Signing the kabushiki joto keiyaku, Share Purchase Agreement (株式譲渡契約) is the beginning of the process, not the end. For foreign buyers acquiring Japanese companies, the signing-to-closing phase typically runs two to five months and involves regulatory clearances, government filings, counterparty notifications, and a precisely choreographed closing day. Errors in this phase can delay closing, trigger CP failures, or create post-closing liability. This guide walks through every material step.
The Signing-to-Closing Phase: What Changes After the SPA Is Signed
Once the SPA is executed, both parties are legally bound to close the transaction, subject to the zentei joken (前提条件) being satisfied. Several things change immediately on signing:
(a) The target enters an interim covenant regime. The seller and target are contractually restricted from taking actions outside the ordinary course of business without buyer consent. The SPA governs what the target can and cannot do until closing.
(b) Regulatory clearance clocks begin. FEFTA prior-notification and JFTC pre-merger notification, if required, should be filed as early as possible after signing. Both carry statutory review windows that will dictate the earliest permissible closing date.
(c) Third-party consent processes are activated. Key contracts with change-of-control clauses, banking relationships, and regulatory licenses requiring notification or re-application must be addressed in parallel with the regulatory filings.
(d) Closing deliverable preparation begins. Both sides identify and begin assembling the documents required on closing day. The buyer's legal team issues a closing checklist; the seller's team begins collecting signatures, board minutes, and officer certificates.
The period is transactional but also operational. Buyers who treat signing as a rest point before closing typically find themselves compressed at the end. The better practice is to activate all workstreams on the day of signing.
Conditions Precedent (CP) in Japan M&A
Typical CPs in a Japan SPA covering a private share acquisition by a foreign buyer include:
(a) FEFTA clearance. Where the target is in a designated industry, the buyer's prior-notification to the relevant ministry must have cleared the statutory review period without a recommendation or order to modify or halt.
(b) JFTC pre-merger clearance. Where domestic turnover thresholds are met, the 30-day waiting period under the Antimonopoly Act (独占禁止法) must have expired or the JFTC must have issued early termination.
(c) Board approvals. For a target KK with share transfer restrictions in its teikan, Articles of Incorporation (定款), board approval of the share transfer is a condition to the transfer being valid under Companies Act (会社法). Buyer-side board approvals (if required by the buyer's own constitutional documents or local law) are also typically included.
(d) Third-party consents. Material contracts with change-of-control consent requirements must have been satisfied. The SPA schedule identifies which consents are "must-have" CPs versus "best-efforts" covenants.
(e) Regulatory license confirmations. Where the target holds licenses that require notification of change of control or that could be revoked on a change of control, confirmation of continuity is typically a CP.
(f) No material adverse change (MAC). The representations and warranties given by the seller at signing must remain true and correct at closing, and no MAC (as defined in the SPA) must have occurred in the target's business between signing and closing.
The CP schedule in the SPA determines the minimum closing timeline. Regulatory clearance windows are the most common controlling factor for cross-border deals.
FEFTA Clearance as a CP: Timing and Process
Under FEFTA (外為法), a foreign investor acquiring shares in a Japanese company in a designated industry must file prior-notification (事前届出, jizen todoke) with the relevant ministry through the Bank of Japan before closing. This is the single most significant regulatory CP in most cross-border Japan acquisitions.
The statutory review period is 30 days from the acceptance date of the notification. In practice:
(a) The ministry accepts the notification within a few days of submission; the 30-day clock runs from acceptance, not submission.
(b) Most notifications in non-complex sectors complete review within 30 days without adverse action. The buyer may proceed to close once the review window has elapsed without a recommendation or modification order.
(c) For transactions involving sensitive infrastructure, defense-adjacent technology, or buyers with foreign-government affiliation, the review can extend to four to five months. The ministry may also issue a recommendation requiring deal modification.
(d) The May 2025 amendment to 外為法 introduced a Type-A / Type-B investor classification that tightens exemption access, particularly for investors with foreign-government intelligence-cooperation obligations. First-time non-resident acquirers in designated sectors should assume mandatory prior-notification applies.
How to draft CP language to manage timing risk: The SPA should set the FEFTA CP as "completion of the 30-day (or extended) statutory review period without a recommendation or order" rather than "receipt of a clearance letter," because METI does not issue affirmative clearance certificates in all cases. The CP is satisfied by the passage of time without adverse action. Including a long-stop date of six to eight months from signing provides adequate buffer for extended review cases.
JFTC Pre-Merger Notification as a CP
Under the Antimonopoly Act (独占禁止法), share acquisitions above specified domestic turnover thresholds trigger a mandatory pre-merger notification to the Japan Fair Trade Commission (JFTC).
