JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
2.2 Primary Regulators The Financial Services Agency (FSA) administers securities regulations under the FIEA, including regu - lations involving tender offers, public offerings and proxy solicitations. The Ministry of Finance (MOF), the Ministry of Economy, Trade and Industry (METI) and other relevant ministries regulate cross-border transactions under the Foreign Exchange and Foreign Trade Act (FEFTA), including inward/outward invest - ments. The Japan Fair Trade Commission (JFTC) regulates transactions that substantially restrain competition under the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (the “Anti-Monopoly Act”). Tokyo Stock Exchange, Inc (TSE) and other stock exchanges oversee transac - tions involving a listed company. 2.3 Restrictions on Foreign Investments Under the FEFTA, a foreign investor is required to file prior notification with the MOF and the competent ministers and wait a certain period (in principle 30 days, which may be extended up to five months, or shortened if the ministers determine there is no need for further examination) if the foreign investor intends to acquire: shares of a private company (except an acquisition of shares of a private company from another foreign investor, unless the acquisition may have potential risk of harming national security) or 1% or more of shares or voting rights of a listed company; and such target company engages in the restricted businesses regarding national security, public order, public safety or smooth management of the Japanese economy identified in the FEFTA. The FEFTA also pro - vides a post-acquisition notification requirement for foreign investors. Acquisitions of Shares or Voting Rights The threshold for the prior notification requirement with respect to acquisitions of shares or voting rights in listed companies was lowered from 10% to 1% by an amendment to the FEFTA in 2020. However, the amendment also established exemptions from the prior notification requirement. Under the current rules, the blanket exemption may be available for foreign financial institutions, and the regular exemp - tion may be available for general investors (excluding state-owned enterprises) and certain sovereign wealth funds (SWFs) accredited by the authorities.
Share Acquisition A share acquisition from one or more third parties (other than the issuing company itself) may be made through an “on-market” or “off-market” transaction. An acquisition of shares of a listed company is subject to the tender offer rules if an acquirer seeks to acquire shares in excess of certain thresholds provided in the Financial Instruments and Exchange Act (FIEA) (for details see 6.2 Mandatory Offer Threshold ). A share acquisition may also be made by a “share exchange”, one of the statutory business combina - tions, whereby an acquiring company can acquire 100% of the shares of a target company upon a two-thirds shareholder vote. An acquiring company can also acquire all or a part of the shares of a tar - get company by use of a statutory “share delivery” mechanism. An alternative is a subscription of shares issued by a target company. Generally, a listed company can issue shares by a board resolution unless the issue price is a significant discount from the market price or the total outstanding shares after the issuance will exceed the authorised number of shares provided for in the articles of incorporation. Even if the board approves an issuance that results in an acquirer holding a major - ity of the shares of a target company, the acquirer is not required to offer to purchase shares from minority shareholders. Business Acquisition A business (asset) acquisition is generally conducted through a contractual buy-sell agreement or a statu - tory company split (or demerger), which is a statutory spin-off procedure. Third-party consents are required to effect a contractual business acquisition: for exam - ple, consents from counterparties to transferred con - tracts and transferred employees are required. However, these consents are not statutorily required in the case of a company split. Instead, the Companies Act requires the parties to a company split to comply with various procedures, including the ones for credi - tor protection.
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