Tobita & Partners provides high quality legal advice and assistance to Japanese, foreign and foreign-based corporations and individuals.

It was decided that a listed company is effectively forced to have an outside director as a member of the Board of Directors along with the revision to Corporate Law executed on June 20,2014.
It is not regulated by the Law as the financial circles have reacted against it. However, if a corporation decides not to have an outside director, it has to explain and inform the following items:
1. Explain the reason why it is inappropriate to have an outside director
2. Report the reason why it is inappropriate to have an outside director in the Business Report
3. Report the reason why it is inappropriate to have an outside director in the Reference Documents for Shareholders Meeting when it offers agenda for electing directors excluding outside directors.
Moreover, the Rule of Stock Exchange has provided that a listed company must make efforts to have more than one outside/independent officer.

It might be striking in waves as if it was not enough already by those who would like to introduce the outside director system.
I think that if they make such many regulations, it might be simple and better to make the outside director system obligatory in Corporate Law.

By the way, I expect that almost all corporations would have outside directors in the following year. I say that because the Japanese society tends to be across-the-board. If a corporation does not follow the regulation and decides not to have an outside director, it has to explain the reason why it is inappropriate to have an outside director. The Stock Exchange would also keep an eye on the corporation.
Though 62.2% of corporations in Japan had outside directors in 2013, nearly 100% of those corporations are expected to have outside directors in the following year.

Conversely, if some corporations do not have outside directors under such a system, those corporations must have their own policies.
I wish some corporations with strong performance and well organized compliance would appear and declare as follows:
"Our corporation has a reliable Board of Company Auditors and excellent accounting auditors, so our compliance is well organized and functions effectively. We think that outside directors who do not know about our corporation would do more harm than good, so we will never have outside directors. We do not think the outside director system is useful or helpful because there are many corporations with outside directors having caused scandals in the past. Our current directors are the best members."

※Please note that the operation described in this article has been changed.
The latest information is here.

If you are a non-resident and you would like to establish your company in Japan, you have two hurdles to get over.

One is “Application for Visa” and another is “Incorporation Procedure”.

(As for “Incorporation Procedure”, we have already explained in detail on this Blog [Click here for related information ☝]).    


When you establish your company, you should become a manager (a representative director) of your company. Then your visa category should be an "Investor/Business Manager Visa". Of course you can come to Japan without the Investor/Business Manager Visa, but you are allowed to stay in Japan only for three months with a short-term visa (tourist visa).


You can apply for the "Investor/Business Manager Visa" under the condition that your company has been established in Japan. Therefore, you have to establish your company in Japan prior to your visa application.


In order to establish a company in Japan, at least one representative director has to be a resident of Japan and he/she has to have an address in Japan.

If you would like to have a Japanese address, you have to obtain a long-term visa (such as an Investor/Business Manager Visa) in advance.

Therefore, you should find your partner who has a Japanese address and you should establish your company with your partner at first.


Next, in order to obtain the "Investor/Business Manager Visa", you have to invest more than six million yen in your company. In addition, your company has to lease an office and it has to be equipped with telephones, faxes, copy machines and computers, which indicates that the business is actually in operation.

Therefore, your company has to make a leasing contract for its office, employ staffs and operate the business actually before you obtain the visa.


Finally, you should make and present necessary documents such as a Business plan, C.V. and an Application for change of status of residence.

It will take about three months from an application to an acquisition of your visa.


By the way we can help you to incorporate your company and to apply for your visa at a reasonable fee.

It might be possible to help you with only one part of the total procedures which you can specify or of course we can undertake the whole procedure.

Moreover, we can advise or counsel you on the legal matters of your company after incorporation.

Please feel free to inquire about it. 


If you register vacant rooms in your house to an online lodging reservation site and lodge travelers in such rooms, would it be a violation against the Hotel Business Law?

