DD of M&A Transactions in Japan

Concluding an M&A deal in Japan, even the most insignificant one, requires performing thorough DD. The scope of DD usually covers the following areas:

• corporate structure, including incorporation documents & other internal rules;
• validity of shares & blocks of shares;
• transactions with subsidiaries;
• financing mechanisms;
• assets, including intellectual property;
• employees;
• agreements;
• licenses and permits;
• compliance with laws; 
• disputes.

Responsibility for Statements

Prior to performing DD of an M&A deal in Japan, sellers are to prepare a DD report for potential buyers. Sellers may be held responsible for making any misleading statements preceding the signing of an M&A contract in Japan. However, such liability may be excluded from an M&A agreement.

Publicly Available Information

Those seeking to register a private company in Japan should keep in mind that publicly available information is:

• names of directors/auditors;
• number & types of shares;
• amount of capital;
• share certificates;
• approval for the transfer of shares;
• registration date.

Also, prior to conducting legal DD of an M&A transaction in Japan, buyers may look for information regarding a target company's IP & immovable property in an online database compiled & maintained by the Patent Office.

Alleged vs Actual Knowledge

The buyer's actual knowledge excludes the possibility of filing a lawsuit for breach of warranties in Japan.