M&A in Japan — For Foreign Acquirers

M&A in Japan for Foreign Acquirers and Investors

Acquiring or investing in a Japanese business requires consideration of the transaction structure, regulatory requirements and arrangements for operating the business after closing. We advise foreign companies and investors in English on Japanese law, from transaction planning and legal due diligence through negotiations, closing and post-closing governance. This page focuses on privately held Japanese companies and businesses; listed-company acquisitions, tender offers and large shareholding reports are outside its scope.

We handle cross-border M&A, and our lawyers' experience before joining the firm includes advising large companies on M&A and in-house advice on export control and foreign investment regulation.

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Last updated: September 10, 2026

What to Prepare Before Contacting Us

Please share what you already know about the proposed transaction. A general description is enough for the first enquiry; you do not need to have settled the structure, assembled documents or arranged translations. You can also contact us to review a seller's proposed preliminary terms before committing to them.

The parties involved — Tell us about the proposed acquirer and target in general terms, identifying the parties and group relationships only as far as you can disclose them at this stage. Party identities will be needed before we can complete a conflict check.
The target's business — Describe its main products or services and any relevant subsidiaries or business divisions. Mention any licences, regulated activities, technology or sensitive information that you already know about.
What you propose to acquire — Tell us whether you are considering all or part of the existing shares, newly issued shares, or a particular business or group of assets. Where the structure is undecided, a description of the commercial objective is sufficient.
The rights and involvement you expect — Describe your intended ownership level, board representation, management involvement and access to information. For a minority investment, mention any particular governance or exit arrangements you are considering.
The current stage of discussions — Explain whether discussions are preliminary or whether a confidentiality agreement, letter of intent, term sheet, memorandum of understanding, exclusivity arrangement or draft transaction agreement is already in place. Flag any commitments already made.
Your proposed timetable — Identify any proposed signing or closing dates and the reasons for them. Mention known financing, internal approval, seller-process or operational dependencies.
Available information and known concerns — Describe the information already available, its principal language and any issues identified so far. These might concern ownership, key contracts, employees, intellectual property, financing or the seller's continuing involvement.
Your advisers and communication arrangements — Identify your in-house team, overseas counsel, M&A advisers, accountants and tax advisers, where appointed. Tell us your preferred working language, relevant time zones and the support you are seeking from Japanese counsel.

Please begin with a short overview rather than sending sensitive transaction documents through the initial enquiry form. The appropriate arrangements for sharing documents can be discussed following an initial conflict check.

How we can helpTransaction structure / FEFTA and merger control filings / Legal due diligence and information access / Employees / Transaction documents and closing / Post-closing legal work

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Contents

1. Choosing the Transaction Structure
2. Assessing Foreign Investment and Merger Control Requirements
3. Conducting Due Diligence and Managing Information Access
4. Employees and Employment Arrangements
5. Negotiating the Documents and Preparing for Closing
6. Post-Closing Legal Work and Coordination with Your Advisers
Frequently Asked Questions

1. Choosing the Transaction Structure

Purchasing Existing Shares or Subscribing for New Shares

Transaction structuring, regulatory screening and restrictions on information access need to be considered together from the outset, rather than as consecutive stages. An acquisition of a privately held Japanese company can be structured as a purchase of existing shares from its shareholders. The company remains the same legal entity and generally retains its contracts, employees, licences and liabilities, although the ownership change may trigger contractual or regulatory requirements. A subscription for newly issued shares instead brings capital into the company and can dilute existing shareholders; it is used for minority investments and growth financing, and requires its own corporate approvals. In either case, the acquirer should identify early any restrictions requiring company approval for share transfers, contracts with change-of-control provisions, and the regulatory questions discussed in Chapter 2, because these determine what must be done before the transaction can be completed.

Acquiring a Business Rather Than the Company

Where the acquirer wants only part of a company's operations, or wishes to leave certain liabilities behind, a business transfer may be considered. The parties define the perimeter of the business, and the assets, contracts and obligations within it are transferred individually. Contracts generally need the counterparty's agreement to be assigned, affected employees generally must consent to the transfer of their employment, and licences held by the seller may not pass with the business. Shared premises, systems, intellectual property, services and personnel may need to be separated or covered by transitional arrangements. A business transfer does not remove every risk connected with the business, and the legal analysis of the structure should be kept separate from the tax and financial comparison, which we coordinate with the relevant advisers.

