In June 2025, the Ministry of Economy, Trade and Industry (METI) released the first-ever standardized model LPA in English (“English Model LPA”), following the convening of an Expert Committee in February to draft the new model. This English version addresses previous challenges faced by fund managers using translated Japanese LPAs and aligns with global fund practices, enhancing the attractiveness of the market for foreign investors. This article looks at the issues raised during our latest seminar in collaboration with AIMA Japan and Langham Hall.
White & Case LLP, in collaboration with AIMA Japan and Langham Hall, hosted a seminar “Igniting innovation: Japan’s bold leap with the new limited partnership model agreement” at the office of White & Case in Tokyo on October 22, 2025.
The event spotlighted Japan’s first standardized English Model Investment Limited Partnership Agreement (LPA), released by the Ministry of Economy, Trade and Industry (METI) in June 2025: https://www.meti.go.jp/english/press/2025/0623_002.html. This marks a significant step in aligning Japan’s fund practices with global standards and attracting greater international investment.
In this context, at the seminar, policymakers, legal and tax experts and industry leaders, including White & Case’s Eriko Sakata, Sayako Shiraki and Mao Muraguchi who were principal drafters of the English Model LPA, delivered presentations and engaged in a panel discussion to share their perspectives on the key provisions and practical applications of the English Model LPA and the significant implications for Japan’s investment landscape. These include:
1. Facilitating Fund Formation and Cross-Border Investment
Lower Barriers for New and Existing GPs: The new English Model LPA provides a standardized, internationally recognizable template for fund documentation. This is particularly beneficial for emerging Japanese general partners (GPs) who may lack the resources or experience to draft bespoke agreements from scratch. By offering a ready-made, market-accepted starting point, the model LPA reduces legal costs, shortens negotiation timelines and lowers the threshold for seeking to attract foreign limited partners (LPs).
Easier Access for Foreign Investors: Historically, foreign investors have been hesitant to invest in Japanese funds due to unfamiliarity with Japanese legal documents and the lack of English-language agreements that meet global standards. The new model LPA, aligned with international practices, makes it easier for foreign investors to understand and commit to Japanese funds. This is expected to facilitate greater cross-border capital flows and help Japanese GPs tap into a broader investor base.
Parallel and Offshore Structures: The model LPA is designed to be flexible and compatible with parallel fund structures, where both Japanese and offshore vehicles (such as Cayman, Singapore or Luxembourg partnerships) can operate side by side. This allows GPs to efficiently manage both domestic and international investors under similar terms, reducing friction and administrative complexity.
2. Alignment with Global Standards
Incorporation of Global Market Standards: The model LPA incorporates global market standards, such as clear provisions for allocation of investment opportunities, borrowings and security interests, indemnification and GP removal. These features increase transparency and investor familiarity with respect to Japanese fund terms, making Japanese funds more attractive to sophisticated international LPs.
3. Remaining Challenges and Industry Concerns
Tax and Regulatory Considerations: While the introduction of the new model LPA marks significant progress, there are still some points to be aware of, such as Japan’s tax rules regarding permanent establishment (PE). These considerations may require some additional attention for foreign investors, but ongoing industry dialogue and potential future reforms are expected to further enhance clarity and ease of investment.
Adoption and Customization: While the model LPA provides a strong foundation, it is not a one-size-fits-all solution. GPs are expected to tailor the agreement to their specific needs, especially for more complex funds. The model is intended as a starting point, not a mandatory template, and practitioners are encouraged to seek legal advice to ensure compliance and suitability for their particular circumstances.
Overall, the initiative was widely praised by industry stakeholders, including fund managers and investors, for its collaborative development process and its potential to modernize Japan’s fund ecosystem. The seminar concluded with optimism about the new model LPA’s potential to ignite innovation and attract global capital to Japan.
The following is a summary of White & Case team’s presentation during the seminar:
1. Background of English Model LPA
METI previously published several versions of model LPAs. However, the English version was merely a translation of the Japanese version. From the perspective of foreign investors, it diverged significantly from offshore LPAs they typically encounter, making them hesitant to advance investments.
