5.Financing

|Q6 (Regulation of Convertible Bonds with Warrant (CB))

If we issue a convertible bond with warrant (CB), we have heard that we need to be careful about the Financial Instruments and Exchange Act, but what exactly does that mean?

If the issuance of a CB is considered a “public offering of marketable securities”, in principle you are required to submit a registration statement (and subsequent securities reports as continuous disclosure), which will be a great burden on the company. So, it is better to plan your CB issuance so that it won’t be considered a “public offering of marketable securities”. In order to do this, you should not make offers to more than 49 persons and entities (within a 6-month period) and you should fulfill the requirements specified below .

If the investors are not qualified institutional investors, (i) you must impose transfer restrictions that prohibit any partial transfers, and affix a legend on the CB certificates or other instruments to let potential transferees to know about the restrictions, or (ii) you must not issue 50 or more units of the CB (subject to the 6-month integration rule for the same type of CB) and you must impose restrictions that prohibit each unit of the CB from being divided into a greater number of units, and you must affix a legend on the CB certificates or other instruments to let potential transferees to know about the restrictions.

(Posted: January 27, 2012)