Company Splits and Statutory Share Exchanges

The Companies Act also provides statutory reorganisation mechanisms. In an absorption-type company split, specified rights and obligations of a business are transferred to an existing company by operation of law, subject to applicable creditor-protection and employee-protection procedures. In a statutory share exchange, an eligible Japanese company becomes the wholly-owning parent of another Japanese stock company on the terms of the exchange agreement. These mechanisms can be useful in particular situations, but they are not interchangeable with an ordinary share purchase. The wholly-owning parent in a statutory share exchange must be a Japanese stock company or limited liability company, so a foreign acquirer cannot use that mechanism directly and would need to analyse a structure involving an eligible Japanese entity. Whether such a structure is appropriate depends on the transaction and should be assessed with tax advisers.

Contracts, Licences and Corporate Approvals

For each structure, the practical question is what stays with the target, what must be transferred, whose consent is needed and which corporate procedures apply. Key contracts should be reviewed for change-of-control and assignment provisions. Licences and registrations must be checked under the relevant sector legislation, because the consequences of a change of ownership or a transfer of business vary between regimes. Board resolutions, shareholder approvals and creditor procedures depend on the structure and the articles of incorporation, the company's constitutional document; not every transaction requires shareholder approval. Membership interests in a Japanese limited liability company (godo kaisha) follow different rules from shares in a stock company.

2. Assessing Foreign Investment and Merger Control Requirements

Foreign Investment Screening under FEFTA

The Foreign Exchange and Foreign Trade Act (FEFTA) governs inward direct investment into Japan. Certain Japanese entities also qualify as foreign investors under direct or indirect foreign-ownership or other prescribed criteria. The assessment depends on the investor and its ownership chain, the transaction, the activities of the target and its group, and any available exemption. A foreign investor's purchase of unlisted shares or equity interests from another foreign investor is assessed under the separate "specified acquisition" rules. Even a small minority acquisition can require prior notification. The target's actual activities should be checked against the definitions of designated business sectors rather than relying on its headline industry description; the investor's characteristics also matter.

Exemptions, Waiting Periods and Subsequent Reports

Following acceptance of a required prior notification, a statutory waiting period applies during which the investment cannot be completed, and the authorities may extend the review where necessary. Exemptions from prior notification are conditional: the investor's characteristics, the target's activities and the acquirer's intended involvement all matter, and proposed board participation or access to non-public technical information can affect the analysis. An exemption from prior notification does not necessarily remove post-acquisition reporting obligations. Notification, exemption and reporting rules differ between inward direct investment and specified acquisitions. We identify the applicable route, prepare the filings and reports required under Japanese law, and support communications with the authorities.

Merger Control under the Antimonopoly Act

Separately, the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (the Antimonopoly Act) may require prior notification to the Japan Fair Trade Commission (JFTC). For a share acquisition, the test combines the sales in Japan of the acquirer's corporate group, the sales in Japan of the target and its subsidiaries, and whether the acquiring group's aggregate voting rights newly cross an applicable threshold. A newly formed acquisition vehicle with no sales of its own does not remove the group-based test. A statutory waiting period applies to a notifiable acquisition. Transactions below the notification thresholds may still be examined for competition concerns, and other structures are subject to their own notification tests.

Building Regulatory Requirements into the Transaction

FEFTA screening, merger control and sector-specific approvals are separate questions, and clearance in another jurisdiction does not cover Japan. The results of the analysis feed into the transaction documents: the conditions to closing, the allocation of responsibility for filings, the permitted conduct between signing and closing, and the timetable. Information-sharing and integration planning before closing should also be assessed on their own terms, whether or not a filing is required. We recommend identifying the information and dependencies needed for each regime before committing to a signing or closing date.

