SCAPIN-1079: ORDINANCES AND REGULATIONS AFFECTING THE HOLDING COMPANY LIQUIDATION COMMISSION
GENERAL HEADQUARTERS
SUPREME COMMANDER FOR THE ALLIED POWERS
APO 500
23 July 1946
AG 091.3
(23 Jul 46)
ESS/AC
(SCAPIN-1079)
| MEMORANDUM FOR | IMPERIAL JAPANESE GOVERNMENT. |
|---|---|
| THROUGH | Central Liaison Office, Tokyo. |
| Subject | Ordinances and Regulations Affecting the Holding Company Liquidation Commission. |
1. Reference is made to the following:
a. Central Liaisn Office Memorandum No. 1171 (2. 1), dated 12 March 1946, forwarding Memorandum from Ministry of Finance, LO 341 dated 5 March 1946, subject: “Organization Ordinance Concerning the Supervising Committee of the Liquidation of the Holding Companies,” and attached final draft of the reference Organization Ordinance;
b. Central Liaison Office Memorandum No. 2296 (EF), dated 13 May 1946, inclosing two (2) Memoranda from the Ministry of Finance, LO 522. dated 11 May 1946. subject: “The Regulalations Concerning the Enforcement of the Holding Company Liquidation Commission Ordinance (The Ordinance of Cabinet. Ministry of Finance and Ministry of Justice,” with attached final draft of the reference Cabinet Ordinance, and LO 528 dated 13 May 1946, subject: “Articles of Incorporation of the Holding Company Liquidation Commission,” with attached Articles of Incorporation.
2. No objection is offered to the proposed two (2) Ordinances nor to the Articles of Incorporation, provided that, with respect to compensation to the zaibatsu, adequate safeguards be established to provide against windfall or gain resulting from an increase in the market price or value of bonds received in compensation beyond the value assigned to such bonds when exchanged for receipts.
3. To further implement the program of deconcentration of economic power, and independently of proposals for the enactment of permanent legislation to effectuate such programs, the Imperial Japanese Government is directed to take such immediate action as may be necessary, as a minimum, to insure the following.
a. The elimination of the influence of listed families or family members through security ownership or the holding of a position of business responsibility by either such family member or his appointee in any company; provided, however, that the Imperial Japanese Government may, with the approval of the Supreme Commander for the Allied Powers, permit certain families and individuals to be exempt or removed from this restriction upon a showing of necessity or good cause.
b. Limitation on intercorporate security holdings by Restricted Companies.
c. Prohibition of multiple directorates in all Restricted Companies except those of a financial nature, where adequate controls will be established.
d. Prohibition among Restricted Companies of contractual, service or patent arrangements which restrict competition or restrain trade and commerce.
4. The Imperial Japanese Government is, accordingly directed to submit promptly, in quintuplicate, typed in English on 8” X 11” paper, to the Supreme Commander for the Allied Powers, its proposal for carrying out the requirements of paragraphs 2 and 3, above.
5. As used in this Memorandum, the term “Restricted Company or Companies” shall be construed to mean those companies which are listed in Memorandum for the Imperial Japanese Government from General Headquarters, Supreme Commander for the Allied Powers, file AG 004 (8 Dec 45) ESS/AC (SCAPIN-403), subject: “Establishment of a Schedule of Restricted Concerns,” or subsequent additions thereto. The term “listed families or family members” shall pertain to those families whose activities are restricted by Memoranda for the Imperial Japanese Government from General Headquarters, Supreme Commander for the Allied Powers, file AG 004 (6 Nov 45) ESS/ADM (SCAPIN-244), subject: “Dissolution of Holding Companies,” and file AG 091. 4 (3 Jun 47) ESS/AC (SCAPIN-995), subject: “Reports to be Made by Certain Families.”
6. For the purpose of carrying out the objectives of this Memorandum, direct communication is authorized between the companies concerned and the Economic and Scientific Section, General Headquarters, Supreme Commander for the Allied Powers.
FOR THE SUPREME COMMANDER:
JOHN B. COOLEY,
Colonel, AGD,
Adjutant General.
