Despite being one of the largest worldwide investors and one of the most developed economies, Japan still attracts significant amounts of foreign investments. In Japan, equity investment including investing via direct investment funds is gaining higher importance in terms of industry restructuration. Both institutional and retail investors seek to invest in alternative funds. This post should come in handy to those planning to obtain an investment fund manager’s license in Japan.
Collective investment
The scope of the term collective investment institution can include financial institutions of a wide range:
- Hedge funds;
- Mutual funds;
- Investment funds;
- Private equity funds;
- Professional investor funds;
- Variable capital companies;
- Investment limited partnerships;
- Property and real estate funds and others.
Direct investment fund
Japan obliges direct investment funds to have a registered office in the country. The general partner’s responsibilities include the preparation of financial statements. They also must invite a certified auditor for conducting an audit within 3 months after the financial year ends. Moreover, general partners apply for securities registration, prepare and pass the prospectus to investors. Meanwhile, they are required to disclose information. Corporate secretaries do not have any prescribed requirements.
Fund types in Japan
Japan offers several legal forms of direct investment funds to choose from:
- Partnership
This mechanism is constructed for all partners to share the profits and the losses. Partnerships have unlimited liability to third parties which means that third parties can sue the investors for damages.
- Investment limited partnership
In partnerships like these limited partners’ liability is limited: they only bear the liability to the extent of their capital contribution to ILP. However, the fund operator who becomes a general partner bears unlimited liability. It is also important to remember that such partnerships in Japan are not allowed to invest 50% of their assets or more in foreign corporations.
- Limited liability company
In Japan, this mechanism is the most typical when it comes to establishing private equity funds. According to the legislation, it must have a commercial registration within two weeks after opening. This type of partnership implies that partners only bear liability based on the liabilities of the fund.
All net inflows from equity securities other than the ones recorded as direct investments are considered to be portfolio equity investments: stocks, bonds, depository receipts, direct share purchases by foreign investors on the local stock market.
Conclusion
Individuals who plan to establish a direct investment fund in Japan should be familiar with long-term regulatory conditions and current trends on the market. This is more achievable when being in touch with specialists who monitor this sector on the regular basis.
Contact COREDO and our experts will keep you to date.