(1) Numerical Standards for ''Rapid Buy-Ups'' Based on a Combination of On-Market and Off-Market Transactions, etc. in Cases Wherein TOB is Mandatory

• A new provision was established so that ''rapid buy-ups'' would refer to cases in which more than 10% of all outstanding shares are acquired either through purchase or through the acquisition of new issues in a period not exceeding three months, provided that more than 5% of it has been acquired by such means as off-market purchase.

(2) Enhancement of Information Provided to Investors

• a. Enhancement of Disclosure in TOB Notice
• It is now a requirement to provide a more specific description of the management policies after the execution of TOB and course of action, etc. as a shareholder (including whether there is any plan to additionally acquire share certificates, etc. and whether there are any prospects for delisting, etc.). Furthermore, considering that problems may arise in the form of conflicts of interest on the part of the management team, etc. in its relationship with shareholders when the management team, etc. becomes a bidder in a management buyout (MBO) or TOB made by the parent company centered around the shares of its subsidiary, if the TOB price has actually been calculated on the basis of a TOB price calculation and appraisal form obtained from a third party, it is now a requirement to attach a copy of such TOB price calculation and appraisal form to the TOB notice.
• b. Targeted Party's Obligation to Declare Its Position
• Necessary provisions were developed with respect to specific matters to be stated in the position statement report, which is a disclosure document stating the targeted party's opinions on the TOB. Moreover, it is now a requirement to submit a position statement report within 10 business days of the public notice of the commencement of TOB.
• c. Opportunity given to Targeted Party to Ask Questions to Bidder
• Necessary provisions were developed with respect to specific matters to be stated in the position statement report (a disclosure document stating the targeted party's questions) and response to questions (a disclosure document stating the bidder's response to the targeted party's questions). Also, it is now a requirement to submit the response to questions within 5 business days of receiving the ''position statement report''.

(3) TOB Period

• a. Length of TOB Period
• The length of the TOB period, which is currently between 20 and 60 calendar days, has been changed to between 20 and 60 business days.
• b. Cases in which Target Party Requests Extension of TOB Period and Extended TOB Period
• Previously, the targeted party was able to request an extension of the TOB period if the TOB period initially set by the bidder was less than a certain period. This ''certain period'' is now stipulated as 30 business days. Moreover, the extended TOB period is now stipulated as 30 business days.
  Furthermore, necessary provisions were developed for TOB notices, such as establishing a column in the ''period of purchase, etc.'' section wherein the extended period of purchase, etc. must be stated in cases where a request for extension has been received.

(4) Flexible Approach to Amendment of Terms and Conditions of TOB and Withdrawal of TOB

• a. Cases in which Reduction of TOB Price is Permissible
• The reduction of the TOB price, which is prohibited under the existing system, will soon be permissible in certain cases, namely, when the targeted party carries out a stock split, etc. or executes a gratis issue of stocks, etc.
• b. Cases in which Withdrawal of TOB is Permissible
• Withdrawal of TOB, which is only permissible in the case of merger, bankruptcy, etc. under the existing system, will also soon be permissible in cases where so-called anti-takeover measures are launched and cases where so-called anti-takeover measures are not terminated.
  In regards to the reasons for withdrawal due to be added, withdrawal based on minor reasons will not be made permissible as is the case for the reasons for withdrawal that are currently accepted. Necessary provisions were developed for the criteria of minor reasons.

(5) Development of Necessary Provisions for Partial Introduction of Obligation to Purchase All Shares

• A new provision was established to oblige the bidder to purchase all shares, etc. of the targeted party if the bidder's shareholding ratio exceeds two-thirds of all outstanding shares, etc. after the TOB.
  Furthermore, in cases wherein the bidder's shareholding ratio exceeds two-thirds of all outstanding shares, etc. after the TOB, it is now a TOB requirement to execute TOB with respect to all shares, etc. with voting power as a general rule.
  The same TOB period must be set with respect to all shares, etc. subject to TOB. It is now also a requirement that the difference in TOB price in the column be specified as the basis of calculation of the TOB price in the TOB notice.

(6) Numerical Standards for ''Rapid Buy-up'' by Major Shareholders During Other Party's TOB Period

• A new provision was established so that such ''rapid buy-ups'' would refer to the purchasing of more than 5% of all outstanding shares, etc. during the other party's TOB period.

(7) Scope of TOB Regulations regarding Purchase of Subsidiary's Shares

• Under the existing system, TOB regulations are not applicable to cases in which shares of a subsidiary with more than 50% of the voting power are purchased from an extremely small number of shareholders. In cases wherein the bidder's shareholding ratio exceeds two-thirds after the TOB, the bidder is now obliged to engage in TOB, considering that TOB that results in delisting, etc. might put small shareholders with leftover shares in an extremely vulnerable position.

(8) Other Provisions

• Necessary provisions were developed with respect to the method of calculating the shareholding ratio, withi the exception of the prohibition of separate purchases, criteria of minor reasons concerning special parties, etc.

(1) Securities to be Reported and Expansion of Scope of Securities requiring Indication of Rights relating to Securities to be Reported

• Investment securities, etc. were added to the list of securities to be reported.

(2) Significant Proposals, etc.

• The following matters have been stipulated as significant proposals, etc. made to directors or at the general meeting of shareholders that are not subject to the special reporting system:
  1. Disposal or transfer of material assets;
  2. Large amount of debt;
  3. Election or dismissal of representative director;
  4. Material change to the directorship;
  5. Election or dismissal of manager or other significant employee;
  6. Establishment, amendment or abolition of branch or other significant organization;
  7. Reorganization, etc. under Japanese company law;
  8. Significant changes in dividend policies;
  9. Significant changes in policies relating to increases or decreases in capital
  10. Delisting, etc.; and
  11. Listing of subsidiary's shares, etc.

