Monday, October 13, 2014

Basic Requirements and Facts for Japanese Companies

Company Name - Prior examination of a company name is not required, but an application to form a company with the same name and address with an existing company will be rejected. You can use alphabets, Arabic figures, Japanese Characters (Hiragana, Katakana, and Kanji), and some marks (symbols). The Japanese word to indicate a type of corporation should be included in the company name. For example, "ABC Kabushiki Kaisha".

Directors - Japan requires at least one director, with no upper limit of the number of maximum directors. A company cannot be a director. Only a natural person can be a director. Nationality is not a requirement. There are two types of directors.  One is director and the other is representative director.  A representative director is a director with representation right of the company and should be appointed from among directors. At least one representative director should reside in Japan. Board meeting for directors can be held anywhere in the world or at multiple places using telephone or video conference system, or even a unanimous written consent of directors can be a replacement for the board resolution if it is included in the Articles of Incorporation of the company. There is no need to have a board at a company. A company with a board should have at least three directors and one statutory auditor. In case of a company without board, there is no such requirement. One director is enough, and the regulations regarding the board meeting do not apply.

Shareholders - Any natural person, judicial person, or non-judicial organization of any nationality can be a shareholder, though those who are going to conduct a certain type of business (ex. defense industry, utility, etc.) or of a certain country should obtain a prior permission.  There are no lower and upper limit for the number of shareholders. Shareholder meetings can be held anywhere in the world or at multiple places using telephone or video conference system, or a unanimous written consent of shareholders can be a replacement for the resolution of meeting of shareholders.  In contrary to the board meeting, in case to hold a shareholders resolution in the form of unanimous written consent, it is not required to have a related clause in the Articles of Incorporation.

Company Secretary - Unlike many other countries, a Japanese company does not need to appoint a company secretary.  It is not in the Japanese legal system.

Share Capital - For Japanese companies, a shareholder is requested to invest at least one Japanese yen. If there is only one shareholder at a company, the minimum share capital is JPY1. If there are two shareholders, the minimum is JPY2. Sometimes, the minimum share capital is stipulated in laws other than the Companies Act. Ex. a company generally has to have at least JPY 5 million or more as the share capital, to apply for a Investor/Business Manager Visa. Share capital should be expressed in the Japanese yen but can be paid in foreign currencies or in the form of contributions in kind. The share capital in cash should be deposited at a Japanese bank account in case you incorporate a Kabushiki Kaisha (KK), but in case of a Godo Kaisha (GK, Japanese LLC), you do not need to use a Japanese bank.  You can just pay it to the representative of the company in cash.

Registered Address -  Japanese companies must supply a local Japanese address as their registered company address. Registered addresses cannot be a PO Box, they are required to be a physical address.

Public Information - The Japanese Companies Act requires that details about directors (representative directors should provide their personal addresses), auditors and other officers (if any) are public information. A Company must file details with the Legal Affairs Bureau in its district.  KKs and branches of foreign companies are required to supply the method of public notice (ex. announcements of financial results) in the company registry. Shareholders are not public information in the case of KKs.  On the other hand, operating members (=shareholders) in GKs (LLC) must disclose their names. Representative members of GKs must disclose their names and addresses.

Taxation - There are many kinds of taxes in Japan such as corporate tax, corporate resident tax, withholding tax, consumption tax and so on.  It would be better to consult an Japanese accountant before you start forming an entity or registering a branch in Japan.  One thing I would like to point out here is a company should pay corporate resident tax of JPY70,000 per year (the amount is for the company with the share capital below JPY 10 million), regardless of the profit you make in Japan.

Ongoing Compliance - Companies including branch offices or other entities in Japan are required to prepare and maintain accounts. Small companies do not need to undergo an audit on their accounts and operations.

Every company is required to file an annual tax return with the tax authorities (for a bigger company, more than once a year).  The commercial registration of a KK needs to be renewed at least once in ten years.  An annual general meeting must be held once a year, soon after the close of annual accounts. These two regulations do not apply to a GK.

Others - I wrote this article based on the regulations on Kabushiki Kaisha, the most common form of company in Japan.  Therefore, different rules apply to other entities such as Godo Kaisha (Japanese LLC)  or branch registration.  It is recommended to take a professional's advice before registering your company/branch in Japan.

Wednesday, May 14, 2014

Japan's regulation on bitcoin

It is reported that the Japanese government is considering not to control the transactions using bitcoins but just to introduce a system where bitcoin exchangers are requested to file a prior notification to the government before they do business.

Article from Mainichi

Wednesday, May 22, 2013

Tokyo's Special Zone for Asian Headquarters

Starting from April 1, 2013, Tokyo began to assist foreign companies to establish their headquarters in Tokyo. Foreign companies which registered their headquarters in this special area can enjoy the following benefits:

- Effective corporate tax rate shall be cut down to 28.9%, compared with the normal rate of 38%.
- Local government subsidizes half of company establishment cost such as fees related to obtaining "status of residence", fees for registering the establishment of the headquarters/R&D center and other relevant filing procedures and recruitment costs.

There are some conditions to apply for these subsidies.  Please contact us for details.

Wednesday, March 27, 2013

Update your company registration of officers

Don't forget to update your company register of officers of your company regularly.

A KK (Kabushiki Kaisha) is the most popular form of corporation in Japan, and it should stipulate the term of office of directors (and auditors, if any) in the Articles of Incorporation. You can decide the term of directors from one year up to ten years, and once stipulated, you are requested to follow the rule.

Suppose you stipulate the directors' term of office as two years, the Articles of Incorporation usually have the following phrase:
Article XX The term of office of directors shall expire at the close of the ordinary general meeting of shareholders for the last business year that will end within two years after their election.
To conform with this article, you are requested to biyearly elect directors at the ordinary general meeting of shareholders, and register it.

If you don't do this or filing is delayed, the representative of the company shall be punished by a non-penal fine.  The amount of fine is usually around JPY100,000.

Tuesday, September 18, 2012

Corporate Auditor in Japan

Many people ask me the roles and liabilities of corporate auditors in Japan. The following article of Japan Corporate Auditors Association replies to such questions from various points of view.

About Corporate Auditor

Please note that there are a (corporate) auditor (Kansa-yaku) and an accounting auditor (Kaikei-kansa-nin) in Japanese companies.  The names are similar, but the role of the two institutions are different.  The article I introduced here is about the former one.

An accounting auditor should be a licensed Japanese accountant or an accounting corporation.  Therefore, if you are asked to be an auditor, it is usually the corporate auditor.

Wednesday, June 27, 2012

Increase of Consumption Tax

Japan parliament passes sales tax rise; ruling party splits (Reuters)

A historic bill to raise the consumption tax passed the Diet. Currently, the Japanese consumption tax (sales tax) rate is 5%. The rate will be increased to 8% in April of 2014, and reach 10% in October of 2015.

I agree to the idea that the direct-indirect tax ratio should be rectified in the long run, but increasing the rate at this economically tough time will undermine the unstable Japanese economy.

Sunday, June 17, 2012

Downloading illegal contents are subject to punishment

On June 15, amendment to the Copyright Act was approved at the The House of Representatives, and is expected to pass the Diet soon.

Downloading illegal contents had been illegal from before, but there was no punishment.

By this amendment, an act of downloading the illegal contents such as illegally uploaded music files shall be punishable by imprisonment with work for a term not more than two years or by a fine of not more than two million Yen.

The amendment also made ripping a copy-protected DVD beyond the scope of reproduction for private use.

Punishment for ripping has not been introduced yet, while providing software to rip copy-protected DVDs became punishable.


Edit (June 22):

This change will be effective from October 1, 2012.