JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
Trust Structure Trusts are generally considered the most appro - priate vehicle for securitisation because they are recognised as having legally assured bankruptcy remoteness under the Trust Act and are gener - ally subject to “pass-through” taxation, whereby taxation at the trust level (double taxation) can be avoided. Furthermore, the trust structure and the terms of TBIs can be created flexibly under the trust agreement. In the standard trust structure, the originator entrustor ( itakusha ) entrusts its assets with a trustee in exchange for TBIs in the entrusted assets and then obtains funding by selling TBIs to third persons. However, if investors prefer loans rather than purchasing TBIs, the originator entrustor can obtain cash by seeking redemption of its TBIs through the trustee borrowing loans from inves - tors. Depending on investors’ demand, the trus - tee can seek funds by issuing trust bonds to investors instead of receiving loans. Furthermore, if some investors prefer loans and others prefer TBIs, some TBIs can be redeemed by loan investors providing loans to the trustee, while other TBIs can be sold to investors. 1.3 Applicable Laws and Regulations The relevant legislation includes the Companies Act, Commercial Code, Act on Special Measures Concerning Taxation, Act Concerning Liquida - tion of Assets, Trust Act, Trust Business Act, FIEA, and Act on General Incorporated Asso - ciations and General Incorporated Foundations. 1.4 Special Purpose Entity (SPE) Jurisdiction When the legal framework for securitisation was first developed in the late 1990s, exempted
than permission and without the aforementioned delegation requirements, to the extent that the investors are limited to certain “qualified spe - cifically exempted investors” ( tekikaku-tokurei- toshika ). The most common GK-TK structure involves a GK owning the beneficial interests in real estate rather than the real estate directly, to avoid the application of the Joint Enterprise Act. However, since beneficial interests constitute “securities” under the Financial Instruments and Exchange Act (FIEA), a GK owning beneficial interests funded by TK investments is subject to the self- investment regulation under the FIEA (for further details, see 4.10 SPEs or Other Entities ). Furthermore, since TK investments also con - stitute securities under the FIEA, solicitation for the purchase of TK investments is subject to the business regulations under the FIEA. Where the GK’s principal assets comprise beneficial inter - ests that also constitute “securities”, the disclo - sure regulations under the FIEA will apply (for further details, see 4.1 Specific Disclosure Laws The TMK is a type of entity introduced by the Act Concerning Asset Securitisation of 1998 specifi - cally to facilitate asset securitisation. A TMK is required to file the commencement of business with government authorities, and is not author - ised to conduct any acts outside those set out in the asset liquidation plan. or Regulations ). TMK Structure A TMK is subject to the supervision of the FSA by way of various supervising measures, and particular requirements apply to TMKs (see 6.2 SPEs for details).
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