Threshold triggers (filing required when both conditions are met):
(a) The acquirer's Japan domestic turnover exceeds JPY 20 billion.
(b) The target's Japan domestic turnover exceeds JPY 5 billion.
These thresholds should be confirmed against current JFTC guidelines at the time of the transaction.
The standard waiting period is 30 days from acceptance of the notification. The JFTC may grant early termination of the waiting period for straightforward transactions, which can compress this to 10 to 15 days in practice. For transactions raising horizontal overlap or vertical concerns, the JFTC may open a Phase 2 review, which can extend the review by several months.
Parallel US nexus: Where the acquirer or target has US-side revenues triggering HSR Act thresholds, a Hart-Scott-Rodino filing will be required in parallel. The longer of the two waiting periods governs the permissible closing date. Counsel in both jurisdictions must coordinate CP satisfaction timing to avoid a premature close.
Pre-Closing Interim Covenants: What the Target Must and Must Not Do Between Signing and Closing
The SPA's interim covenant provisions restrict the target's behavior between signing and closing. Breach of an interim covenant is a serious risk: it can give the buyer a right to refuse to close or to claim damages.
Standard ordinary course obligations require the target to:
(a) Continue operating the business in the ordinary course consistent with past practice.
(b) Maintain existing insurance coverage, pay taxes and obligations as they fall due, and preserve material business relationships.
(c) Keep the buyer informed of material developments, regulatory communications, or litigation.
Restricted actions requiring explicit buyer consent typically include:
(a) Entering into material contracts above a defined threshold value, or amending or terminating material existing contracts.
(b) Incurring indebtedness outside the ordinary course, or creating encumbrances on assets.
(c) Making capital expenditures above a defined threshold.
(d) Declaring or paying dividends or returning capital to existing shareholders.
(e) Issuing new shares, granting options, or altering the capital structure.
(f) Making changes to key personnel (representative directors, CFOs), organizational structure, or constitutional documents.
MAC monitoring: The buyer should designate an internal owner to monitor the target's business throughout the interim period. MAC clauses in Japan SPAs are construed narrowly; general market downturns or industry-wide effects typically do not qualify.
Third-Party Consents and License Transfers
This workstream begins immediately after signing and often runs on the critical path.
Many commercial agreements (supply contracts, distribution agreements, technology licenses, real property leases) contain change-of-control clauses requiring counterparty consent to assignment or continuation after a change of ownership. Post-signing, the seller contacts each counterparty and obtains written consent or waiver.
Where consent is a "must-have" CP, failure to obtain it by the long-stop date gives either party a right to terminate the SPA. Where consent is a best-efforts covenant, failure does not block closing but leaves a residual risk of contract termination post-close.
Japanese banks typically require notification of a change of beneficial ownership. The seller's main bank relationship should be notified early. Where the acquisition is financed with buyer-side debt and the target's existing credit facilities must be refinanced or consented to, this needs to be coordinated in the closing financing timeline.
Which licenses transfer automatically on a share deal versus which require action:
(a) Share deal: licenses typically survive. A share acquisition does not change the legal entity holding the license; the target KK continues to exist and continues to hold its licenses. However, certain regulated licenses require change-of-control notification to the supervising authority within a defined post-closing window.
(b) Asset deal: licenses must be re-applied for. In an asset acquisition, the license holder changes; virtually all Japanese regulatory licenses are entity-specific and do not transfer by contract.
(c) Licenses with pre-closing notification or consent requirements. Some licenses (notably in financial services, pharmaceuticals under the PMD Act (薬機法), and telecommunications) require either prior notification to or consent from the supervising ministry before a change of control is effective. These become pre-closing CPs or covenants rather than post-closing obligations.
Preparing the Closing Deliverables Checklist
The closing deliverables checklist is the operational backbone of the closing process. Core SPA-required documents for a Japan share acquisition include:
(a) 株式譲渡契約 (kabushiki joto keiyaku, Share Purchase Agreement) original execution copies, or closing certificate confirming CP satisfaction if sign/close are separate.
(b) 株式譲渡承認通知書 (kabushiki joto shonin tsuchisho, share transfer approval notice), issued by the target's board under 会社法, confirming board approval of the transfer where the articles contain transfer restrictions.
(c) Board minutes of the target confirming: CP satisfaction, board approval of the transfer, acceptance of the resignation of outgoing directors, appointment of incoming directors.
(d) Resignation letters from outgoing representative directors and directors, effective at closing.
(e) Officer certificates from seller and buyer confirming accuracy of representations and warranties at closing.