According to an article in the Nikkei Shinbun Newspaper dated May 16, 2014, the Safety Division of the Metropolitan Police Department arrested an Englishman on the suspicion of violating the Hotel Business Law due to running a budget hotel for foreign travelers without permission.

According to the article, the Englishman started the budget hotel business at his three storied wooden house last November. He promoted the accommodation to guests using an online lodging reservation site and he charged 2500 yen - 5000 yen per night.
The Englishman was arrested due to the suspicion of having lodged 7 women from Thailand in March and April without the Hotel Business permission.

A public health center had warned and instructed the Englishman about ten times that his house was too small to lodge many guests and his lodging business was violating the Hotel Business Law. However, he insisted that his house was not a ryokan (hotel) but a share house. Therefore the Englishman might be arrested because he had run the lodging as "business" and he did not comply with the instruction from the public health center despite the repeated warnings, so he was judged as reprehensible.

However, is this kind of act violating the Hotel Business Law?

Under the Hotel Business Law, we should consider whether this kind of act corresponds to "Budget Hotel Business" or not.
If it corresponds to "Budget Hotel Business", we have to obtain a permission from a prefectural governor (Article 3 (1)). If we run a Hotel without permission, we shall be punished with imprisonment with work for no more than 6 months or a fine of no more than 3,000,000 yen.

Therefore, the space owner has to obtain a permission of "Budget Hotel Business" and as a prerequisite, the building should satisfy the requirements of the Building Standards Act and the Fire Service Act in order to be used as a hotel but not as his/her own house, which shall be used by an unspecified large number of people.
However, it might be really difficult to fulfill all these requirements, so it would be difficult in reality to obtain a permission of "Budget Hotel Business".

According to the Hotel Business Law, the Hotel Business means "the business in which we receive an accommodation charge from a guest and lodge a guest" and the lodging means "providing a guest room with bedclothes to a guest (Article 2 (6))".

The official public health center website says the following: As for the Article of "providing a guest room with bedclothes to a guest", it is not necessarily the case where the manager provides bedclothes, but those provided by themselves shall apply. 
If so, when we lend rooms to guests similar to apartment management seems to fit in the Hotel Business, but the classification is described in the notification of Ministry of Land, Infrastructure (March 31, 1986/No.44) as follows:

"The business in which we lodge a guest" shall fulfill the following two conditions.
1. In view of facility management on the whole, a manager is in charge of the maintenance, management and improvement of facility sanitation including occupied guest rooms under the social standards
2. A guest shall not make a living in a guest room as a general rule.

Judging from these Articles, an online lodging reservation site shall gather guests by offering one night lodging with an accommodation charge and the owner shall provide a room with bedclothes to a guest. Moreover, the owner shall be in charge of maintenance, management and improvement of facility sanitation and in contract, guests shall use a guest room for the purpose of sightseeing so that they shall not make a living in the guest room. Therefore, this kind of business must be regarded as "the business in which we receive an accommodation charge from a guest and lodge a guest” and it complies with the Budget Hotel Business.

Therefore, if we use an online lodging reservation site and offer guests rooms to lodge them in our house without a permission, it is highly likely to be regarded as being illegal as prohibited by the Hotel Business Law.

However, I wonder if this conclusion would be okay.

Along with the development of the Internet, it became easier for us to offer our vacant rooms to travelers privately, and we could earn money and enjoy the communication with travelers.
Nevertheless, if we are judged as illegal by the outdated Hotel Business Law and arrested because we did not obtain a permission, I think it is quite out of date. 
I think there is less necessity to provide high-level safety same as the Budget Hotel regulated in the Hotel Business Law (travelers may not expect such high-level safety.)

Needless to say, there are various cases such as an individual owner buying a large building or several houses and devoting himself/herself to the Hotel Business for foreigners, so it might be difficult to classify them.
However, I think the case of an individual owner providing guest rooms only for short stay should be judged as an exception of the Hotel Business Law, or deregulation shall be necessary.
What are your thoughts?