MEMO FOR RECORD: (SCAPIN - 1079)
WFM/JMcIH/RMC/gg
8 July 1946
1. SCAP, by Memorandum AG 004 (4 Apr 46) ESS/AC (SCAPIN-859), subject: "Holding Company Liquidation Commission," offered no objection to an Imperial Ordinance, entitled: "The Holding Company Liquidation Commission Ordinance," forwarded by the Ministry of Finance with accompanying Memorandum LO 339, dated 9 March 1946.
a. Paragraph 3 of reference Memorandum instructed the Japanese Government to furnish promptly the following: The Cabinet and Departmental Ordinances required to implement the Imperial Ordinance, the Organization Ordinance Concerning the Supervising Committee of the Liquidation of the Holding Companies, and the Articles of Incorporation of the Holding Company Liquidation Commission.
b. On 12 March 1946, the Japanese Government submitted to SCAP an "Organization Ordinance Concerning the Supervising Committee of the Liquidation of the Holding Companies"; on 11 May 1946 submitted an Ordinance of the Cabinet, Ministry of Finance, and Ministry of Justice, subject: "The Regulations Concerning the Enforcement of the Holding Company Liquidation Commission Ordinance"; and on 13 May 1946 submitted "Articles of Incorporation of the Holding Company Liquidation Commission." The three (3) documents herein referred to set forth in detail the regulations required to carry out the general purposes of the Imperial Ordinance establishing the Holding Company Liquidation Commission (HCLC) and should effectively implement this Ordinance. The approval requested is merely routine. Accordingly, the two (2) Ordinances and the Articles of Incorporation are approved with the minor modification noted below.
c. Paragraph 17 of the proposed Cabinet Ordinance provides that the assigned value of registered bonds to be turned over to the Zaibatsu in exchange for receipts shall be the acquisition cost of the bonds at the time that the Commission acquired such securities. As a general proposition, this method of compensation is satisfactory. However, if the Government bonds in question are subject to an appreciation and increase substantially in market value, those receiving such bonds would have windfall gain to the extent that the market value at the end of the ten (10) year period exceeds the market value at the time when the bonds were acquired by the Commission. To avoid such a possibility, the Japanese Government has been instructed to draft provisions which would eliminate any such windfall.
2. With the approval of these Ordinances, the Articles of Incorporation, and the impending approval of the members of the Commission, the HCLC will be ready to undertake its work of dissolution. In connection with the dissolution of large corporate combines and the reorganization of their subsidiaries certain decisions will have to be made with respect to the influence of zaibatsu families, the amount of stock which may be held by any individual, the extent to which one corporation may hold securities in another corporation, the extent to which multiple directorates will be permitted in subsidiary corporations and the elimination of contractual arrangements among subsidiaries which tend to restrain trade and commerce, Paragraph 4 of the attached Memorandum requires the Japanese. Government to submit its proposals with respect to these matters in such form as may be necessary to establish standards and guides in connection with the reorganization of those companies on the Schedule of Restricted Concerns. It is not anticipated that the establishment of these standards, or their enforcement will have an adverse effect on the economy of Japan. Both the Japanese Government and the Zaibatsu Holding Companies have anticipated that steps would be taken to eliminate the influence of the Zaibatsu families in these corporate structures. In nearly all cases, members of Zaibatsu families in positions of responsibility and influence have already voluntarily resigned their positions in anticipation of action by SCAP. Furthermore, both the Japanese Government and the Zaibatsu Holding Companies have initiated proposals for the purpose of limiting intercorporate shareholdings and multiple directorates among Restricted Concerns. It, therefore, is apparent that the request for the above proposals by the Japanese Government has been expected and that the establishment of such standards, with the approval of SCAP, will not have any serious repercussions either politically or economically. On the contrary, the establishment of such standards is more likely to have a beneficial effect thru the elimination of the present uncertainties with respect to future methods of reorganization.
3. The interests of USAFIK have been considered. This action does not affect the Korean area.
4. This is considered an administrative matter.
5. Concurrences: Government Section (Miss E. M. Hadley); Legal Division, ESS (Lt. Col. E. R. Minnich).
J. McI. H.
