Recently, we were asked to register a capital increase in a Japanese subsidiary of a foreign corporation by the issuance of subscription shares. The following is a brief description of the process involved.
Method of capital increase
In this case, the capital increase of the subsidiary was performed through the receipt of a capital contribution from the parent company and the issuance of new shares.
Procedures for the issuance of subscription shares (capital increase) by the subsidiary
The procedures for the issuance of subscription shares (capital increase) are as follows.
1. Decide on subscription details
First, details of the subscription must be decided by resolution of a shareholder meeting. In this instance, since the company was a 100% subsidiary of a foreign corporation, a shareholder meeting was convened through written resolution by obtaining the written consent of the sole shareholder.
2. Share subscription agreement
Next, the parent company and subsidiary must enter into a Share Subscription Agreement. Entering into the Share Subscription Agreement requires the approval by a resolution of a shareholder meeting (or the Board of Directors if the company has a Board of Directors).
3. Make capital contribution
The parent company must then pay the capital contribution amount to the subsidiary’s bank account prior to the payment deadline date.
4. Effective date of capital increase
The issuance of the subscription shares (capital increase) is effective the date of the payment. A registration application must be filed within two weeks of the effective date.
Notice to Bank of Japan Pursuant to Foreign Exchange and Foreign Trade Act (FEFTA)
Since the non-resident parent company acquiring shares in its Japanese subsidiary through the issuance of subscription shares qualifies as an act of direct inward investment, the relevant notice was filed with the Bank of Japan.
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