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Documentation

Preliminary agreements
What preliminary agreements are commonly drafted?

This depends on each transaction’s type, size and schedule. In a large-scale, long-term transaction, commonly the parties first execute a memorandum of understanding in which they outline the transaction’s purpose, structure, schedule and general terms and conditions.

Principal documentation
What documents are required?

Stock purchase
An agreement setting down the terms and conditions for the transaction.
Certain documents regarding matters subject to disclosure regarding execution or closure of the transaction.

Tender offer
Public notice of commencement of a tender offer and registration statement for a tender offer.
A tender offer explanatory statement.
Notice of the purchase.
Public notice of the number of tendered share and tender offer report.

Merger/share exchange/company split
An agreement setting out the terms and conditions for the transaction.
A security registration statement (in certain cases, as set out in the Financial Instruments and Exchange Law).
Certain documents subject to advanced disclosure, including the relevant agreement.
A public notice in relation to the procedures for creditors’ objections.
Certain other documents regarding matters subject to disclosure after execution of the transaction.
Notice in relation to the appraisal rights of opposing shareholders.

Issuance of shares for subscription
A share subscription agreement or share application certificate.
A security registration statement (in certain cases set out in the Financial Instruments and Exchange Law).

Which side normally prepares the first drafts?

The seller generally prepares the first draft, but this depends on the specific circumstances of a transaction.

What are the substantive clauses that comprise an acquisition agreement?

The substantive clauses in an acquisition agreement cover the price (including any price adjustments), timing and place of closing, representations and warranties, covenants, conditions precedent, indemnification and termination.

What provisions are made for deal protection?

In recent years, the number of transactions including deal protection clauses (eg, break-fee clauses and exclusive negotiation clauses) has increased. However, because there are few court precedents on this matter, it is unclear whether a court would confirm the validity of such clauses, especially when they might conflict with the fiduciary duties of a target’s directors.

Closing documentation
What documents are normally executed at signing and closing?

At signing, a definitive agreement setting out the general terms and conditions of the transaction is executed. At closing, in some cases the parties execute ancillary transaction agreements relating to the post-transaction business (eg, distribution agreements, service agreements and licence agreements).

Are there formalities for the execution of documents by foreign companies?

No.

Are digital signatures binding and enforceable?

Although Japan has a law on digital signatures, generally parties do not execute M&A transaction agreements through digital signatures.

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