5.Financing

|Q1 (Regulation of Private Placements)

We plan to issue shares to several acquaintances. We’ve heard that the Financial Instruments and Exchange Act (“FIEA”) applies to the issuance of shares in a public company, but may we believe that it is irrelevant for a non-public company?

The FIEA is a law that regulates financial instruments, and its scope is not limited to public companies. In particular, if your company issues shares of capital stock, options/warrants, or convertible bonds with warrants, and such issuance is deemed to be a “public offering of securities” (FIEA, Article 2, Section 3), in principle you are required to submit a registration statement (FIEA, Article 4, Section 1) as well as additional securities reports (FIEA, Article 4, Section 1). So, even before your company becomes a listed company, you need to be careful about the regulations under the FIEA. Since the burden of preparing these disclosure documents is extremely heavy, and in particular the securities reports are a continuing obligation, it would be practically difficult for a private company to satisfy these obligations. Accordingly, it is important to make sure that your activities do not trigger the filing of a registration statement before you become a listed company.

(Posted: January 27, 2012)