Therefore, White & Case team suggested to METI that an English Model LPA based on a typical offshore LPA would be necessary. In response, METI approached us about creating a new English Model LPA in conjunction with updating the existing Japanese model LPA.
2. Comparison with Other Model LPAs
(1) Institutional Limited Partners Association (ILPA)
There is a model LPA created by ILPA, an international organization dedicated to advancing the interests of LPs and their beneficiaries. The ILPA model was developed in collaboration with various law firms and published in July 2020.
The ILPA model is designed for traditional private equity buyout funds organized under Delaware law and includes contract terms that are fair and highly transparent for investors.
Some specific differences include:
Regulatory Provisions: While the METI model includes many provisions specific to Japanese law (e.g., clauses regarding anti-social forces and regulations under the Financial Instruments and Exchange Act of Japan (FIEA)), the ILPA model addresses U.S. regulations including U.S. securities laws. It was discussed whether to include provisions relating to U.S. or other foreign regulations in the METI model, but they were not included because it would be quite difficult to keep updating the METI model to reflect subsequent regulatory changes in foreign jurisdictions.
Information Disclosure: The ILPA model explicitly outlines an internationally standardized reporting format through the ILPA Reporting Template, detailing what information must be reported to investors, and specifying the content of quarterly and annual reports in greater detail. The METI model does not standardize these items to such extent.
Advisory Committee: The advisory community clause is also more investor-friendly in the ILPA model, explicitly stating adherence to the best practices described in the ILPA Principles for the Advisory Committee.
(2) Japan Private Equity Association (JPEA)
The Japan Private Equity Association published a model LPA in April 2025. Although created around the same time with the METI’s Japanese model LPA, it was developed by a different law firm under a separate initiative. However, since it is similarly based on Japan’s Limited Partnership Act for Investment (ILP Act), the content is broadly similar to the METI’s Japanese model LPA.
On the other hand, the English model LPA published by METI was created by essentially incorporating the contract terms extracted from the METI Japanese model into a standard offshore limited partnership agreement. Consequently, while contract terms are basically identical to that extent, the METI’s English Model LPA includes other provisions consistent with global market practice as further explained below and the order of clauses and specific drafting in the METI’s English Model LPA also differ significantly.
3. Example Use Cases for English Model LPA
There would be three main options to use the English Model LPA:
establishing a single Japanese limited partnership under the English Model LPA that accommodates both Japanese and foreign investors;
establishing multiple Japanese limited partnerships: one for Japanese investors using a Japanese LPA, and another for foreign investors using an English Model LPA; and
establishing a Japanese limited partnership alongside an offshore limited partnership with similar terms of the English Model LPA.
(1) Single Japanese Limited Partnership with English Model LPA
The first option involves establishing a single Japanese limited partnership with the English Model LPA, where both Japanese and foreign investors will invest. The use of the English Model LPA is expected to facilitate participation by foreign investors more readily than providing them with an English translation of a Japanese LPA.
One point to note in this scenario is that the English Model LPA is not identical to the Japanese model LPA. Therefore, it is not possible, for example, to have Japanese investors sign the Japanese model LPA and foreign investors sign the English Model LPA in order to establish a single Japanese limited partnership. Similarly, neither is intended to be used as a translation of the other. For a single Japanese limited partnership, it is necessary to uniformly use either the Japanese or English Model LPA for both Japanese and foreign investors.
(2) Multiple Japanese Limited Partnerships with Japanese and English Model LPAs
The second option involves establishing two or more Japanese limited partnerships, using the Japanese model LPA for those to be formed for Japanese investors and the English Model LPA for those to be formed for foreign investors. Given that the contract terms of the Japanese model LPA are fundamentally reflected in the English Model LPA, this structure allows for well-coordinated management of all these Japanese limited partnerships to some degree although care should be taken to build mechanisms for uniformed investment decisions, LP votes, etc. from a legal and tax perspective.
That said, this scenario might not become very common at least for a while as there are potential tax and other issues to be considered in connection with foreign investors investing in Japanese limited partnerships and a fund vehicle solely dedicated to foreign investors would not necessarily need to be Japanese.
