Foreign Exchange Control Order. Copyright Roderick Seeman

Article 12 (Reporting, etc., of Capital Transactions)

1.The registration based on the provisions of Article 22, Paragraph 1 of the Law, must be made based on the procedures as provided for by Ministry of Finance Ordinance within a period as determined by the Minister of Finance that is within 3 months prior to the day that the capital transactions listed in any of the items of the same paragraph is to be made.

2. In those situations where the party who must make the registration based on the provisions of Article 22, Paragraph 1 of the Law is an exchange non-resident, the said non-resident must make the said registration through an exchange resident representative (limited to a party who has the authority to receive documents sent based on the provisions of Paragraph 1 of the following Article, excluding situations where the capital transactions related to the registration are classifiable as acquisition of securities listed in Item 3 of Article 22, Paragraph 1 of the Law).

3. These matters which shall be determined by Cabinet Order as provided for in Article 22, Paragraph 1 shall be the matters listed in the following:

(1) The names and addresses or residences of the parties who will make the capital transaction (for corporations, their names, the location of their main offices and the names of their representatives);

(2) The particulars of the capital transaction;

(3) The timing of execution of the capital transactions;

(4) The reasons for making the capital transaction;

(5) Other matters as determined by Ministry of Finance Ordinance.

4. Those situations which will be determined by Cabinet Order as provided for in Article 22, Paragraph 1 of the Law shall be those situations where the Minister of Finance has designated capital transactions as having been deemed not particularly an obstacle to the achievement of the objectives of the Law, even if the registration provided for in the provisions of the same article is not made.

5. The corporations which will be determined by Cabinet Order as provided for in Article 22, Paragraph 1, Item 1 of the Law, shall be those corporations listed below which were established under foreign legislation:

(1) Corporations where the ratio of the shares or equity interest possessed by exchange residents to the total number of shares issued or the total amount of equity interest in the said corporation is above the rate set by the Minister of Finance but not below 25%;

(2) Corporations which have all of their issued shares or all of their total equity interest held by corporations or exchange residents listed in the preceding Item, and corporations listed in the same Item;

(3) Other than the corporations listed in the preceding 2 items, corporations which issue securities in foreign countries for the benefit of corporations listed in the preceding 2 Items or exchange residents.

6. The acquisition of securities or the lending of money to be designated by Cabinet Order as provided for in Article 22, Paragraph 2 of the Law, shall be the acquisition by exchange residents of foreign currency denominated securities or the lending of money (limited to those where the loan term exceeds one year) listed in the following:

(1) The acquisition of foreign currency denominated securities in relation to issuance by the corporation which was established under the legislation of foreign countries (hereinafter in this paragraph referred to as "foreign corporation") in situations where the number of shares or the amount of equity interest possessed by such exchange residents becomes 10% or more of the total issued shares or the total equity interest of the said foreign corporation, or in situations which fall under situations as designated by Ministry of Finance Ordinance as situations similar to the foregoing;

(2) The acquisition of foreign currency denominated securities issued by foreign corporations in which the number of shares or the amount of equity interest possessed by such exchange resident is 10% or more of the total shares issued or the total equity interest of the corporation, or the acquisition of foreign currency denominated securities issued by those foreign corporations designated by Ministry of Finance Ordinance as similar to these; or the lending of money to these foreign corporations;

(3) Other than those matters listed in the preceding 2 items, the acquisition of foreign currency denominated securities issued by foreign corporations which are in a permanent relationship with such exchange resident, such as dispatching of executives, long term provisions on raw materials or other matters as determined by Ministry of Finance Ordinance; or the lendings of money to said foreign corporations.

6. Parties who are to be determined by Cabinet Order, as per the provisions of Article 22, Paragraph 2, of the Law, shall mean the corporations which have their main office in a foreign country (excluding corporations established based on the laws and regulations of a foreign country (meaning "foreign corporations" in Paragraph 9) and, from among the business offices of authorized foreign exchange banks that are Japanese corporations, those that are non-residents.)

7. The deposit contracts which are to be determined by Cabinet Order, as per the provisions of Article 22, Paragraph 2, Item 1, of the Law, shall be those deposit contracts (excluding those related to negotiable certificates) satisfying the requirements listed in the Items below, corresponding to the classifications of deposit contracts listed below:

(A) Deposit contracts among, from among the non-residents which are provided for in Article 22, Paragraph 2, Item 1 of the Law, parties who are financial institutions and such other parties as determined by Ministry of Finance Ordinance.

