Securities administration - Japan
For registered and book entry bonds, the registrar issues notices prior to the scheduled payment date. On payment date, the custodian receives the interest payment through one of the inter-bank payment systems.
For bearer bonds, coupons are attached to the physical bond certificates. Prior to the date of coupon payment, the custodian is required to detach this coupon and send it to the clearing house. The issuer or the paying agent credits the coupon proceeds to the custodian's account with the BOJ on the payment date.
For equities, record dates are determined by the relevant companies according to market practice, usually every six months in March and September (to be confirmed by the relevant company). Dividend rates are decided by the Board of Directors of the company or Annual General Shareholder’s meeting, which are usually made around two months after the record date, and dividends are paid within three months after the record date.
Income collection
Note: Except for equities subject to a Foreign Ownership Limit (FOL), where final entitlements are assigned, on a pro-rata basis or by lot, when the limit is reached, the basis for entitlement is, in all cases, closing position on Market Record Date, regardless of the position on Ex-Date (which is two business days before Record Date) or Trade Date. The final entitled positions are confirmed by the registrar through JASDEC around a month after the RD.
Market Record Date (Frozen Period) | Standard interest calculation rule | ||
Book-entry | Bearer | Registered | |
Daimyo bonds | |||
n/a | n/a | depending on issuer | 30/360 |
JPY Global bonds | |||
n/a | n/a | depending on issuer | Initial/last interest: actual/actual |
Samurai bonds | |||
Payment date -1 | n/a | Payment date -21 business days | Initial/last interest: actual/actual |
Shogun bonds | |||
n/a | n/a | depending on issuer | Initial/last interest: actual/actual |
JGBs | |||
Payment date | n/a | Payment date -7 business days | Initial/last interest: actual/actual |
Equities a | |||
Determined by the company concerned | n/a | ||
ETFs/REITs b | |||
Determined by the company concerned | n/a | ||
a. Payment Date is approximately within 3 months after Record Date.
b. Payment Date is approximately within 1 month after Record Date.
Corporate actions
Most common corporate events
Beside regular income payments, there are several corporate action types in Japan, of which the most common are as follows:
- Rights issues
- Announced between one and two months before record date.
- Rights can be tradable or non-tradable.
- Subscription period starts four to six weeks after the record date and lasts for about 10 days to several months.
- The issuing company can establish their own range of period during which the rights can be exercised, however, the Company Law stipulates that the maximum length for this exercise period is 10 years.
- Listed right issues are JASDEC eligible and held in the book-entry form, those are listed until four business days before expiry date.
- Stock split (including bonus issues)
- Announced at least one month before record date.
- For shares held with JASDEC, new shares resulting from stock splits will be credited one business day after the record date (RD+1).
- The new shares are credited to the shareholders’ accounts.
- Tender offer
- Announced when the company starts a tender offer.
- Normally the offer period will last for three weeks and shares subscribed for the offer are withdrawn from the client's account and transferred to the tender offer agent, normally on the closing day of the offer period.
- An account for this specific transaction must be opened with a tender offer agent (a security firm designated by the company).
Organisation of AGM/EGMs
Types of shareholders' meetings are as follows:
- The AGM is usually held within three months after the fiscal year end closing date of the company. The peak season is currently at the end of June. The majority of listed companies have their fiscal year ending on 31 March and generally hold the AGMs concentrated around the same time in late June.
- Extraordinary General Shareholders' Meeting (EGM): EGMs are held occasionally, when the resolution of the general shareholders' meeting is needed.
Notice of a shareholders' meeting is dispatched normally via ordinary mail at least two weeks prior to the date of the meeting. For non-resident shareholders, the notice is sent to their respective custodian bank.
Shares are not blocked from trading, as the entitlements are based on the settled (JASDEC) positions at record date.
Proxy voting
The fiscal year end for the majority of companies falls at the end of March and these companies hold their AGMs on the same time in late June. As a result, voting by proxy is common practice.
Under the new Company Law (also referred to as Corporate Law) companies are allowed to set separate record dates other than the standard fiscal-year-end date to determine voting rights. When setting other record dates than the fiscal year end dates, companies must comply with the following conditions:
- The record date must be announced at least two weeks prior to the record date.
- Voting rights determined at such a record date must be exercised within three month from that record date.
Voting is normally filed by physical mailing of the voting card completed on behalf of foreign investors by custodians in the Japanese market.
However, the local Banking Law restricts custodian banks from providing assistance in physical attendance by foreign investors or their designated representatives. Such an arrangement should be made directly through the foreign investor's legal representative in Japan.
Neither Clearstream Banking S.A. nor its local custodian will be able to provide assistance to foreign investors or their designated representatives for physical attendance to such meetings.
Round-up service
- Odd lot purchases
The round-up service allows investors to buy odd lots and thus to “round up”, into tradable units, existing odd lots arising from corporate actions. Although historically available on an ad-hoc basis, due to a change in the Commercial Code, an increasing number of issuers offer it on an ongoing basis for shares held in JASDEC.
Instructions to buy odd lots are submitted electronically to the issuer or their registrar through JASDEC. The purchase cost is determined by the official market closing price on the request date and advised by JASDEC two business days after the request date. The issuer delivers rounded-up odd lot shares, via JASDEC, five business days after the request date.
The issuer may set a frozen period for round up services, generally round up requests are not acceptable from RD-3 business days until RD. - Odd lot sales
Odd lots up to the amount shown on JASDEC’s books may be sold back to the issuer. The sale usually takes four business days.
For an odd lot sale, instructions are submitted electronically to the issuer or their registrar through JASDEC. The issuer executes odd lot sales at the closing price on the request date. The odd lot shares are then transferred to issuer or their registrar on the request date. The proceeds are paid four business days after the request date by electronic fund transfer.
The issuer may set a frozen period for odd lot sales, generally odd lot sale requests are not acceptable from RD-3 business days until RD.
Dissenting rights
Under the new Companies Law, issuing companies are allowed to take certain actions without approval from shareholder meetings. If this is the case, the issuing company announces this action (generally in the press) and shareholders who dissent this action are entitled to sell their holdings to the issuing company at a fair price offered by the issuing company. In line with the amendment to the Company Law (that promulgated on 27 June 2014), shareholders are no longer allowed to demand for purchase (share buy-back) against issuing companies in case of small-scale reorganisations etc (simplified merger, locally called kan’i soshiki saihen tou) resolved by the board of directors of the issuing companies on or after the effective date (1 May 2015).
In addition, under certain conditions, shareholders are entitled to request the issuing company to buy-back their shares when the company takes specific corporate actions such as merger and business transfer with shareholders' approval at the shareholders' meeting. Shareholders must express their intention of dissenting prior to the shareholders' meeting and must vote against the company proposal at the shareholders' meeting, if they request the issuing company to buy-back.
Sale and purchase of rights
Trading of rights is possible, but liquidity is extremely low and successful trading cannot be guaranteed.