3. Conducting Due Diligence and Managing Information Access

Japanese-Language Documents and Corporate Records

Relevant company records may be available only in Japanese. We review the Japanese materials and report significant legal issues in English, so that a complete translation is not a precondition of the legal review. For a stock company, the Commercial Register is the public record of registered particulars, including its name, capital, directors and any representative director—a director authorised to represent the company. It does not record share ownership. Share ownership should be checked against the shareholder register, the articles of incorporation, the history of share issues and transfers, any share certificates, and approvals for past transfers. Title to the shares being purchased, and the authority of the persons signing for the seller, are among the first matters to verify.

Contracts, Assets and Legal Exposure

The agreed review scope can cover material customer, supplier and financing contracts, security over assets, ownership of and licences for intellectual property, premises, disputes and regulatory compliance. For owner-managed companies, relevant issues also include assets or intellectual property used by the business but owned by the founder or a related party, and arrangements between the company and its shareholders. Findings are organised by their consequence for the transaction: matters to clarify, remedy before closing, address in the agreement, or carry into post-closing work. Legal due diligence assesses legal risks; it is not a verification of the accounts or a valuation, which remain with the financial advisers.

Personal Data in Due Diligence

The Act on the Protection of Personal Information (APPI) applies when personal data about employees, customers or others is disclosed in due diligence. APPI's business-succession rules can allow qualifying due diligence disclosures without the consent otherwise required for third-party disclosure. This treatment depends on the circumstances and appropriate contractual safeguards covering use, handling, security and what happens to the data if the transaction does not proceed. That treatment does not, by itself, resolve the separate requirements for providing personal data to overseas third parties, including through data-room access. Relevant routes include informed consent, jurisdictions recognised by the Personal Information Protection Commission, and qualifying arrangements for equivalent protective measures. The ordinary disclosure rules must also be checked. The recipients, legal basis and safeguards should be assessed before access is granted. A confidentiality agreement alone is not a complete answer, and the acquirer cannot assume that data may be reused for unrelated purposes after closing.

Technical Information and Export Control

Japanese export control applies not only to physical shipments but also to the provision of controlled technology. Export-control requirements can arise before closing when technical information is disclosed for due diligence, including to a non-resident visiting Japan, and certain disclosures to residents subject to specified foreign influence may also be controlled. Later intra-group sharing of technology after the acquisition raises the same question. The information and its recipients should therefore be assessed before access is granted, with reference to the nature of the technology, the recipients, the destination and the intended use. This analysis is distinct from investment screening: the ability to acquire the company does not itself authorise a particular transfer of technology.

4. Employees and Employment Arrangements

How the Structure Affects Employees

The consequences for employees follow the structure. In a purchase of existing shares or a statutory share exchange, the Japanese company remains the employer; the ownership change does not itself alter employment contracts. In a business transfer, transfer of an employment contract to the acquirer generally requires each affected employee's consent under the Civil Code. Employees who do not consent do not transfer merely because the business is sold. In a company split, the Act on the Succession to Labor Contracts upon Company Split provides notices, succession rules and objection rights that limit the parties' freedom to decide which employment contracts transfer. None of these structures should be chosen as a way of selecting the workforce without regard to these rules.

Notices, Consultation and Collective Arrangements

Employee-related steps have different sources. Statutory requirements include employee consultation, notices and objection procedures in a company split, as well as applicable collective-bargaining duties under the Labor Union Act. Collective agreements with a labour union may also require consultation or agreement before certain changes. Guidance of the Ministry of Health, Labour and Welfare on business transfers and mergers addresses both legal duties and recommended explanation and consultation; not every recommended step is a condition of transaction validity. Where collective-bargaining duties arise, an informal employee briefing is not a substitute for bargaining with the union; equally, a union does not have a general right to veto a transaction. Communication should be planned around these requirements and the transaction timetable.

Reviewing Existing Employment Liabilities

Employment due diligence covers employment contracts, working hours and overtime payments, remuneration and benefits, fixed-term and agency workers, pending disputes and dependence on key individuals. It also reviews rules of employment, the workplace rules on working conditions and disciplinary matters, which can bind employees subject to the Labor Contracts Act's requirements. They are not a discretionary group handbook. Where applicable, the Labor Standards Act requires preparation and filing of these rules and seeking an opinion from the appropriate union or employee representative; an opinion is not consent. The review assesses both inherited exposure, such as unpaid overtime, and constraints on the operating model the acquirer has in mind.

