February 2014

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Kinds of companies in Japan

When you conduct business in Japan, you might hear the names of various kinds of companies such as "Kabushiki-Kaisha," "Gomei-Kaisha," "Goushi-Kaisha" or "Goudou-Kaisha".
However, the "Kabushiki-Kaisha" is the most relevant kind of company in Japan.

The number of incorporations in each type of company during 2012 is indicated in the following table:

Total

91,942

Kabushiki-Kaisha

80,862

Gomei-Kaisha

60

Goushi-Kaisha

131

Goudou-Kaisha

10,889


As you can realize from this table, "Kabushiki-Kaisha" demonstrates an overwhelming majority among Japanese companies.

There is also a type of company called “Yūgen-Kaisha” (which means limited company), but it is no longer permitted to incorporate in Japan. Only pre-existing “Yūgen-Kaishas” are allowed to continue their operations under special rules. As a result, these companies will not be covered in this article.

What is the difference between "Kabushiki-Kaisha" and the other companies?

Members of "Kabushiki-Kaisha" are called “Kabunushi” (which means share holders). The "Kabunushi" are not involved in the management of the company, but only have shares representing an equal stake in the capital of the company. As a result, they are not operators but rather owners of the company.
Moreover, they can receive a certain part of the profits made by the company according to the number of shares they have.

On the other hand, "Gomei-Kaisha," "Goushi-Kaisha" and "Goudou-Kaisha" are classified as “Mochibun-Kaisha” (which means membership company similar to partnerships). Members of “Mochibun-Kaisha” do not have shares but "Mochibun" (which means equity interests); they are not only owners, but also operators of the company.

Gomei-Kaisha:
This type is an unlimited liability company so all members are liable for any liability incurred by the business operation. 

Goushi-Kaisha:
This type is similar to a limited partnership. Members are divided into two categories: ①partners who have unlimited liability and ②partners who have limited liability only up to the amount they have invested to the company. 

Goudou-Kaisha:
This type is similar to a limited liability company. All members have limited liability only up to the amount they have invested to the company.

In any case, it's no exaggeration to say that when we say “company” it generally means only the "Kabushiki-Kaisha" currently in Japan.

We can help you to incorporate any type of the company that you would like. 
Please feel free to contact us for any inquiries.  

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We prefer “Lawsuits” to “Arbitration” in Japan.

It is popular to have clauses of arbitration in international transaction contracts.
When disputes arise, the “Japan Commercial Arbitration Association”, “ICC Japan”, ”ADR Center of JFBA” and so on have arbitrated in order to settle disputes in Japan as well.
However, the number of the cases resolved by arbitration are quite few.
In contrast, there are many cases resolved by lawsuits. 

The following statistical table shows how little arbitration is used.

The number of the civil cases that were presented to the district court during 2012 in Japan

663,954

The number of the cases that were resolved by  arbitration in  ADR Center of JFBA during 2012 in Japan

6

The number of the cases that were presented to the JCAA during 2012 in Japan

15


In Japan, we use lawsuits much more than arbitration to settle disputes.

Are you concerned about the quality of courts in Japan?
From my 17 years exprience as a lawyer, Japanese judges are somewhat bureaucratic, but most of them are excellent (it is true).  In most cases, they can determine fairly and appropriately.
Therefore, we certainly recommend using court procedures to resolve disputes. 

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Prenuptial Agreement
 
Prenuptial Agreement is a contract signed by two people before they marry in order to define conditions on their property, lifestyle and so on after they get married.
This kind of contract is popular in the US; meanwhile, our initial thought was that it does not necessarily fit in the Japanese society.
However, these days, a Prenuptial Agreement has been signed by not only international married couples but also Japanese couples.

What is the "Prenuptial Agreement"?

(1) "Memorandum"
This is an agreement to be freely drafted by a couple, and it is then concluded by signatures and sealed. So, it is easy and flexible to create it.
However, it will not have the strong legal effect.

(2) "Contract"
This is a legally binding contract such as a bought and sold note or lease contract.
You can enhance the legal effect of the contract further by drafting it based on a lawyer's advice or entrusting lawyer to the drafting.

(3) "Notarized Deed"
This is a public document that is notarized by a notary officer. You should follow the specified procedure and pay fees.
Although the content of the document is the same as the Contract (as mentioned (2) above), if you have your contract notarized, the legal effect may become enhanced.

(4) "Contract on Property of Husband and Wife"
This is a contract defined in the Article 755 of the Civil Code.
This is an agreement only to define the provisions on the property, and you can sign it only before your marriage.
The articles in this Contract may be asserted against a third party after such articles are registered. 
After you have your contract registered, you cannot change the articles.

In addition, we have the regulation in the Civil Code as follows:
In Article 754, either a husband or wife may at any time during the marriage rescind the contract; provided, however, this will not harm the rights of a third party.
Therefore, if a couple signs this contract after they get married, either a husband or wife may rescind it in principle.
Therefore, please be careful.

As stated above, if you sign your own Prenuptial Agreement in accordance with each individual situation, your desired lifestyle might be esteemed legally also.
In Japan, as we have tenaciously considered the supposition of divorce before a marriage as a taboo, the Prenuptial Agreement has not been popular yet.
However, the more diversified styles among couples and marriages are approved socially, the more popular Prenuptial Agreements become.