(3) Base Date for Special Report

• Institutional investors who wish to submit a notice regarding the base date for making a special reports must choose from among the following combinations of days:
  1. Second and fourth Monday of each month (if there is a fifth Monday in the month, then the second, fourth and fifth Monday); or
  2. The fifteenth day and last day of each month

(4) Purpose of Shareholding

• These necessary provisions were developed to render the disclosed information on the shareholding purpose more specific.

(5) Other

• These necessary provisions were developed in regards to double entries between joint shareholders that should be netted, the scope of nominal joint shareholders, the reasons for submitting amendment report, the criteria for minor reasons concerning deemed joint holders, etc.

(1) The revised TOB system and the section relating to significant proposals, etc. under the revised reporting system for large shareholdings came into force on December 13, 2006.

(2) The other sections of the revised reporting system for large shareholdings are scheduled for introduction on January 1, 2007. Mandatory submission of electronic reports on large shareholdings, etc. via EDINET (Electronic Disclosure for Investors' NETwork) is scheduled to come into force on April 1, 2007.

(1) Necessity of Synchronized Management

In an electronically registered receivables system, requests for registration of payments, etc. (deletion of records) to the management body must, as a general rule, be made by the creditor. The debtor cannot request the deletion of records unless the creditor gives approval. This prevents the risk of duplicate payments by the debtor, as the receivables are transferred in accordance with the creditor's response even if the debtor has made a payment, etc.

(2) Synchronized Management Based On Management Records

In order to prevent the risk of duplicate payments by the debtor, it would be effective to introduce a mechanism for the management body to delete the records based on its authority (synchronized management by the management body) without waiting for the creditor's request for the deletion of the registration of the receivables (request for deletion of registration) in cases where the debtor has completed the payment, etc.

(3) Method of Performing Synchronized Management by Management Body

One way for the management body to perform synchronized management through confirmation of the remittance of funds is to have the management body delete the relevant records when it is contacted by a financial institution and informed of the remittance of said funds from the debtor's account into that of the creditor.

(1) Ensuring Fairness and Impartiality of Management Body

The accrual of electronically registered receivables, etc. comes into effect based on records in the register. It is extremely important that fairness and impartiality is ensured within the management body responsible for managing the register.

(2) Averting Bankruptcy of Management Body

If the management body were to go bankrupt, it would not only have a major impact on customers, but might even cause economic and social havoc in Japan. Accordingly, bankruptcy on the part of the management body needs to be prevented at all cost. It is also necessary to build a mechanism to minimize inconvenience among customers in the event that said body does go bankrupt.

(3) Ensuring Credibility of Register

If there is an error in the records of the register, there is a risk of the assignee acquiring electronically registered receivables as a result of being misled to believe that the erroneous records are correct, which might undermine the security of transactions. It is therefore necessary to design such a system in a way that ensures the credibility of the register managed by the management body.

(4) Requirements of Management Body

In consideration of the above, a management body of the above-described sort will be required to adhere to the following strictures:

• (a) Scope of Operations
  It is considered appropriate for the management body to demonstrate specialization in the operations it provides in order to ensure fairness and impartiality and avert bankruptcy risks.
• (b) Financial Base
  A certain financial base is required so as to be able to invest in systems, etc. and to run the management body in a stable and continuous manner.
• (c) Ability to Execute Operations
  It is necessary to ensure the ability to execute operations to the extent required for the proper management of the register.

(5) Supervision

In addition to looking into building a designation system, etc. by using debenture transfer bodies, etc. similar to the management body as reference, it is necessary to develop necessary provisions for inspection and supervision to ensure the effectiveness of various regulations targeted at the management body, while properly identifying the business status of the management body.

(1) Use by Consumers

Customer protection is also a crucial issue. Although consumers are currently protected in terms of legislation, it is important to prevent disputes from arising, as it is detrimental to them for such disputes to arise in the first place.

(2) Protection of Customer Information

The management body should be obliged to implement thorough measures to ensure confidentiality, customer identification and data security, as it oversees the management of a register of electronically registered receivables wherein customer information is compiled.

(3) Dissemination of Operational Rules to Customers, etc.

As the use of electronically registered receivables will be controlled by operation rules, etc. established by the management body, it is important to take appropriate measures to ensure that said operation rules, etc. are made common knowledge. It is also necessary to give consideration to customers' computing environments, bearing in mind that IT-related knowledge and proficiency varies from customer to customer.

(1) Relationship with Financial Instruments and Exchange Law, etc.

Electronically registered receivables have the potential to be widely traded as financial instruments, as a wide range of applications is conceivable. With this in mind, it is necessary to look into applying the regulations of the Financial Instruments and Exchange Law.

(2) Netting of Electronically Registered Receivables

It is necessary to examine what kind of approach would be appropriate in the netting of electronically registered receivables with a view to ensuring practical merits, security in settlement and customer protection.

(3) Standardization, etc.

It is the hope that a suitable approach will be taken to the standardization of technologies, etc. for exchanging electronic data held by the management body based on currently operational practices.

Upon designing an electronically registered receivables system, it will be important to not only take the view of ensuring credibility but also to attempt to ensure the growth potential of financial services through electronically registered receivables by taking a flexible approach to diverse business needs, IT innovation, etc. in the future. It is the hope that said legislation based on these views will see the widespread implementation of electronically registered receivables, and will lead to the sound progress of this system.