1. Are you investing into the shares of Japanese companies? You should know FEFTA.

Before investing into the shares of Japanese companies, you should know regulations on foreign investment in Japan. Such regulations are Foreign Exchange and Foreign Trade Act (“FEFTA”). FEFTA regulates, among others, the cases where “foreign investor” is investing into the shares of the company in Japan.

Such “foreign investor” includes both foreign corporation and individuals who do not live in Japan. Therefore, not only investment companies such as VCs but also angel investors who are investing individually are considered as “foreign investor”. If such “foreign investor” acquires the shares of the non-listed company in Japan, it needs to make prior notification or post notification to the Ministry of Finance and other competent ministry under the FEFTA depending on the businesses of the target company.  The businesses requiring prior notification includes mining, petroleum, leather, fishing, forestry, agriculture, aircraft, weaponry, atomic energy, and space development, but please be noted that some IT businesses such as software package business is also classified as the businesses requiring the prior notification. If foreign investor fails to make such notifications, FEFTA provides certain sanctions including criminal fines.

Therefore, when foreign investor makes investment into the shares of Japanese companies, it is possibly required to make prior notification or post notification to the relevant ministry in Japan. In that case, you need to wait for certain period (normally from 2 weeks to 30 days) before you can obtain clearance under the FEFTA. If foreign investor fails to make such notifications under the FEFTA, then there are possibly sanctions including criminal fines. 

So, please consult with lawyers in Japan like us before investing into the shares of Japanese companies.

2. Did you already invest in the shares of the Japanese companies in the past without knowing the FEFTA?

Please contact us as soon as possible. We have a lot of experiences to work on the cases to remedy the illegal situation to avoid the actual sanctions, and we can be of assistance even if you are on such situation. 

Yukihiro Nagata, Partner

y-nagata@kensei-law.jp