Foreign Exchange and Foreign Trade Control Law. Copyright Roderick Seeman

CHAPTER V DIRECT DOMESTIC INVESTMENTS, ETC.

Article 26 (Notice, etc., of direct domestic investments, etc.)

A "foreign investor" shall mean any one of those mentioned below, which performs any one of the direct domestic investments, etc., mentioned in each Item of the next Paragraph:

(1) A natural person who is a non-resident;

(2) A juridical person or other organization established under foreign legislation, or a juridical person or other organization having its main office in a foreign country;

(3) A company of which the number of stock or the amount of capital subscription directly owned by one or more of those mentioned in Item (1) and/or the preceding Item, and/or the number of stock or the amount of capital subscription designated by a Cabinet Order as being indirectly owned by the above-mentioned through another company or other companies, equal(s) or exceed(s) in the aggregate one-half (1/2) of that company's total stock issue or total subscribed capital; or

(4) Other than those mentioned in the preceding two Items, a juridical person or other organization, where parties listed in Item (i) constitute either the majority of the board members (meaning directors and other similar posts. Hereinafter in this Item, the same) or of the parties who have the right of representation by board directors.

2. A "direct domestic investment, etc." shall mean an act which falls under any Item below:

(1) Acquisition of any company's stock or equity interests (excluding those received from any of those listed in the Items of the previous Paragraph or the acquisition of shares of (companies which have their shares listed on a stock exchange provided for in Article 2, Paragraph 11 of the Securities Exchange Law or companies which issue shares determined by Cabinet Order to be similar to those (hereinafter called "listed companies, etc.")).

(2) Transfer of share(s) or equity holdings of any company other than listed companies, etc., which were held continuously prior to becoming a non-resident (limited only to such transfers as made by a non-resident natural person to any one mentioned in any Item of the preceding Paragraph);

(3) Acquisition of shares of listed companies, etc. (limited only to such instances where either the ratio of the number of shares of the said listed company, etc related to the said acquisition against that company's total stock issue; or the aggregate ratio of the total number of shares of the said listed company etc., which the party making the said acquisitions comes to hold after the said acquisition, plus the number of shares of the same listed company etc possessed by nonresident natural persons, juridical persons or other organizations (limited to those classifiable as those listed in Items (i) or (iv) of the previous Paragraph) having a special relationship, as provided by Cabinet Order, with the party making the said acquisition, through shareholder relationships, etc., continuous economic relationships, familial relationships and other relationships corresponding thereto, against that said listed company’s total issued and outstanding shares equals or exceeds a ratio determined by a Cabinet Order which shall be not less than ten-hundredths (10/100));

(4) Consent given to a substantial alteration of the objective of a company's business (limited only to such consent as given by those who own in total one-third (1/3) or more of that company's total outstanding issued stocks or total investment in capital );

(5) Establishment of a branch, etc., in Japan or substantial alteration of the type or the business objective of a branch, etc., existing in Japan (limited to only such establishment and alteration as designated by a Cabinet Order, which is to be made by any one of those mentioned in Item (1) or (2) of the preceding Paragraph);

(6) Money lending to a juridical person having its main office in Japan in excess of an amount determined by a Cabinet Order (excepting those lendings made by a bank or other such other financial institution designated by a Cabinet Order, and which has its lines business the making of loans, or and lendings in our currency made by any one of those mentioned in Item (3) or (4) of the preceding Paragraph), for which the term exceeds one year;

(7) Any other act designated by a Cabinet Order as being similar to any one of those mentioned in each of the preceding Items.

3. When a foreign investor who makes any of the a direct domestic investment, etc., mentioned in any Item of the preceding Paragraph (excepting those cases determined by a Cabinet Order, in consideration of such instances as inheritance, legacy, merger of juridical persons, etc.(Hereinafter in this Article and until Article 27-2, the same)) must make a report, as provided by Cabinet Order, to the Minister of Finance and the Minister(s) in charge of the industry involved. Provided however, concerning the direct domestic investment, etc. for which notifications must be made by Paragraph 1 of the following Paragraph, these restrictions do not apply.