A case of business transfer of a business division of a Japanese company to an American company
Outline of the case
A Japanese company received a proposal from an American competitor to transfer a business unit related to the manufacture of its products. Normally, in a business transfer, the U.S. company, as the acquirer, establishes a Japanese subsidiary and acquires the business through the Japanese subsidiary, but in this case, the U.S. company was the direct acquirer and expressed its desire to purchase the Japanese company’s business. At the time of our request, due diligence by the U.S. company had already been completed, and both parties had agreed on a business transfer price of 1.8 billion yen. At the request of the Japanese company, we prepared an Assets Transfer Agreement in English based on the agreement between the parties.
Services offered by Kuribayashi Sogo Law Office
Since more than 80% of cross-border M&A transactions are conducted in the form of a share transfer agreement, it can be said that there are very few cases in which a business is transferred in the form of an Assets Transfer Agreement. However, in the case of an Assets Transfer Agreement, in principle, the company’s assets and liabilities are transferred in a comprehensive manner, whereas in the case of a Business Transfer Agreement, it is possible to transfer only some business units out of multiple business units. In addition, among the business divisions to be taken over, the assets and liabilities to be taken over can be specified and only limited assets and liabilities can be taken over, thus eliminating the risk of taking on unexpected liabilities for the transferee. Kuribayashi Sogo Law Office prepared an Assets Transfer Agreement in English, negotiated the details of the agreement with the buyer company, and provided support up to the signing of the agreement. In this case, it is extremely important to clearly define the assets and liabilities to be assumed by the transferee and to ensure that there is no conflict of understanding between the transferor and the transferee. In addition, unlike a stock transfer agreement, each asset and liability needed to fulfill perfection requirements for the transfer of rights, so it was necessary to confirm the respective perfection requirement and coordinate them so that the registration could be registered without omissions in the closing procedures. Our firm also handles these procedures such as preparation of closing-related documents on behalf of our clients.
Support for Foreign Companies by Kuribayashi Sogo Law Office
When a foreign company transfers or acquires shares of a Japanese company, it is called a cross-border M&A because the transaction crosses national borders. We have assisted Japanese companies in the transfer of shares of a Japanese company owned by a Japanese company to an American company, and we have assisted Japanese companies in the transfer of shares of a Japanese company owned by an American company to a Japanese company. We have a proven track record of supporting various cross-border M&A transactions. The above deals are generally referred to as domestic-foreign deals, since the target company is a Japanese company but the seller is a Japanese company and the buyer is a foreign company. Our services in these cross-border M&A transactions can be broadly divided into three phases. The first phase is the bidding and DD phase prior to the conclusion of a contract. We provide assistance in drafting non-disclosure agreements, letters of intent, and, in cases where bidding procedures are used, Non-Binding Offers and Binding Offers. We have foreign attorneys (attorneys licensed to practice law in the U.S. and Chinese attorneys licensed to practice law in China) who act as consultants, so that native lawyers can review the contents of documents, which enables us to prepare various documents of high quality. In addition, when the target is a Japanese company, a legal audit by a Japanese lawyer is often required. We often conduct legal audits of target Japanese companies on behalf of the buyer’s company. We often prepare legal audit reports in English as well as Japanese. The second phase is the M&A contract negotiation phase. We not only draft and revise share transfer agreements, but also represent and assist our clients in consultative negotiations with the counterparty foreign company (or its attorneys representing the counterparty). Recently, Zoom-based contract negotiations have become the mainstream, so we participate in Zoom meetings together with the client, explaining in English the matters confirmed in prior meetings with the client and proposing amendments to the contract terms in English. The third phase is the closing phase. After the SPA is agreed upon, we will confirm the contents of the Condition Precedent and support the client to ensure that the preconditions for the transaction are met. At the closing, we assist the client in preparing and submitting a Closing Certificate and Disclosure Letter, as well as minutes of the board of directors meetings and shareholders’ meetings of the target company and the companies involved that approve the transaction, in both English and Japanese, and if necessary, obtain certification at a notary public or obtain an Apostille is also obtained. In addition, when M&A transactions are carried out, there are many cases of capital increases and changes in directors, so we handle the registration of changes in directors and the total number of shares issued and outstanding on behalf of our clients. Recently, it is also important to note whether or not procedures related to the Antimonopoly Law and the Foreign Exchange and Foreign Trade Control Law are required. We also examine the necessity of these procedures, report the results to the client, and prepare and submit various notifications as necessary.
Fees
We generally charge a time fee for cross-border M&A transactions. Upon receiving a request for assistance with a cross-border M&A transaction, we clarify our fees by concluding an Engagement Agreement in Japanese or English prior to the transaction. The hourly fee for partner attorneys is 35,000 yen. The hourly fee for associate attorneys is 25,000 yen. Each month, you will be billed with a statement for the amount of time spent by each attorney multiplied by the billable rate (unit price per hour) of each attorney. A billing statement will be prepared in Japanese or English and submitted to the client along with the monthly invoice so that the client is aware of the work performed by the firm and the approximate amount of legal fees to be paid. In the event that there is a difference of opinion regarding fees, we will seek the client’s opinion and may adjust the amount of fees. For cross-border M&A transactions such as this one (where one or both parties are foreign companies and the transaction crosses national borders), most law firms will propose a time charge system, but if you prefer a fixed fee, we will be happy to discuss this with you. Please inquire with us. We have also offered a fixed fee for the transfer of management rights between group companies, in consideration of our client’s desire to save costs.
