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Guidebook for Taking Advantage of Spin-off Approach Compiled

Aiming at the improvement of the profitability and mid to long term corporate value of Japanese companies, the Ministry of Economy, Trade and Industry (METI) has been engaging in developing business environments in which companies are able to quickly and boldly reorganize themselves. As part of this effort, METI compiled a Guidebook for Taking Advantage of Spin-off Approach to encourage companies to take advantage of this business reorganization method which is widely used by overseas companies.

1. Background

With the advent of the fourth industrial revolution, Japanese companies need to choose more efficient business models to cope with changes in their business environments. To this end, it is important for Japan to aid companies in quickly and boldly reorganizing themselves. Moreover, operating profit rates of Japanese companies, which are very diverse in scale, are significantly lower than those of Western countries, and it has been pointed out that insufficient optimization of the business portfolios of Japanese companies constitutes a major cause of this situation.

To address this, under the FY2017 Tax System Reform, Japan aimed to encourage bold business reorganization of Japanese companies, and to this end, it provided special measures for tax deferments involving capital gains or losses on transfers brought about in advancing a spin-off approach, a business reorganization method through which a company separates a specific business department or wholly owned subsidiary from the company and establishes a new company with no capital ties to the original parent so that it operates independently. Moreover, under the FY2018 Tax System Reform, Japan will take additional measures to relax eligibility requirements for companies reorganizing their business in preparation for establishing a spin-off.

This development of institutional environments is expected to encourage companies to start making use of a spin-off approach. However, challenges are seen in practical efforts due to the lack of case examples of successful spin-off efforts in Japan and no specific, clear examples of the application of specific related laws and regulations are available. METI decided to compile the guidebook in order to address these challenges. The guidebook explains not only the relevant tax systems but also the Companies Act, accounting systems, and other systems and provides a Q&A section to explain these issues from a practical viewpoint.

METI expects companies in a wide variety of fields intending to employ a spin-off approach to take advantage of the guidebook.

2. Outline of the guidebook

Section 1: Details of a spin-off approach

This section explains the outline of a spin-off approach as a method of business reorganization, effects brought about by the approach, and case examples from overseas companies.

Section 2: Outline of the FY2017 Tax System Reform

This section describes the outline of the tax system reform involving a spin-off approach as stipulated under the FY2017 Tax System Reform, and a summary of the eligibility requirements that companies should meet in conducting a spin-off approach to obtain approval for their business reorganization efforts.

Section 3: Q&A for a spin-off approach

This section aims to offer a reference for companies intending to taking advantage of a spin-off approach, and to this end, it describes key points of procedures that companies must complete in adopting a spin-off approach, including procedures for holding shareholder meetings under the Companies Act, necessary documents that companies must file under the Financial Instruments and Exchange Act, procedures for listing new enterprises on security exchanges, tax processing, and accounting.

Note: The guidebook was basically compiled in accordance with the regulations concerning adopting a spin-off approach under the FY2017 Tax System Reform. METI will add new sections of the regulations concerning the approach under the FY2018 Tax System Reform into the guidebook.

Release date

March 30, 2018

Division in Charge

Corporate System Division, Economic and Industrial Policy Bureau

Related website

Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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