We can help you draft your Prenuptial Agreement.
The expert lawyers can give you advice or make articles in accordance with your view of marriage and desired lifestyle.
Please feel free to contact us for any inquiries. 

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Incorporation Procedures

The following explains the incorporation procedures for foreigners who would like to establish a company in Japan.  It is a simple procedure (Promotive Incorporation) in which only incorporators participate.  Though there is another procedure (Subscriptive Incorporation) for raising funds from investors other than incorporators, it is more complicated than the former.

Incorporating a company, by contrast with sole proprietorship, may contribute to improved social credibility with banks and business connections, and may additionally have tax advantages.

Incorporation requires more than one person, but many partners are not imperative. Stated capital may be as little as one yen, and the cost of stated capital need not be of concern.

The following will demonstrate how easy it is to incorporate.


Promotive Incorporation

1. First considerations in incorporating are to the basic matters of the company. You should determine the trade name, the location of the head office, and so on.

Basic matters are as follows:




① Create the official seal of the corporation.

It is necessary that the seal be larger than 1cm by 1cm square and smaller than 3cm by 3cm square.

② Prepare a certificate of the individual incorporator’s seal impression. 

This certificate has to be issued within three months prior to the application date for registration. 

Otherwise, if you have not registered your seal impression, you can substitute a certificate of signature (certified by foreign authorities such as an embassy).

③ Set the beginning and the end of a business year. (e.g. begin on April 1 of

each year and end on March 31 of the following year).

④ Determine the amount of stated capital. 

Any amount more than one yen is acceptable.

⑤ Determine incorporators and members of the corporation. 

⑥ Determine the location of the head office in Japan.

⑦ Determine the business purpose. 

The corporation can conduct business within the limits of “business purpose” that you determined here. 

If you wish to change or add some business purposes after the incorporation, you have to notify the Registration of Changes.  Therefore, you should determine, as near as possible, potential business purposes that are expected to be conducted in the future.

⑧ Determine the trading name. 

You can determine any name as your corporate name except for the following restrictions: 

  • A company shall use in its trade name the words "Kabushiki-Kaisha," "Gomei-Kaisha," "Goushi-Kaisha" or "Goudou-Kaisha" respectively for Stock Company, General Partnership Company, Limited Partnership Company, or Limited Liability Company.

  • You can only use letters of kanji (Chinese character used in Japanese writing), hiragana (Japanese cursive syllabary), katakana (Japanese syllabary used primarily for loanwords), alphabetic characters, Arabic numerals, and [&] [,] ['] [,] [-] [.] [・].

  • You cannot use the name of existing major corporations.

    After determining the trade name, you should confirm with the Regional Legal Affairs Bureau(Registry Office),that there is no precedent registration of the same trade name at the same address.


2. Next, you should hold a meeting of incorporators and make decisions about what you considered in 1 above.

If you have several incorporators, you must hold a meeting and make the following decisions. If you are the only incorporator, you should document the following decisions in writing instead of holding the meeting:



① the number of shares at incorporation

② total number of authorized shares,

③ the issue-price of shares,

④ name of the depository institution,

⑤ the trade name,

⑥ and the business purpose.

3. You should produce the Articles of Incorporation and acquire certification.

If you produce the articles in English, the English articles should have their Japanese translation, because notary officers can only certify in Japanese.

After the Articles of Incorporation have been completed, you have to go to the Notary Public office to obtain a certificate of them.

4. Incorporators should pay the amount of the shares (Stated Capital) at incorporation which is prescribed in the Articles of Incorporation.

At first, one of the incorporators should open an individual bank account, otherwise you can use your existing bank account.

Then, full payment as set in the Articles of Incorporation should be deposited in the bank account.

After incorporators pay the amount of the Stated Capital at Incorporation completely, documents confirming full payment must be completed.


The company is virtually established at this time.

Application for registration of incorporation follows, so that the company is publicly accepted and can conduct its business.

Procedures for the election of executives such as representative directors, directors, company auditors, and so on, are conducted. If the executives are specified by the articles of incorporation, many of the procedures for election can be omitted.

5. You should apply for Registration of Incorporation at the Regional Legal Affairs Bureau (Registry Office).

The registration procedure will complete within one week if there is no defect. After that, you can make a request for a certificate of the registered description of the company.


This completes the company incorporation.

As the company will have to pay tax when it conducts its business, you should notify to the national tax office, municipality authorities, and the metropolitan tax office. Moreover, as you will have to participate in social and labor insurance when you employ staff, you should notify the Labor Standards Inspection Office, Public Employment Security Office, and Social Insurance Office.

Costs for Procedures

Certification of the Articles                                     about 92,000 yen

Application for Registration of Incorporation            150,000 yen ~

The amount of the Stated Capital × 7/1000 = The amount of the tax*

* If the result is 150,000 yen or less, the tax is 150,000 yen uniformly.


This is the Incorporation Procedures.
As a general rule, the procedures for foreigners are same as those for Japanese.
After you determine the basic matters of the company, you have only to draw up the necessary documents and submit them to the public office. As the costs for the procedures are not so high, we recommend you to challenge it by yourself.

By the way we can help you to incorporate your company 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 advice or counsel you on the legal matters of your company after incorporation.
Please feel free to inquire about it.

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