MEMO FOR RECORD : (SCAPIN 408/2)
WFM/ECW/mk
5 November 1948
1. The Regulations Affecting Restricted Concerns, as set forth in SCAPIN 408 and which were implemented by Ordinance 657 promulgated by the Japanese Cabinet in November 1946, require all Japanese companies listed in the Schedule of Restricted Concerns, as designated by various SCAPINs, to obtain approval from General Headquarters, Supreme Commander for the Allied Powers, for all actions not in the normal course of business.
2. The purpose of these regulations was to prevent dissipation of assets by companies subject to dissolution in accordance with the provisions of JCS 1380/15. The restricted concerns list includes not only companies which are subject to dissolution, but also the direct subsidiaries of these companies whose assets might also be dissipated through the influence of the parent company.
3. Since the promulgation of the Regulations Affecting Restricted Concerns various other actions have been taken which cause re-examination of the necessity for such control over restricted concerns, at present. Of these actions, the principle ones include the promulgation of the HCLC Ordinance, Ordinance 233, the promulgation of Ordinance 567, and the promulgation of the Deconcentration Law. Under Ordinance 233 the holding companies subject to dissolution come under the direct supervision of the HCLC and most of their share holdings in other companies have been transferred to the HCLC. Under Ordinance 567 all restricted companies are required to dispose of their share holdings in other companies as well as terminate interlocking directorates and contractual arrangements, thus dissolving the legal ties formerly existing between the combine companies. Pending disposal of their share holdings, voting proxies have been transferred to HCLC. Under the Deconcentration Law the designated companies are subject to continued supervision regardless of the existence of the restricted concerns regulations provisions.
4. In view of the above action, the detailed supervision by General Headquarters, Supreme Commander for the Allied Powers of most of the activities of restricted concerns as provided by the Regulations Affecting Restricted Concerns does not appear to be necessary. Although the delays which formerly characterized processing of restricted concerns applications are no longer significant, in general the time and expense of application are difficult to justify in view of the net accomplishment. It is, therefore, recommended that the restricted concerns be relieved from compliance with the Regulations Affecting Restricted Concerns. However, in order to make the supervision under other laws and ordinances effective, the following actions should also be taken: Ordinance 567 should be amended to indicate clearly its application to successor companies set up by restricted concerns. Many of such companies are being set up under the Enterprise and Financial Reorganization Laws. Also, the Law Concerning Temporary Measures of Companies should be repealed. This Law, which was passed during the war, gives to executive officers of companies broad powers not subject to stock holder approval. Such law is highly objectionable at this time. At various times, representatives of the Japanese Government have stated that they intended to recommend its repeal, but, so far, no action has been taken.
5. Concurrence: Orally obtained from
ESS/IND (E.S. Vaughn)
ESS/FIN (J.R. Allison)
ESS/TEX (F. A. Williams)
ESS/EX (F. Baker)
E. C. Welsh - 26-6561
E. C. W.