THE CAPITAL SUBSCRIPTION LAW
Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits
("Shusshi ho" also known as the Capital Subscription Law)
(Law No. 195, 23 June 1954)
(Unofficial translation*)


Article 1 (Regulations of receiving capital subscriptions)
No person shall accept capital subscriptions by expressing clearly or implicitly to the general public that the whole amount of subscription or an amount in excess of such subscription will be refunded at a later date.

Article 2 (Prohibition on money deposits)
  1. No person, except those who are authorised under special provisions of other laws to accept money deposits as a business, shall accept money deposits as a business
  2. "Money deposits" referred to in the preceding paragraph, shall mean such acceptance of money from the general public as having the same economic characteristics as the acceptance of money on deposit, savings or time deposit and borrowings, received in whatever form or manner and regardless of title.
  3. When a limited company (excluding banks and securities financing companies under the provision of Article 2 paragraph 17 of the Securities and Exchange Law (Law No. 25 of 1948)) obtains funds from the general public through the issuance of corporate bonds for the purpose of lending money, it shall be deemed to be engaged in the acceptance of money deposits as a business.

Article 3 (Prohibition of illegal loans etc.)
Directors, staff and other employees of financial institutions (meaning banks, trust companies, insurance companies, shinkin banks (credit associations), Zenshinren Bank, labour banks, Rokinren (National Association of Labour Banks), Norinchukin Bank, Shoko Chukin Bank (the Central Cooperative Bank for Commerce and Industry), as well as other cooperatives engaged in accepting savings such as credit cooperatives, agricultural cooperatives, and fishery cooperatives) shall neither, taking advantage of their position, lend money, act as intermediary in lending and borrowing of money nor guarantee debt, for the purpose of generating profit for themselves or for a third party other than the said financial institution.
Article 4 (Regulations on intermediary commissions for cash loans)
  1. No person who acts as intermediary in lending and borrowing of money shall contract to receive a commission exceeding an amount equivalent to 5/100 of the sum of loan pertaining to intermediation, or receive a commission exceeding such amount.
  2. Moneys which are received by a person acting as intermediary in lending and borrowing of money in relation to said intermediation shall, in the title of reward, investigation fee and in whatever form or manner, be deemed to be the commission, and the provision of the preceding paragraph shall apply thereto.

Article 5 (Penalties for high interest rates)
  1. In the case where any person who lends money has contracted with interest at a rate exceeding 109.5% per annum (109.8% per annum in respect of a year including February 29, and 0.3% on a daily basis) (including the predetermined amount of compensation for damages on account of failure to perform obligations in connection with the debt, hereinafter the same), or has received interest at a rate in excess thereof, such person shall be punished with penal servitude for not more than three years or a fine of not more than three million yen, or both.
  2. Notwithstanding the provisions of the preceding paragraph, in the case where any person who lends money as his business has contracted to lend money with interest at a rate exceeding 40.004% per annum (40.1136% per annum in respect of a year including February 29, and 0.1096% on a daily basis), or has received interest at a rate in excess thereof, such person shall be punished with penal servitude for not more than three years or a fine of not more than three million yen, or both.
  3. For the purpose of application of the provisions of the preceding two paragraphs, if the period of the loan is less than 15 days, interest shall be calculated by deeming the period to be fifteen days.
  4. For the purpose of application of the provisions of the preceding paragraph 1 and paragraph 2, if the money has been lent by the method of deducting interest in advance, interest shall be calculated by deeming the actual amount delivered to be the principal sum.
  5. In the case of the contract stipulating that the interest for a period less than a year to be included in the principal, the provisions of paragraph 1 and paragraph 2 shall apply by deeming the amount exceeding the original principal amount in the sum of principal and interest as interest.
  6. Moneys which are received by a person who lends money in relation to the said loan shall be deemed to be interests, regardless of whether they are received as fees, discount charges, commissions, investigation charges or otherwise under whatever name they may be charged, and the provisions of paragraphs 1 and 2 shall apply thereto.

Article 6 (Relation to Price Control Ordinance)
The provisions of Article 9-2 (Prohibition of contracts with unduly high prices, etc.) of the Price Control Ordinance (Imperial Ordinance No. 118 of 1946) shall not apply to the interest for lending of money and the commission for intermediation in lending or borrowing of money.
Article 7 (Cases deemed to be lending of money etc.)
For the purpose of application of the provisions of Article 2 paragraph 3 and Article 3 to Article 6 inclusive, the delivery or giving and receiving of money by means of discounting bills, transferring mortgage or any other similar method shall be deemed to be lending of money or lending and borrowing of money.

Article 8 (Other penalties)
  1. A person who falls into one of the following categories shall be punished with penal servitude for not more than three years or a fine of not more than three million yen, or both:
  1. A person who violated the provisions of Article 1, Article 2 paragraph 1, Article 3 or Article 4 paragraph 1;
  2. A person who perpetrated a conduct, under whatever title, to evade the prohibitions under the provisions of Article 1, Article 2 paragraph 1, Article 3, Article 4 paragraph 1, or Article 5 paragraph 1 or 2;
  1. The section pertaining to Article 1 and Article 3 within the provisions of the preceding paragraph shall not apply in the case that such act falls within the proper provisions of Articles of the Penal Code (Law No. 45 of 1907)

Article 9
  1. When a representative of a juridical person (including an association or foundation which is a non-juridical person and has appointed a representative or administrator; hereinafter the same in this paragraph), or an agent, employee or other worker engaged by a juridical person or an individual, has violated Article 5 or the preceding Article (excluding the section pertaining to Article 3) in regard to the business or assets of such juridical person or individual, the juridical person or the individual shall be liable to a fine specified in each Article which shall be separate to the penalties imposed on the offender.
  2. In imposing penalties on an association or foundation which is a non-juridical person by virtue of the provision of the preceding paragraph, the representative or administrator thereof shall represent the association or foundation in regard to acts of procedure, and the provisions of law concerning criminal procedures in case where the accused is a juridical person shall apply mutatis mutandis.


* An unofficial translation
- Copyright 1999, David M Harvey (Refer to http://www.asianfinancegroup.com)

An analysis of commitment fees and the application and interpretation of the Capital Subscription Law is available from the Financial Law Board at http://www.flb.gr.jp/epage/edoc/publication01-e.pdf


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