For deposit contracts for which there are no provisions for the time period concerning repayment, those where repayment is made after or on the day the said deposit contract is dissolved, and for deposit contracts for which the time period is set, those where repayment arrives after the day after the date of conclusion of the said deposit contract.

(B) Deposit contracts among parties, from among the non-residents which are provided for in Article 22, Paragraph 2, of the Law, who are parties other than those of the previous Item:

A deposit contract which is a contract which has provisions for the time period of repayment and that time period for repayment shall arrive after two days have passed from the date of conclusion of the said deposit contract, and the amount of deposit received based on the said deposit contract is equal to or greater than an amount determined by the Minister of Finance.

8. The transactions or actions which are to be determined by Cabinet Order, as provided in Article 22, Paragraph 2, Item 3 of the Law shall be deposit contracts (excluding those related to negotiable deposits) or transactions related to the creation, etc of claims based on monetary lending agreements with other authorized foreign exchange banks in Japan, and the accounting for the management or procurement of funds related to the said transactions with the said other authorized foreign exchange bank is adjusted in the special international financial transactions account provided for in the same Paragraph (meaning the "special international financial transactions account" in Items 10-12)

9. The acquisition of securities, or the monetary lendiings which are to be determined by Cabinet Order as provided in Article 22, Paragraph 3 of the Law, shall be any of the acquisition of securities or monetary lendings (limited to those monetary lendings exceeding one year) listed hereunder by a resident:

(A) The acquisition of securities in relation to an issue by a foreign corporation in those situations where the number of shares of the foreign company to be held by the said resident or the amount of investment in capital by the said resident equals or exceeds 10% of the total issued and outstanding shares or the total investment in capital of the said foreign company or situations corresponding to that as determined by the Ministry of Finance Ordinance.

(B) The acquisition of foreign currency denominated securities related to a foreign corporation of which 10% or more or its total issued and outstanding shares or of its total investment in capital, is held by the said resident, or foreign corporations determined by Ministry of Finance as correspond to that, or the making of monetary loans to these foreign corporations.

(C) In addition to those listed in the previous 2 Items, the acquisition of foreign currency denominated securities in relation to issues by foreign corporations which are in a permanent relationship with the said resident, such as the seconding of executives, long term raw material supply relationships and others as designated by Ministry of Finance Ordinance, or monetary loans to such foreign corporations.

10. Authorized foreign exchange banks, which having received the authorization fo the Ministry of Finance, concerning the establishment of special international financial transactions account, based on the provisions of Article 22, Paragraph 2 of the Law, as per the determinations of Ministry of Finance Ordinance, append bookkeeping records, and must enter the management or procurement of funds related to the transactions or actions listed in each of the Items of the same Paragraph based on methods and standards as determined by Ministry of Finance Ordinance.

11. Concerning transfers between the special international financial transactions account, and other accounts, they must be based on the determinations listed hereunder.

(1). Everyday, at the end of business, (when the said day is a holiday, the previous day. Hereinafter in this Paragraph, the same.) the amount of funds transferred from the special international financial transactions to another account shall be limited to the amount calculated by, from among the amounts which have been entered in the special international financial transactions account every day at the end of business, during the month prior to the month of the said day, the total amount during that month of those related to the management of funds for nonresidents, as provided in Article 22, Paragraph 2 of the Law, and dividing that total amount by the number of days in the month, and the amount obtained thereby (when that said amount obtained by dividing the number of days in the month is less than an amount determined by the Minister of Finance) multiplied by a rate set by the Minister of Finance. (For the period from the day that the authorized foreign exchange bank started the accounting for the special international financial transactions account until the last day of the following month, an amount determined by the Minister of Finance, considering the monetary loans in foreign currency by the authorized foreign exchange bank, and other conditions.)

(2) The total amount of the transfers of funds during the month of the end of day transfers from the special international financial transactions account to other accounts, shall be limited to the total amount of the transfers of funds during the month of the end of day transfers from the other accounts to the special international financial transactions account.

12 Authorized foreign exchange banks must confirm that the other party to the transactions, listed in Article 22, Paragraph 2, Items 1 or 2 of the Law, entered in the special international financial transactions account is a non-resident provided for in the same Paragraph, by the method of collecting documents as provided for by Ministry of Finance Ordinance, or such other methods provided by Ministry of Finance Ordinance, in addition to making confirmations according to the provisions of Ministry of Finance Ordinance, concerning the uses of the funds related to monetary loans entered in the special international financial transactions account.

13. When a securities company is going to receive the designation of the Minister of Finance as provided for in the proviso of Article 22, Paragraph 1 of the Law, it must apply for the said designation based on procedures as determined by Ministry of Finance Ordinance.