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Establishing a Subsidiary Company in Japan

A foreign company willing to establish a subsidiary company in Japan may choose from the following options:

  1. Kabushiki-Kaisha [K.K. Co.] (Joint-stock corporation) {Kabushiki Joto Seigen Kaisha – (If No Committee is Established)}
  2. Godo-Kaisha [G.K. Co.] Limited Liability Company (LLC) or similar entity stipulated by Japan's Companies Act.

There are formats such as Gomei-Kaisha (unlimited partnerships) and Goshi-Kaisha (limited partnerships) under the Companies Act, but they are rarely chosen in practice because equity participants burden is unlimited rather than limited liability.

A subsidiary company is a separate legal entity from the foreign company, therefore foreign company will bear the liability that of an equity participant stipulated by law for all debts and credits generated by the activities of the subsidiary co. Minimum requirement for establishing a subsidiary co in Japan is to have a local physical address (not a PO Box) & a local “Resident in Japan”. Either a Japanese or a foreign national, but in case of a foreign national the person must have an appropriate status of residence as per immigration law.

Note: re exception allowed for “subsidiary co.” since the change of regulation effective Mar'15.

Japanese govt. has allowed foreign co. to register a local subsidiary co. in Japan without a local “Resident in Japan”. [In case of G.K. Co. the overseas investor must be a corporation] But in both cases it would require a temporarily a local Resident in Japan” for the purpose of completing the procedure of paid-up capital for K.K. Co. & equity for G.K. Co. In case of a K.K. Co. a “local resident shareholder” & in case of a G.K. Co. a “local resident member (equity holder)”.

The features of K.K. Co. and G.K. Co. at a glance:

  1. Capital:  1(one) yen or more. [Establishment with zero yen capital is theoretically possible but in practice to incorporate without paying capital is not possible.]
  2. Investors: 1(one) or more
  3. Corporation as an Investor: Possible (process of registration is lengthy)
  4. Liability of Investors: Limited to amount of investment / equity participation.
  5. Directors / Executive officers: 1(one) or more (In case of a GK. Co. in principle, all members are executive officers, but may be stipulated otherwise in “Articles of Association”)
  6. Legally stipulated term of office of Directors / Executive officers: In case of KK (with capital less than 500 million & without committee [Kabushiki Joto Seigen Kaisha]) 2 years in principle & extend-able up to 10 years. In case of GK no legally stipulated term.
  7. Transfer of share / equity: In case of KK it can be transferred freely in principle unless it is stipulated in “Articles of Association” that it requires approval of board of directors. In case of a GK unanimous approval of members (equity holders) required.
  8. Resident in Japan: Effective Mar’15 Japanese govt. has allowed foreign co. to register a KK or GK without local resident in Japan. However, for completing the procedure of paid-up capital a local resident is required temporarily.
  9. Registered Office: A local address in Japan is required. (physical address and not a P.O. Box)
  10. Co. Secretary: Not required 
  11.  Yearly Auditing of accounts: Not mandatory 

Time-frame for registration: Depends on the type of entity & structure of investors, directors (executive officers) etc. Upon applying at Legal Affairs Bureau for registration it takes about 2(two) weeks to obtain company registration certificate. For further details please refer to registration flowchart of K.K. Co. & G.K. Co.

For further information please contact us by mail.

 

 

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Disclaimer: This information is for illustration purpose, no warranty is given that it is free from error or omission, and Sarkar Office® cannot be held liable for any decision made based on this information only!