JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
TMK Structure A tokutei mokuteki kaisha (TMK) structure involves a specified purpose company, which is a corporate entity specifically designed to acquire a specific asset (such as real estate assets) by issuing asset-backed securities under the Asset Liquidation Law. The best feature of a TMK is that, by fulfilling certain requirements, it will be eligible for special favourable tax treatment that is not available to a KK or a GK. The downside is the imposition of various regulatory requirements and special restrictions under the Asset Liquidation Law. In most cases, a TMK finances the acquisition of real estate assets (which can be actual real properties or TBIs) by issuing preferred shares and obtaining third-party debt. The TMK’s equity consists of “specified shares” and “preferred shares”. Specified shares are similar to ordinary voting shares of a KK. The amount of specified shares is nominal and is not supposed to be used for the acquisition of real estate assets, and the preferred shares comprise most of the TMK’s equity. The third-party debt is usually obtained in the form of “specified bonds” or “specified loans”. J-REIT Structure Please see 5.3 REITs . 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Please see 5.1 Types of Entities Available to Investors to Hold Real Estate Assets . 5.3 REITs A J-REIT is a type of investment fund in corpo - rate form under the Investment Trust and Invest -
folio for which can be continually expanded or replaced with new assets. The main features of each structure are dis - cussed below. GK-TK Structure A GK-TK structure usually involves three types of vehicles: • the fund is formed as a limited liability com - pany ( godo kaisha or GK); • the GK is to acquire and hold one or more TBIs in a real estate trust (Property Trust); and • the GK obtains quasi-equity investment from a TK investor under a TK agreement, and takes out a loan from a third-party financial institution. A GK is one of the ordinary corporate forms available under the Companies Law, with all equity holders (members) of the GK bearing limited liability. For tax and other regulatory or practical reasons, real property is often traded under trust arrange - ments in Japan – ie, property is acquired in the form of a TBI rather than an outright purchase of the property. In that case, the real property is owned by the trustee of the Property Trust (usually, a licensed trust bank in Japan) for the benefit of the GK as beneficiary. A TK is one of the forms of partnership avail - able under the Commercial Code, and is formed by an agreement between the GK as operator and a TK investor. As a legal matter, the funds contributed by the TK investor belong to the GK as operator, and all acts of the TK business are done in the name of the GK.
480 CHAMBERS.COM
Powered by FlippingBook