Q4. How to buy unlisted shares in a KK company in Japan
A4. In general, shares in a KK company can be transferred from the transferor to the transferee by simply agreeing to transfer the shares. However, the transferee will not be able to exercise its rights as a shareholder unless the name and address of the transferee are recorded in the company’s shareholder register.
If share certificates have been issued for the shares being transferred, the delivery of the share certificates will also be necessary for the share transfer to take effect.
Quite often, unlisted shares are subject to a restriction on transfer. In other words, the transfer of shares in an unlisted company may be subject to the approval of the shareholders’ meeting, board of directors or other condition. If such restriction on transfer exists, the relevant approval will also be required.
If the transfer price of the shares is different from the value of the shares, there may be adverse tax consequences. In such regard, valuation of the shares becomes important. However, it is not always easy to value unlisted shares.
In the case where shares in a Japanese KK company are acquired by a foreign entity, it should be aware of the restrictions under the Foreign Exchange and Foreign Trade Law of Japan. Although in most cases only a post closing reporting requirement will be triggered (if any), there are some cases where the transfer of shares will trigger a pre-transfer reporting requirement and the transfer may be put on hold until the regulators decide whether or not to approve the transfer.
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