SPC and fund business in Japan
Recently the number of persons or companies who incorporate investment partnership ( = Toshi kumiai ) by SPC （Tokutei mokuteki kaisha or Tokubetsu mokuteki kaisha. Meaning of these words are different from each other.） is increasing.
Because, in the case you collect investors via SPC, you do not need to get registration of Financial Instruments Business Operators ( Kinyu shohin torihiki gyosha = きんゆうしょうひんとりひきぎょうしゃ).
In the case you incorporate SPC and obtain authorization from authority and purchase property from Originator, the SPC can divide profit among investors and this business is regulated in Act on Securitization of Assets.
( = shisan no ryudo ka ni kansuru houritsu = しさんのりゅうどうかにかんするほうりつ).
SPC incorporated by this law is named Tokutei mokuteki kaisha = 特定目的会社 ).
In the case you incorporate a legal entity ( LLC, KK, Tokutei mokuteki kaisha ) to start fund business, the legal entity is called Tokubetsu mokuteki kaisha.
Herein after SPC means Tokutei mokuteki kaisha = specific purpose company.
Demerit of SPC in Japan
At first you need to incorporate SPC and prepare notification of commencement of business ( Jigyo kaishi todoke ) and statement of plan of securitization of assets ( Shisan ryudo ka keikaku = 資産流動化計画 = しさんりゅうどうかけいかく) and obtain authorization from prime minister.
It will take at least 2 months in this process until you can obtain authorization.
And depending on situation, you need to hire certified public accountant ( Konin kaikeishi ) and obtain comment from attorney etc and you need to pay a lot of fee for them.
( There is other way that you do not need to hire such professionals )
Advantage of SPC in Japan
In the case you incorporate SPC and the SPC issues Preferred Equity Securities ( = Yusen shusshi shoken = 優先出資証券. ), you can collect investors without registration of Financial Instruments Business Operators ( Kinyu shohin torihiki gyosha ).
( Preferred Equity Securities ( = Yusen shusshi shoken ) is a kind of stock shares, though. )
In the case SPC purchases and sells real estate without license of realtor, it is legal.
In the case SPC asks other company management of operation, SPC does not need to obtain registration of Financial Instruments Business Operators ( Kinyu shohin torihiki gyosha ).
In the case of SPC, it can apply for tax deduction in purchase tax, registration tax.
And if the SPC can fulfill some requirements, it can allocate dividend （ Haito = 配当 ）as deductible expense.
( Your SPC can be pass-through entity = fiscally transparent entity ).
Specific capital ( = Tokutei shihon ) of SPC in Japan
In the case you incorporate Tokutei mokuteki kaisha, there is not limit of minimum capital amount.
It corresponds with registered capital amount ( shihon kin ) of joint stock company.
And a person who contributes money to incorporate Tokutei mokuteki kaisha is called “specific member = Tokutei shain” and general incorporated association ( Ippan shadan hojin ) or legal entity in foreign country often become specific member.
Preferred capital = Yusen shihon
Other than specific capital, Tokutei mokuteki kaisha can receive preferred capital through issue of Preferred Equity Securities ( = Yusen shusshi shoken = 優先出資証券. ).
Though this is a kind of share stock, usually there is not voting right in Tokutei mokuteki kaisha.
Shareholders of Preferred Equity Securities can receive dividend prior to specific members.
Tokutei mokuteki kaisha can issue preferred equity securities of different classes.
Specific corporate bond ( Tokutei shasai ) of SPC
In the case Tokutei mokuteki kaisha issues specific bond, it needs to hire administrator of specific corporate bond = tokutei shasai kanri nin.
Specific borrowing = Tokutei kari ire = とくていかりいれ
Tokutei mokuteki kaisha can borrow money from other company and in general it borrows money with nonrecourse loan.
Tokutei mokuteki kaisha needs to at least appoint one director and one auditor ( kansa yaku ) to protect investors.
( Depending on content of plan of securitization of assets, you need to appoint accounting auditor = Kaikei kansa nin)
Requirements of pass-through taxation ( ぱすするーかぜい ) of SPC
In the case you manage Tokutei mokuteki kaisha, application for pass-through taxation is important.
However, if scale of your business is still small, it is not easy to apply for it.
If your Tokutei mokuteki kaisha can not use pass-through taxation, most of profit of your Tokutei mokuteki kaisha will be used for payment of corporate tax.
Requirements to apply for pass-through taxation of SPC
Your tokukei mokuteki kaisha does not violates of statement of plan of securitization of assets ( Shisan ryudo ka keikaku = 資産流動化計画 = しさんりゅうどうかけいかく)
Your Tokutei mokuteki kaisha satisfies one of below.
The amount of specific corporate bond is more than 100 million yen
Your Tokutei mokuteki kaisha issues specific corporate bond only to qualified institutional investor ( = tekikaku kikan toshika ).
The number of persons who receive Preferred Equity Securities is 50 or more !!
Only qualified institutional investor receives the Preferred Equity Securities.
More than 50% of Specific corporate bond and Preferred Equity Securities are subscribed only in Japan
Your Tokutei mokuteki kaisha delivers more than 90% of distributable profit ( = Haito kanou reiki = 配当可能利益 ).
At the time you start your business, it is not easy to find qualified institutional investor ( = tekikaku kikan toshika ).
So, you need to collect investors of 50 or more.
However if the amount of Preferred Equity Securities ( = Yusen shusshi shoken ) is more than 100 million yen per a year, you need to hire CPA and submit Securities registration statement = Yuka shoken todokedesho.
In order to establish SPC, articles of incorporation should be notarized by notary public.
After notarization, funds to incorporate SPC should be paid to bank account and documents should be prepared to prove such payment.
Certificate of registered seal of specific member ( Tokutei shain. He is a kind of incorporator ) is necessary.
The amount of registration tax to file registration of incorporation of SPC is 30,000 yen.
Fee for notary public will be 52,000 yen.