(f) Updated 株主名簿 (kabunushi meibo, shareholder registry), reflecting the buyer as registered shareholder, signed and dated as of closing.
(g) Corporate seals (会社印鑑) and registered seal certificates (印鑑証明書) of the target, to be handed over to the buyer at closing.
(h) Statutory books and corporate records of the target.
Closing Day Mechanics
Japan M&A closings for private deals are typically structured as a simultaneous exchange: payment is released against delivery of documents. The buyer does not release the purchase price wire until the seller has confirmed delivery of all required documents.
Practical closing day sequence:
(a) Buyer's and seller's legal teams assemble in-person (or via virtual closing room) with all pre-executed documents held in escrow pending confirmation of CP satisfaction.
(b) Buyer confirms with its bank that the wire transfer is ready to execute.
(c) Parties confirm satisfaction of all CPs by reference to the closing checklist. No CP may be waived without written agreement from both parties.
(d) Seller delivers or confirms electronic delivery of all closing documents.
(e) Buyer releases the wire to the seller's designated account.
(f) Both sides confirm receipt and the closing is declared complete.
Wire timing: Japanese domestic bank transfers made before the cut-off (typically 15:00 JST for same-day settlement) settle the same business day. Cross-border wires typically require one to two business days. The parties should agree in advance whether closing is conditioned on receipt of funds (not merely initiation of the wire) and build the timeline accordingly.
Registry update: The transfer of shares in a Japan KK is effective as between the parties when the shareholder registry (株主名簿) is updated. This is a legal act performed at closing; it is not a public filing. The subsequent houjin touki (法人登記) update at the Legal Affairs Bureau (法務局, homu kyoku) is a separate post-closing step.
Immediate Post-Closing: Day 1 to Day 30 Obligations
Closing is not the end of the compliance timeline. The 30 days following closing carry a series of mandatory filings and notifications.
(a) Legal Affairs Bureau registration update. Changes to directors, representative directors, and the paid-in capital record must be filed with the competent Legal Affairs Bureau (法務局) under 会社法. The statutory filing deadline for director changes is two weeks from the date of the change. Failure to register within the statutory period carries a fine.
(b) Tax office notification. Changes to the representative director or the company's management structure must be notified to the relevant zeimusho (税務署). Where the acquisition triggers a change in the corporate tax consolidation structure, additional filings apply.
(c) Social insurance and pension notifications. If the acquisition triggers changes to the entity's labor and social insurance profile, notifications to the Japan Pension Service (日本年金機構) and the relevant Labor Standards Inspection Office (労働基準監督署) must be filed within statutory windows.
(d) FEFTA post-closing notification. Certain categories of FEFTA prior-notifications require a notification of completion of the investment within 45 days post-closing. Confirm whether this obligation applies based on the notification category filed pre-closing.
(e) Regulatory change-of-control notifications. For licenses with post-closing notification obligations (identified in the pre-closing checklist), file with the relevant ministry within the prescribed window. Late filing creates regulatory exposure and, in some cases, invalidates the license.
(f) Employee communications. Under Labor Standards Act (労働基準法), where employment terms change as a result of the acquisition, proper process applies. A share deal does not change the employer entity; the target KK remains the employer. Material changes to employment conditions require consent or appropriate notice.
How Aplash Can Help with Pre-Closing and Closing Coordination
Aplash's M&A advisory scope covers the regulatory and corporate coordination layer of the signing-to-closing period. This includes:
(a) FEFTA prior-notification management: assessing designated-sector applicability, preparing and submitting the notification through the Bank of Japan, monitoring the review window, and advising on CP language to reflect actual clearance mechanics.
(b) JFTC pre-merger notification coordination: threshold analysis, preparation of the notification package, and liaison during the waiting period, with parallel coordination where HSR or other jurisdictions are involved.
(c) License transfer and regulatory continuity analysis: mapping target licenses against deal structure, identifying pre- and post-closing notification obligations, and coordinating with relevant ministries.
(d) Closing deliverables coordination: preparing or reviewing the closing checklist against SPA requirements, coordinating execution of Japanese-language corporate documents, and confirming registry and seal delivery mechanics.
(e) Post-closing registration and notification filings: Legal Affairs Bureau director change filings, tax office notifications, and ministerial change-of-control filings in the 30-day window.
The signing-to-closing phase in a Japan acquisition is operationally intensive. Regulatory CP workstreams, particularly FEFTA and JFTC, must be initiated on the day of signing, not when other workstreams are complete. Parallel execution across all tracks is the only way to hold the closing timeline.
This article is informational only and does not constitute legal, tax, or regulatory advice. Consult a qualified advisor before acting on the content.