(3) Japanese and Offshore Limited Partnerships with English Model LPA
The third option involves establishing an offshore limited partnerships as well as a Japanese limited partnership on similar terms. It is very common for multiple Japanese or offshore limited partnerships to exist as part of a larger structure, often including GKs (godo kaisha) or a TMK (tokutei mokuteki kaisha) or offshore holding SPVs too.
Although the English Model LPA was originally drafted for Japanese limited partnerships, its contractual framework closely resembles that of typical offshore LPAs. Therefore, if necessary amendments under laws of the relevant jurisdiction(s) (e.g., governing law clause, transfer and other regulatory provisions) are made, it can also serve as a base for drafting an LPA of an offshore limited partnership.
In practice, when using the English Model LPA as a base for an offshore limited partnership, there are nuances somewhat unique to Japanese limited partnerships and the English Model LPA, such as the concept of “investment units,” process for subsequent closings, the specific timing of GP clawback and restrictions associated with limited liability of LPs. Appropriate modifications are anticipated in the LPA of the relevant offshore limited partnership to address those discrepancies in the practices of offshore limited partnerships and Japanese limited partnerships. Such modifications will inevitably lead to corresponding changes in the LPA of the Japanese limited partnership for alignment of terms.
Even if some degree of modification is necessary, there will still be benefits for emerging GPs in particular to use the English Model LPA as a starting point when drafting offshore LPAs. For example, a GP who previously established a Japanese limited partnership with the Japanese model LPA would find it extremely difficult to switch to a completely different offshore LPA when seeking to raise funds from foreign investors. This difficulty stems from the challenge of reflecting the practical experience and operations accumulated thus far under the Japanese LPA, which will be mitigated if the English Model LPA that basically covers the terms included in the Japanese model LPA is used. It will also be easier for existing investors in a Japanese limited partnership formed with the Japanese model LPA to review the offshore LPA as a successor fund to be formed outside Japan if such offshore LPA has been drafted based on the English Model LPA.
4. Basic Approach Taken for English Model LPA
To state the obvious, the English Model LPA complies with the ILP Act. In practice, we sometimes see parallel vehicle structures where an offshore LPA of an offshore limited partnership is finalized first and then translated into Japanese and used for a Japanese limited partnership, which additionally requires changes to ensure that all mandatory provisions and other requirements stipulated in the ILP Act are fully complied with. The English Model LPA, however, is inherently drafted to comply with those requirements to eliminate that extra step.
As compared to the Japanese model LPA, the English Model LPA not only incorporates terms of the Japanese model LPA but also include adjustments in drafting. These include the order of clauses, the grouping of certain provisions and the specific use of terminology, which are generally made consistent with global fund practices. The English Model LPA also incorporates clauses that are commonly seen overseas and felt could be effectively utilized for a greater flexibility or other benefits in Japanese limited partnerships too.
While it is referred to as the English “model” LPA, it merely presents one example of what an LPA might include. It is not rigidly fixed content where certain commercial provisions are absolutely essential or some clauses are non-negotiable due to Japan’s established domestic practice. Therefore, we fully anticipate that each GP may flexibly modify the terms of the English Model LPA based on its own practices or reflecting the outcome of negotiations with Japanese and foreign investors.
5. Detailed Comparison with Japanese Model LPA
Allocation of Investment Opportunities: When GP affiliates manage multiple investment funds or other vehicles, one issue that always arises is how investment opportunities will be allocated among the fund in question and such other funds or vehicles. The English Model LPA now includes a provision that investment opportunities shall generally be allocated on a fair and equitable basis, which is of course expected to be modified in practice e.g., in terms of the scope of such other funds or vehicles, and the allocation criteria and permitted exceptions.
AIV: An alternative investment vehicle (AIV) is separately formed when the fund seeks to make a portfolio investment which should not be made by the main fund vehicle due to regulatory, tax or other reasons. This is a fairly common mechanism in offshore LPAs, and the English Model LPA now also includes an AIV provision consistent with global market standard.
