In this guidance column for financial instruments business operators (FIBOs) and prospective FIBOs, Japan Asset Management Platform Group (JAMP) discusses how to establish the listing system of beneficial owners (substantial stockholders), recently announced by the Japan Investment Advisors Association to its member institutions on December 3, 2021. Readers may refer to our previous column on confirming substantial owners https://investmentjapan.jp/guide/3085/.
"Rules on the Retention of the List of Information on Beneficial Owners at Commercial Registry Offices" (Ministry of Justice Notification No. 187, 2021) promulgated on September 17, 2021 will come into effect on January 31, 2022. At that time, 84 commercial registry offices in Japan will begin administering a list of beneficial owners (BOs) with specific information about the substantial shareholders of stock companies (the "System"). A stock company may request a copy of the documentation relating to a particular company.
The System will allow financial institutions and other specified business operators to more easily confirm the controlling interests of their customers when conducting specified transactions as stipulated in the "Act on Prevention of Transfer of Criminal Proceeds" (Act No. 22 of 2007. APTCP). The System is intended to strengthen measures already in place to fight money laundering and terrorism finance.
Overview of the System
What is the Beneficial Owner List?
| A list naming those entities/individuals who hold voting rights at a stock company and the percentage of votes controlled by each. |
What does the BO List System do?
| Upon request from a stock company, the Commercial Registry Office confirms the contents of the list of BOs prepared by the stock company by means of a prescribed attached document and issues a copy of the list. |
Which BO is subject to the request?
| 1) | A "natural person" who directly or indirectly holds more than 50% of the voting rights, except when the natural person clearly lacks the intention or ability to substantially control the business management of the corporation |
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2) |
A "natural person" who directly or indirectly holds more than 25% of the voting rights, except when the natural person clearly lacks the intention or ability to substantially control the business management of the corporation |
Which corporations can use the System?
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A joint-stock corporation (including a special limited company) can use this service. |
Definition of a BO
| A BO (natural person, etc.) who is recognized as directly or indirectly holding more than one-fourth of the total number of voting rights of a corporation, as defined in Article 4, Paragraph 1, Item 4 of the APTCP and Article 11, Paragraph 2 of the Ordinance for Enforcement of the APTCP. |
Benefits of the System
| The System was created in response to a recommendation of the Financial Action Task Force (FATF), an inter-governmental body combatting money laundering and terrorist financing. The System will strengthen measures that prevent the misuse of legal entities for money laundering purposes and improve transparency at Japanese stock companies. Greater transparency will enhance trust in the safety and ease of transactions internationally. |
For more information on the System and specific procedures and operations, please refer to the Ministry of Justice, Civil Affairs Bureau: https://www.moj.go.jp/MINJI/minji06_00116.html (Japanese only)
About JAMP: https://www.jamplatform.com/english/
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