Planning Retention and Post-Closing Changes

Japanese law does not recognise employment at will. A dismissal that lacks objectively reasonable grounds and is not socially acceptable is invalid, and giving notice or making a payment in lieu of notice does not replace those substantive requirements. Adverse changes to employment terms also require a legal basis, whether individual agreement or a properly implemented change to the rules of employment that meets the statutory conditions. Retention arrangements for key employees, the transition of management, proposed organisational changes and any harmonisation of terms with the acquirer's group should therefore be planned before closing, rather than assumed to be available once the acquisition is complete.

5. Negotiating the Documents and Preparing for Closing

Risk Allocation in the Acquisition Agreement

The share purchase agreement (SPA), or the equivalent document for another structure, allocates risk through representations and warranties, disclosure against them, indemnities and their limitations, pre-closing covenants, and conditions to closing. The terms are negotiated rather than prescribed by a mandatory Japanese form, and due diligence informs where specific protection is needed. We draft and negotiate the transaction documents from a Japanese-law perspective, coordinating price-adjustment and payment provisions with your financial advisers. Warranty and indemnity (W&I) insurance is available for Japanese transactions, subject to underwriting and the terms of the policy. It does not replace due diligence, and the policy's exclusions and the interaction with the SPA should be reviewed before the parties rely on it.

Owner-Managers, Guarantees and Transition Arrangements

For an owner-managed target, establish whether the founder or another manager has given personal guarantees to its lenders. These management guarantees are personal guarantees of the company's obligations, not warranties about how the business will perform. A commitment by the acquirer to procure release is an obligation between buyer and seller; actual release depends on the guarantee terms and arrangements with the lender. The timing and evidence of release should be addressed in the transaction documents. The seller's continuing role as a director or adviser, the handover of customer and employee relationships, related-party arrangements and retention of key employees should be documented with defined responsibilities, authority and duration, rather than left as an undertaking to "stay involved".

Minority Investments and Shareholder Arrangements

An investment for less than full ownership requires its own documentation. A subscription or share purchase agreement may be supplemented by a shareholders' agreement dealing with information rights, board representation, matters reserved for the investor's consent, future financing, restrictions on share transfers and exit arrangements. These contractual rights must be coordinated with the company's articles of incorporation and Companies Act procedures: a provision conflicting with the articles or mandatory company law may not be enforceable in the way the investor expects. Negotiated rights should also be checked against the assumptions made for FEFTA purposes. A board seat or a consent right gives the investor a defined say; it does not give unrestricted control.

Signing, Closing Deliverables and Registration

Signing and closing are distinct legal steps, even when they occur together. The closing checklist should distinguish contractual deliverables from legally required steps. Depending on the transaction, these may include approval of transfers of restricted shares, corporate resolutions, share certificates, updating the shareholder register, third-party consents, security or guarantee releases, and director changes. Where the articles designate the company as a share certificate issuer, certificate delivery and any missing or unissued certificates require separate attention. Changes in registered corporate particulars, such as directors, must be registered separately from the share purchase. Seals (hanko) are used to authenticate documents, but are not a general requirement for contractual validity. Specific execution, evidence and registration requirements, including electronic alternatives, should be checked document by document.

6. Post-Closing Legal Work and Coordination with Your Advisers

Governance and Decision-Making after Closing

After closing, the acquirer's intended governance model has to be expressed in arrangements that work for a Japanese company: the appointment of directors and, where applicable, a representative director, the allocation of authority and approval thresholds, reporting lines to the parent, and the documentation of corporate decisions. Group policies need to be implemented consistently with Japanese law, the target's governance arrangements and existing contractual obligations. For a minority investment, the focus is on implementing the agreed rights and information flows, not on directing operations the investor does not control.

Employment, Data and Compliance Integration

Due diligence and the transaction documents may identify matters to be dealt with after closing: employment policies and changes to the rules of employment, arrangements for sharing personal data and technical information within the group, contracts to be renewed or renegotiated, and internal reporting and compliance responsibilities. Closing does not resolve these matters by itself. We help turn them into an implementation plan with agreed responsibilities and sequencing.