Feeder Fund: A feeder fund is additionally formed when certain investors may not (or unwilling to) invest directly into the main fund for regulatory, tax or other reasons. Given that this structure is quite common, the English Model LPA now includes a provision setting forth, for example, how LP votes should be conducted or default be treated for feeder fund investors, generally providing that those provisions should be applied on a “look-through” basis by looking at individual feeder fund investors rather than treating the feeder fund as a single investor in the main fund.
Borrowings: The scope of LPs’ obligations relating to borrowings by the fund or its portfolio companies are defined more broadly in the English Model LPA for a greater flexibility and operational ease. Such obligations include the provision of certain representations and warranties and are stipulated to remain after a withdrawal of, or a transfer of its LP interest by an LP to certain extent.
Exculpation: The exculpation provision is only included in the English Model LPA, which provides for the principle that GP affiliates shall not be generally liable for losses suffered by the fund due to actions taken by such GP affiliates. However, the scope of covered persons and the applicable liability standards have been adjusted to match the indemnification provision in the Japanese model LPA (so are not necessarily consistent with global market practice).
Indemnification: The indemnification provision itself is included in the Japanese model LPA too, but the English Model LPA additionally provides for advancement of expenses and an indemnitee’s obligation to pursue any available insurance, contribution or indemnity claims.
Discontinuance: This clause in the English Model LPA is somewhat unique and allows the fund to discontinue an LP’s participation in a portfolio investment for a likelihood of a “material adverse effect,” which is also now defined in the English Model LPA. This concept is different (a) from exclusion in that discontinuance occurs after the applicable portfolio investment has been made, and (b) also from required withdrawal from the fund in that discontinuance only relates to a specific portfolio investment.
GP Removal for Cause: While the GP removal for cause provision is included in both the Japanese model LPA and the English Model LPA, additional details of the removal process have been added in the English Model LPA, including applicable notice requirements and a flexibility to cure a cause event. This clarifies the process followed by relevant parties upon the occurrence of a cause event.
Others: In addition to the items above, provisions explicitly permitting (a) certain derivative transactions by the fund, (b) limitation of the scope of information disclosure with respect to a specific LP, (c) the treatment of an LP’s failure to provide certain information required for the fund’s tax filings as a default, and (d) a broader scope of unilateral LPA amendments by the GP have been incorporated in the English Model LPA only.
6. English Model Initial LPA
A model of an initial limited partnership agreement in the English language has been published by METI in conjunction with the English Model LPA. An initial LPA is a short agreement and often used in foreign jurisdictions to establish a limited partnership early on to open its bank account, enter into contracts with service providers, etc. so that these processes will be completed in advance without affecting the timing of investor closings.
To form a limited partnership in Japan, its signed LPA is one of the documents that need to be submitted for the registration application upon the formation. The English model initial LPA has been created in a short format, intended solely to meet the requirements as an LPA to be submitted for the registration application. Given such limited purpose, the English model initial LPA is not a “simplified version of the English Model LPA” and should be amended to a fuller version (which can be prepared based on the English Model LPA) prior to the commencement of the fund’s substantive investment activities.
Other points to be considered for the use of the English model initial LPA include compliance with licensing requirements under the FIEA, specifically, if the GP wishes to rely on the exemption as “Special Business Activities for Qualified Institutional Investors” (Article 63 Exemption) once the English model initial LPA is executed, then the fund must admit at least one qualified institutional investor (QII) upon such execution to meet one of the requirements for the Article 63 Exemption. Given that the use of an initial LPA has not yet become common for the formation of Japanese limited partnerships, however, the pool of potential QII investors willing to sign an initial LPA may be limited to QII investors that have an established relationship with or otherwise close to the GP. This is because Japanese investors comfortable with offshore LPAs are often large institutional investors that have cumbersome internal procedures, making it difficult for them to obtain internal approvals to sign an initial LPA for the purpose of the smooth formation of the Japanese limited partnership in addition to later signing the longer version of the LPA. Hopefully there will be practical developments in these respects soon, now that the English model initial LPA has been published by METI.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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