Introduction

While many people in the global business community know that Japan is the world’s third largest economy, it is not as well known that Japan is also home to the world’s third largest stock exchange, the Tokyo Stock Exchange (TSE). The TSE’s popularity is due in part to its high liquidity, with an average daily trading value of JPY 3.4 trillion[1] (USD 34 billion) in fiscal year 2015[2], as well as the ability for companies to raise substantial sums when going public. Funds raised by the 95 companies issuing shares via public offerings on the TSE during fiscal year 2015 totaled around JPY 994 billion[3] (USD 9.94 billion).

Potential Benefits to Israeli Companies

Since Prime Ministers Abe and Netanyahu exchanged visits in 2014 and 2015, Japanese concerns have evidenced significantly greater openness with respect to transactions in Israel, and Israeli companies see new horizons in Japan. We believe the Tokyo Stock Exchange provides an interesting alternative to traditional stock exchanges for maturing Israeli startups exploring growth financing alternatives. The TSE is a particularly advantageous platform for issuers in the fields of robotics and bioscience given the generally perceived strength of these sectors in the Japanese marketplace.

English Language Document Submissions for Issuers

Under the Financial Instruments and Exchange Act of Japan (the “FIEA”),[4] applicants and listed companies of the TSE must submit certain disclosure documents in Japanese to the relevant Japanese regulators[5]. However, the English-language disclosure system allows foreign applicants and listed companies of the TSE to supply English language documents in place of the Japanese disclosure documents, if the documents “were actually disclosed in a foreign country pursuant to laws and regulations, including rules of a stock exchange or an equivalent institution, in the foreign country,” and are not deemed “inadequate in consideration of the public interest and investor protection in Japan.”[6]

The relevant Japanese regulator may deem English documents inadequate, and thus require the submission of Japanese language documents, if the regulator considers the English versions to have been submitted improperly in the foreign country, or if the disclosure criteria of the foreign country are inadequate in light of the standards of the disclosure system under the FIEA.[7]

Although, as stated above, English language disclosure documents may be submitted in place of the equivalent Japanese language documents, certain documents must nonetheless be translated or summarized in Japanese.[8] A non-exhaustive list of required Japanese language documentation includes: (i) the foreign company’s registration statement, (ii) an outline of the foreign company’s business and business risks, (iii) summary of items not described in the forms associated with the company’s annual and quarterly securities reports, among several others.[9]

As a result of the substantial amount of information and items Japanese regulators require to be produced in Japanese, foreign issuers generally consider the English language disclosure system as only marginally reducing Japanese language requirements, and thus to be of little benefit. Consequently, the system is very rarely used, with only one foreign issuer currently utilizing it.[10]
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