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COVID-19’s Impact on Notification Filings in Japan

April 01, 2020

Foreign investment trust notifications, foreign investment corporation notifications, and Article 63 notifications required to be filed prior to making a solicitation for investments to relevant Japanese investors may be affected by the coronavirus (COVID-19) pandemic and resulting lockdowns.

This is the second in a series of alerts from Morgan Lewis’s investment management team in Tokyo that summarize how the COVID-19 global pandemic impacts investment fund–related businesses in Japan. This second alert summarizes how the pandemic impacts filing requirements for foreign investment funds related to their capital-raising activities; specifically, foreign investment trust notifications, foreign investment corporation notifications, and Article 63 notifications required to be filed prior to making a solicitation for investments to relevant Japanese investors.[1]

While Japanese regulators require original and “wet signature” documents to be filed in connection with these notifications, lockdowns of cities outside Japan caused by the pandemic has made it difficult for many parties making notifications (filing parties) to deliver original documents on a timely basis.

Foreign Investment Trust, Investment Corporation Notifications

Under the Act on Investment Trusts and Investment Corporations (ITICA), the trustee of a foreign investment trust is required to submit a foreign investment trust notification before commencing solicitation of subscription to beneficial interests in the trust. Similarly, under the ITICA, a foreign investment corporation is required to submit a foreign investment corporation notification before commencing solicitation of subscription of shares in the investment corporation.

In making these notifications, the following documents are required to be attached to the notification.

Foreign investment trusts:

  • A copy of a signed trust formation document (e.g., deed of trust, declaration of trust)
  • An original of the certificate of incumbency
  • An original of a power of attorney permitting counsel to make the filing for the trustee in respect of the trust
  • A copy of the certificate of registration of the relevant trust
  • An original of a legal opinion of counsel to the trustee in respect of the formation of the trust under the laws applicable to its formation
  • A copy of the investment management agreement (if investment authority is delegated) between the trustee and the relevant investment manager

Foreign investment corporations:

  • A copy of the corporation’s certificate of incorporation
  • An original certificate of incumbency of the officer signing for the corporation
  • An original of a power of attorney permitting counsel to make the filing for the trustee in respect of the investment corporation
  • A copy of the articles of association of the investment corporation
  • An original of a legal opinion of counsel to the corporation in respect of the formation of the corporation under the laws applicable to its formation
  • A copy of the investment management agreement (if investment authority is delegated) between the investment corporation and the relevant investment manager

While the notification itself can be signed by the trust or corporation’s Japanese counsel, with respect to certificate of incumbency, power of attorney, and legal opinion, originals need to be filed together with the notification.

There has been no official announcement from Financial Services Agency (FSA) about any special treatment under the current lockdowns in major foreign financial centers and other cities due to the COVID-19 pandemic. An FSA officer, however, recently informed Morgan Lewis’s investment management team in Tokyo that, considering the current circumstances that make it difficult to physically deliver original documents on time, the following approach will be acceptable on an interim basis:

  • Filing parties must indicate in writing (1) that they have attached to the notification PDF copies of the certificate of incumbency, power of attorney, and legal opinion because they have not been able to obtain originals due to the COVID-19 pandemic and (2) that they will file originals as soon as they are able to obtain them.
  • Filing parties must file the originals of documents as soon as they are able to obtain such originals (these will be substituted for the PDF copies in the filing register).

While the above conditions may appear overly strict compared with procedures in other jurisdictions, the filing of original documents is a “black letter” legal requirement in Japan so the FSA has limited flexibility to accommodate other arrangements. Typically, the FSA does not accept PDF copies as attachments and requests that the filing party should hold the notification until originals are ready. Because the FSA has not established any deadline for a follow-up on filed PDF copies, investment managers should make the filings with PDF copies on a timely basis as required under the ITICA, and submit the originals as soon as they become available.

Article 63 Notification

A general partner (GP) of a limited partnership may rely on the exemption under Article 63 of the Financial Instruments and Exchange Act (FIEA) which permits the GP to distribute interests in a limited partnership in Japan and/or to manage the assets of a limited partnership where Japanese investors are involved. Such GP is required to submit a notification to the Kanto Local Finance Bureau (KLFB) in accordance with Article 63 of the FIEA (Article 63 notification).

The following documents are required to be attached to an Article 63 notification:

  • An original oath of the GP as an entity
  • A copy of the articles of incorporation of the GP
  • A certified copy of the GP’s corporate registration
  • An original of the resume(s) of certain officers and important employees of the GP
  • An original of the certificate of residence (jyuminhyo) or equivalent document (e.g., an original affidavit with an original notarization) of officers and important employees of the GP
  • An original of a certificate of competency (mibunshomeisho)[2] or equivalent documents (e.g., an original affidavit with an original notarization) of officers and important employees of the GP
  • An original of the oath of officers or important employees of the GP in their individual capacities

The Article 63 notification and the GP’s oath must be signed by a representative of the GP and the oaths, resumes, and affidavits of officers and important employees must be signed by each relevant individual; these originals need to be filed with the Article 63 notification.

There has been no official announcement from the KLFB about any special treatment under current lockdowns due to the COVID-19 pandemic. While it appears that the KLFB understands that in the current circumstances, it may be difficult to physically deliver original documents in a timely manner due to lockdowns of cities where the relevant filing parties are located, KLFB officers have repeatedly advised our investment management lawyers that it is not acceptable to file PDF copies of documents, and that it is necessary to submit the originals at the time of filing an Article 63 notification.

While it is possible that the KLFB may change its approach in the near future, in contrast to the FSA, the KLFB lacks independent authority to interpret laws and regulations to change its operational requirements. Thus, original documents continue to be required for Article 63 notification filings and no solicitation or management activities under that exemption may be undertaken until these originals are submitted to the KLFB.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Tokyo
Tomoko Fuminaga
Christopher P. Wells
Narumi Ito



[1] The conditions applicable to, and requirement in respect of, the solicitation of Japanese investors are complex and beyond the scope of this alert, which is limited to technical requirements for notification filings.

[2] Mibunshomeisho means a document to prove not incompetent, not under adult guardianship, and not bankrupt.