JAPAN Trends and Developments Contributed by: Keiji Tonomura, Minh Thi Cao Koike, Akira Komatsu and Yuki Matsumiya, Nagashima Ohno & Tsunematsu
amendments encourage the fundraising of Web3 start-ups through the issuance of cryptocur - rency. Also, investment in equity interest in GK may increase investment in start-ups because many start-ups also choose GK although the most popular corporate form for start-ups is the limited stock company ( Kabushiki-Kaisha ). The Financial Services Agency and the Ministry of Economy, Trade and Industry jointly held the “Expert Panel on Venture Capital (VC) Funds” to smoothly provide VCs with funds from domes - tic and overseas institutional investors. On 8 November 2024, the Expert Panel finalised and published “Venture Capitals: Recommendations and Hopes” to be used by limited partners and general partners for their VC fundraising and management practice. The items listed as “Rec - ommendations” and “Hopes” are below. Recommendations Fiduciary responsibility and governance Introduction of “Venture Capitals: Recommendations and Hopes” • The VC funds managers (GPs) are fully aware of their fiduciary responsibilities and fulfil their accountability to investors (LPs). • Establish a sustainable management system that enables key persons to concentrate on fund management. • Ensuring a compliance management system at VCs. • Providing other LPs with information about an entitlement to a specific LP that could have a material adverse effect on those LPs. Management of conflicts of interest, etc • A conflict of interest management system shall be established at VCs, and in the event of a conflict of interest between LPs and GP,
appropriate measures shall be taken, such as consulting with the LPs. • Make arrangements to align the interests of LPs and GP, such as by making a commit - ment to invest in the VC. Disclosure • Provide information to LPs after assessing the fair value of assets held by VCs. • Provide LPs with financial information for the VC fund on a quarterly basis. Hopes Improving the corporate value of investee com - panies • VCs communicate sufficiently with investee start-ups to ensure that the investment agree - ment contributes to the growth of the start- ups. • VCs provide management support to investee start-ups, such as help with recruiting and provision of know-how. • VCs continue to provide capital policy sup - port after investment (excluding follow-on investment, fund term extension, considera - tion of optimal exit method and exit timing including M&A). • Fully consider the timing and method of sale shares after the investee start-up is listed (also consider crossover investment). Other • Manage funds with ESG and diversity in mind. Although the items listed in “Venture Capitals: Recommendations and Hopes” are only recom - mendations or desirable matters, not mandatory requirements, it is expected that compliance with “Venture Capitals: Recommendations and Hopes” would be evidence of having improved
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