Funds in Japan

Those interested in establishing funds in the state of Japan should keep in mind that such entities are normally structured as mutual trusts. Structuring funds as partnerships tends to attract fewer investors; however, it provides them with more flexibility when it comes to investments.

Here, we’ll be looking at three ways of establishing foundations in Japan:

• establishing trusts;
• creating corporations;
• setting up partnerships.

Japan: Establishing Partnership Funds

These are the typical forms of partnership funds:

• "tacit" partnerships;
• common partnerships;
• investment-oriented LLPs.

Partnerships have a number of common features, such as: 

• all partners make contributions & take part in the management of funds; 
• funds’ partners bear joint & individual responsibility for their daily operations; however, they tend to delegate their functions to other partners.

“Tacit” partnerships in Japan have the following typical characteristics:

• require fund managers & investors to sign an agreement; managers sign individual agreements with each investor.
• fund managers conduct business on their own & at their expense; they’re required to invest in funds & have the right to obtain a share of the proceeds. 
• managers’ liabilities are limited to their contributions’ amount. 
• there’s no investment-related limitations. 

Japanese LLPs have their own distinctive features: 

• they’re partnerships consisting of LPs & GPs, with the latter bearing unlimited financial responsibility; 
• GPs are responsible for managing funds; LPs aren’t engaged in funds’ daily operations, their financial responsibility is limited to their contributions’ amount & they’re restricted in their investment activities. 
• partners’ financial responsibility is restricted by their contributions’ amount.
• partners jointly manage LLPs. 
• daily management of LLPs can be delegated to individual partners; however,  making essential decisions is the prerogative of all partners.

Japan: CIS

FIEA established the following criteria for CISs:

• setting up LLCs in the state of Japan requires concluding tacit partnership, investment, partnership or LLP agreements;
• collected funds must be used for investment-related purposes;
• dividends or share in profits must be distributed among investors.
• establishing LLCs requires registration with the FSA.

Disclosure & IPO Requirements

Issuing exceptionally liquid securities (e.g. stocks or bonds) requires full disclosure &  registration with the FSA. Requirements for less liquid securities aren’t that stringent.

Only registered issuers of liquid securities can launch IPOs & participate in CISs in the state of Japan.

Establishing Type II FIBOs in the state of Japan requires meeting certain criteria, such as:

• recruiting suitable personnel;
• complying with minimum capital criteria. 

Japan: Regulating Investment Management Activities

Starting investment management businesses in the state of Japan requires applying for an investment manager license in Japan. It also requires meeting minimum capital & personnel requirements. 

Japan: Establishing Cryptoasset Funds

The registration procedure involves:

• making investments in cryptoassets;
• receiving cryptoassets from investors;
• establishing tokenized funds in the state of Japan.

Fund operators must apply for a Type II FIBO operator license. 

Obtaining a License of Investment Fund Operators

Operators making investments in mainly derivatives & securities are required to be registered as investment managers.Because cryptoassets securities aren’t deemed as  financial derivatives or securities, this rule isn’t applicable to operators making investments mainly in cryptoassets. However, investing in investment tokens in the state of Japan may require registration.

Japan: Establishing a Cryptocurrency Exchange

Funds investing in cryptocurrencies are required to apply for a cryptocurrency exchange service provider license in the state of Japan.