Own Cropland were relaxed recently, under special provisions, in order to strengthen the management base of Corporations Qualified to Own Cropland. If a Corporation Qualified to Own Crop-
50 A GRICULTURA L LAW 20 26
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