Formalities

Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

Corporate reorganisations only become effective following certain procedures under the Companies Act, and on the specific date provided under the statutory agreement or statutory plan to be approved by the shareholders’ meeting or board of directors meeting (as applicable) of the parties to the corporate reorganisation. Therefore, backdated or deemed effectiveness is prohibited.

Documentation

What documentation is required in a corporate reorganisation?

Under the Companies Act of Japan, a statutory agreement or statutory plan for corporate reorganisations is required. Items to be provided in the statutory agreement or statutory plan include the company name and address of the parties to the corporate reorganisation, the consideration of the corporate reorganisation and the effective date of the corporate reorganisation.

Also, in order to provide certain information to its shareholders and creditors, parties to the corporate reorganisation must prepare and locate documents including information such as: (i) the statutory agreement or statutory plan; (ii) appropriateness of consideration of the corporate reorganisation; or (iii) financial statements of the parties to the corporate reorganisation. This must be performed both for a certain period before the corporate reorganisation and for six months after the corporate reorganisation becomes effective

Within the aforementioned time frame, parties to the corporate reorganisation are also required to prepare and locate documents including information such as: (i) the effective date of the corporate reorganisation; (ii) the process of the demand for purchase of shares by shareholders and the protection of creditors; and (iii) the date of commercial registration of the corporate reorganisation.

When a company under continuous disclosure obligations is party to the corporate reorganisation, certain disclosure documents, such as the preparation of a registration statement or an extraordinary report may be required by the parties to the corporate reorganisation, and the preparation of a large shareholding report may be required by the shareholders of the parties to the corporate reorganisation. Also, timely disclosure by the parties to the corporate reorganisation may be required if shares of such parties are listed on a stock exchange.

Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

It is not typical for representations, warranties and indemnities to be provided by the parties to a corporate reorganisation, especially when a corporate reorganisation is conducted between group companies.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

Under the Companies Act, there are no particular differences between whether the assets or businesses transferred are a going concern, except in relation to a corporate split (see question 11). However, under the tax laws, if assets or businesses of a going concern are transferred by a non-tax-qualified corporate reorganisation, goodwill may be realised and recognised by the surviving company or newly incorporated company. In these cases, the amount of goodwill shall be amortised by such companies under the tax laws.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

With regard to the general incorporated associations or general incorporated foundations, the only corporate reorganisations that can be implemented are absorption-type mergers and incorporation-type mergers. When general incorporated associations or general incorporated foundations undertake mergers, a general incorporated association or general incorporated foundation is the only entity that can become the surviving corporation or newly incorporated corporation after the merger. The same applies to public incorporated associations and public incorporated foundations. Further, with regard to non-profit corporations, the only corporate reorganisations available are also absorption-type mergers and incorporation-type mergers.

In general, for all of the above entities, the corporate reorganisation requires the approval of membership holders’ meeting or equivalent, and they must follow other statutory procedures similar to the stock corporations, to undertake a merger. Also, especially for non-profit corporations, they must obtain an approval from the competent authority for the merger to become effective.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

Under the Companies Act, commercial registration to the applicable legal affairs bureau is required after entity conversion, merger and corporate split. Filing of an extraordinary report is required when a company under continuous disclosure obligations is a party to corporate reorganisations and exceeds certain thresholds.

Also, filing of a large shareholding report or report on the status of parent company, etc, by shareholders of companies that are party to corporate reorganisations may be required under the FIEA. Further, if a shareholder or shareholders of companies undertaking corporate re-organisations is a foreign entity or non-resident, ex post facto notification to the competent ministers through the Bank of Japan may be required under the FETA, depending on the business the target company undertakes. (See question 5.)