Frequently Asked Questions
Chinese Buyers Acquiring a Japanese SME — Process and Rules
When a foreign buyer acquires a Japanese company, Japan’s Foreign Exchange Act procedures need checking separately from price negotiation, and depending on how the funds move, Chinese-side procedures may also apply. Where prior notification is required, the deal cannot be carried out until the waiting period after acceptance has passed.
What does the process of buying a Japanese company broadly look like?
Typically: target search → NDA → letter of intent → due diligence → definitive agreement → closing. For a foreign buyer, Japan’s Foreign Exchange Act procedures are added, and depending on the funding route, Chinese-side procedures may also apply.
What filings does a foreign buyer need in Japan?
For inward direct investment by a foreign investor of the kinds specified by Cabinet Order, prior notification to the Minister of Finance and the competent minister is required (Foreign Exchange Act Art. 27(1)). The investment cannot be carried out until 30 days after the notification is accepted (Art. 27(2); the period can be shortened).
Whether prior notification applies depends on the target’s business, and the covered sectors are set by Cabinet Order and public notice. Where inward direct investment is made without prior notification, the investor must report it afterwards as prescribed by Cabinet Order (Art. 55-5); whether a given transaction is covered, and how to report, has to be checked against the Cabinet Order.
Source: 外国為替及び外国貿易法（e-Gov 法令検索）
What procedures apply on the Chinese side?
Where a company in China invests abroad, China’s outbound-investment procedures (commonly called ODI) may apply.
Which procedures apply, and before which authority, depends on who is investing (a company or an individual) and on the funding route — directly from China, or funds already held offshore — and practice changes over time. This page has not verified Chinese primary sources, so it gives no procedure names, durations or amounts.
What are the typical pitfalls in acquiring a Japanese SME?
Off-balance-sheet liabilities such as personal guarantees, unpaid overtime, under-funded retirement benefits, whether licences and permits transfer, and customer relationships that depend on one person.
These are hard to see at the price stage, and risks that due diligence does not identify, and that representations, warranties or indemnities in the contract do not cover, can end up with the buyer.
Which part does SEISEI handle?
Buy-side target search, designing how funds move and how the acquisition is structured, financial due diligence, closing and post-closing integration.
Tax filing and tax computation are work under Article 2 of the Certified Tax Accountant Act, and we do not perform them. We do not draft or negotiate contracts or register anything; that is the work of lawyers and judicial scriveners.
What this page does not cover
Whether a specific deal requires prior notification under the Foreign Exchange Act, whether and how long Chinese-side procedures take, valuation, and market rates for intermediary fees.
Primary sources
Related pages
- Cross-border M&A for Chinese buyers (Chinese)
- Buyer’s guide: pitfalls of acquiring Japanese companies (Chinese)
- Corporate Structuring
Get in touch
The funding route affects which procedures need to be checked on both sides, so it is worth settling early. ceo@seisei.tokyo
SEISEI provides financial and management consulting. It does not constitute tax representation, preparation of tax documents, or tax consultation as defined in Article 2 of Japan’s Certified Tax Accountant Act. Filings and tax computations are handled by partner licensed tax accountants (zeirishi).