Unofficial and Provisional Translation
Readers are advised to refer to the original Japanese
text before quoting from this document.


Outline of the Amendment Bill of the Law on Securitization of Specified Assets by Special Purpose Companies (SPC Law) and Related Laws


As part of the efforts to develop an infrastructure for financial services fit for the 21st century, this bill will make the necessary amendments to the Law on Securitization of Specified Assets by Special Purpose Companies (SPC Law) and the Law on Securities Investment Trusts and Companies (Securities Investment Trust Law), both of which design the framework for professionals to manage and invest funds pooled by investors on the market. This bill will, among others, expand the range of products that the professionals may invest in under these laws, in order to promote the provision of diverse investment products and facilitate financing.


Amendment of the Law on Securitization of Specified Assets by Special Purpose Companies (SPC Law)

The bill will amend the SPC Law to expand the range of assets that can be securitized and make the scheme more convenient. As vehicles for securitization, trusts will also be made available.

In conjunction with this, the SPC Law will be renamed as the Law on Securitization of Assets.


1. Amendments to the company-type scheme

(1) The range of assets that can be securitized under this law will be expanded (from real estate and money claims payable to a specific person, to property rights in general)

(2)

The procedures for establishing special purpose companies (SPCs) will be simplified
[1] The current registration system will be changed to a notification system.
[2] Minimum capital requirement will be lowered from the current 3 million to 100 thousand.

(3)

Diversification of securities issued by SPCs will be promoted
[1] Capital reductions of preferred subscription certificates for the purpose of repayment of funds to investors will be allowed.
[2] Issuance of convertible bonds will be allowed, in order to allow freer design of securities.

(4)

SPCs will be allowed borrowing for acquiring assets securitized under this law.

(5)

Regulations concerning asset securitization plans will be simplified and streamlined
Amendment of asset securitization plans will be made possible by a special majority vote, provided that opposing shareholders are granted the right to demand their shares to be purchased by the SPC. (Under the current law, unanimous approval is required.)

2.


 Establishment of a trust-type scheme

An asset securitization scheme using trusts, similar to the company-type scheme, will be developed.


Amendment of the Law on Securities Investment Trusts and Companies (Securities Investment Trust Law)

This bill will amend the Securities Investment Trust Law which establishes a scheme for investment mainly in securities, to lay down provisions enabling investment in a broader range of assets including real estate.

In conjunction with this, the law will be renamed as the Law on Investment Trusts and Companies.


1.


 Relaxation of restrictions on investment

Assets in which funds are mainly invested will be expanded to securities, real estate, and other assets specified by government ordinance.

2. Provisions concerning investment trust managers

(1) Authorization of investment trust managers
Require investment trust managers which manage real estate funds, to obtain (a) a license under the Building Lots and Buildings Transaction Business Law, and (b) an approval of the Minister of Construction for conducting discretionary transactions.

(2)

Measures to prevent acts of conflicts of interests
[1] Transactions between investment trust managers and funds will be prohibited.
[2] Appraisal by an independent, external real estate appraiser will be required for real estates that is difficult to appraise its market value.
[3] Disclosure of specific details to investors will be required when transactions between funds are conducted.

(3)

Duty of loyalty, duty to exercise the care of a good manager, and liability for damages
Provisions will be laid down on [1]duty to act loyally for the investors, [2] duty to exercise the care of a good manager as a professional when conducting business, and [3]liability for damages when investment trust managers inflict damages on investors.

3.


 Provisions concerning trust schemes

The framework for trust companies themselves to manage entrusted assets will be stipulated.

Other Matters

This law will take effect as prescribed by government ordinance on a date no later than six month after promulgation.


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