Working with Your Existing Advisers

We advise on Japanese law. Advice on the law of the acquirer's home jurisdiction remains with counsel qualified there, and tax, accounting, valuation and financial matters are coordinated with the relevant advisers. The transaction may be led by the client's in-house team or by its overseas counsel; in either case we agree at the outset which documents we are responsible for, how Japanese-law findings are reported, and how decisions are escalated. Our approach to contract drafting and dispute prevention also draws on the experience of lawyers at the firm who have heard cases as judges.

Working in English across the Transaction

We communicate with clients in English and agree the working language, reporting format and decision points at the start of the engagement. An English explanation of a Japanese document is different from a full translation, and the language of a contract does not determine its governing law. Any translation or certification requirements of authorities, insurers or courts should be checked separately. Communications with Japanese counterparties, their advisers and the target's management are conducted in Japanese where appropriate, with the client kept informed. Time-zone differences and the client's internal approval process are treated as planning considerations when the timetable is set.

Frequently Asked Questions

Q1. Do we need to establish a Japanese subsidiary before acquiring a Japanese company?

Not necessarily. A foreign company can generally purchase existing shares in a Japanese company directly, subject to applicable investment screening and sector-specific restrictions. Some statutory reorganisation structures, however, require an eligible Japanese company as the direct acquiring entity. The choice should take account of the intended ownership and operating structure, financing and regulatory requirements. We advise on the Japanese-law aspects and coordinate with your tax advisers and counsel in other jurisdictions.

Q2. Can a minority investment require a FEFTA notification?

Yes. A minority investment in a privately held Japanese company can require prior notification under the Foreign Exchange and Foreign Trade Act (FEFTA). The analysis depends on the investor, the transaction, the target's activities and any available exemption. Proposed board participation, management involvement and access to non-public technical information may affect the assessment. Acquiring less than a controlling interest does not, by itself, establish an exemption, and post-acquisition reporting may also need to be considered.

Q3. Can you work with our existing overseas counsel and communicate in English?

Yes. We advise on Japanese law and communicate with clients in English, working alongside their in-house teams, overseas counsel and other advisers. We agree the scope of our work, reporting arrangements and document responsibilities with the client and the advisers involved. Advice on another jurisdiction's law remains with counsel qualified in that jurisdiction. Japanese-language documents can be reviewed for Japanese-law issues and the findings explained in English, with translation requirements considered separately.

Q4. Can we consult you before agreeing a letter of intent or settling the transaction structure?

Yes. You can consult us before the transaction structure is settled and before committing to terms proposed by a seller. We can review a letter of intent, term sheet or draft memorandum of understanding from a Japanese-law perspective, including provisions on confidentiality, exclusivity, conditions and the intended binding effect. Where another jurisdiction's law is relevant, we coordinate with your counsel there. Please identify any response deadline or commitment already made when you first contact us.

Q5. What happens to employees when we acquire the business?

In a purchase of existing shares, the Japanese company ordinarily remains the employer, so the acquisition itself does not transfer employment contracts. A business transfer generally requires each affected employee's consent to transfer their employment contract, while a company split is subject to specific statutory employee-protection procedures. Existing employment terms, collective agreements and applicable consultation requirements also need to be considered. The acquisition does not, by itself, permit dismissals or unilateral changes to employment terms.

Q6. What determines the timetable for an acquisition in Japan?

The timetable depends on the structure, information available, negotiations, regulatory requirements, third-party consents, employee procedures, financing and corporate approvals. Where prior notification is required under FEFTA or Japanese merger-control rules, a statutory waiting period applies, but it should not be treated as the full regulatory or transaction timetable. Structure planning, regulatory screening and controls on information access should begin together. We help identify the Japanese-law steps and dependencies so that they can be incorporated into the transaction plan.

Contact

Discuss Your Proposed Acquisition or Investment in Japan

Tell us about the Japanese company or business, the investment you are considering and the current stage of discussions. We advise on Japanese law and work with your overseas counsel and other advisers on transaction and post-closing legal matters.

Whether we can act, and the scope of our work, will be confirmed after a conflict check.

This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.