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FOUNDING SHARE SUBSCRIP-TIONS CAN BE PAID WITH LISTED SHARES
The Company Act provides that a promoter of a company limited by shares may pay for its founding share subscription by contributing as-sets needed for the business of the company. In an interpretation issued on 15 July 2005, the Ministry of Economic Affairs stated that if listed securities are among the assets needed by a spe-cialist investment company, then a promoter of such a company may pay for its initial subscrip-tion of shares by contributing such listed securi-ties.
However, questions remained as to whether such use of listed securities to pay for share subscrip-tions would violate the restrictions on off-market trading in listed securities, under the Securities and Exchange Act (SEA). The Financial Su-pervisory Commission (FSC) addressed this is-sue in an interpretation dated 25 August 2005, in which it stated that although the SEA provides that trading in listed securities must be conducted on a centralized securities market operated by a securities exchange, if a company promoter uses its holdings of listed securities to make its share payments in accordance with the Company Act, this is not trading in securities, and therefore is not subject to the restrictions on off-market transactions.
If new shares issued by a company are sub-scribed to by existing shareholders, or by specific persons by negotiation, and not issued publicly, a shareholder may also contribute capital in the form of its holdings of listed securities, if such securities are assets needed for the business of the company. The FSC interpretation states that under these circumstances too, such a transaction will not violate the restrictions on off-market trading.