Lesson about incorporating in Japan

(Teacher) Now, I will explain details as for No,1.

Kind of Tax and tax rate amount levied on personal entrepreneuor and company is as follows.

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d bt.
5 e. >
6 Y It


Now what kind of company can you
set up in Japan ?

(Student Akira) kabushiki kaisha(limited joint stock company)and Goudou
kaisha(Limited Liability Company).

(Teacher) In 2006, new commercial law came into operation.Before it, you can
make Yuugen kaisha,Goumei kaisha, Goushi kaisha. But now you cannot make them.
Even now some websites say that you can make Yuugen kaisha. But that information
is out of date.

(Student Akira) Yes, but there are still such kind of company.

(Teacher) Yes, they still exist, though you can not newly make them.

(Teacher) And moreover, If you want to manage business in Japan,you have 3
options.
Setting up new company or subsidiary of foreign company.You can set
up branch office of foreign company in Japan.By these ways you can get juridical
personality. If you make shop or office in Japan and make contract with
customers in person, you have to get juridical personality. For exaple when you
import gadget from phillipines and sell them in Japan at your substantial
shop,you have to make company.

(Student Akira) Why do we have to make company ?

(Teacher) Because, if customer want to charge damage for seller,customers
have to know address or manager of address and name.

(Student Nancy) If we make company in Japan, can we get working status
automatically ?

(Teacher) No,having company in Japan and working status is different
matters.So, even if you do not have working status, you can make company in
Japan, though you can not manage the company.

(Student Jack) But you know that there is a way to get working status by
making company.

(Teacher) Now let’s make company in Japan.What kind of company shall we make
? And what shall we name the new company ?

(Student Nancy) Let’s make Kabushiki kaisha.
Because Goudou kaisha is type
of company for small amount of shareholders.In this company, shareholder should
be manager of the company.So, if you invest your money, you have to be one of
director.So, if you sell your shares to other person, you have to resign the
director.And in this company,when the company make decision on important
matters,all of they have to agree the matters.If one of director disagree the
agenda, the company cannot make effective decision. So, if we think one of your
potential shareholder is going to confuse with other shareholders, you should
select Kabushiki kaisha. In case of kabushiki kaisha, all shareholder’s
agreement is not required to make decision.
It is depend on percentage of
shares.Majority shareholder can make decision.
I am afraid that Jack will
confuse with me in the future.
And as for name,how about Kabushki kaisha
Sony.Customer will buy our gadgets by mistake.

(Teacher) You can name your company as you like.Even if you are not Obama,
you can name your company Obama. So,you can make company named Kabushiki kaisha
Sony. But real Kabushiki kaisha Sony will charge damage for your company.Because
they think that your company make profit by damaging real Sony. There is a law
named “Unfair Competition Prevention Act”(Act No.47 of 1993)

(Student Nancy) So, how about Nancy kabushiki kaisha.And I want to be
representative.

(Teacher) As for name of company,if your company is subsidiary of foreign
company, for example Bank of Africa, name of your subsidiary company office is
also Bank of Africa.

(Student Nancy) I know it.

(Teacher) Do you have address in Japan? One of representative has to have
address in Japan.

(Student Nancy) Yes, I have.So, we can use my apartment as head office of the
company.

(Student Jack) I agree.What is other difference between Kabushiki kaisha and
Goudou kaisha ?

(Teacher) In case of kabushiki kaisha,in general,director’s term of office is
for 2 years. However, if all shares of the company have restrictions on
transfer, they can extend the term up to 10 years at most.
In case of Goudou
kaisha,there is not restriction about term.

(Student Jack) How about public notice ?

(Teacher) In case of kabushiki kaisha, they have to provide public notice
about financial statements.
In Japan, most of Kabushiki kaisha(especially
small company) does not carry out this obiligation.

(Student Jack) Is there any penalty for negligence ?

(Teacher) In commercial law, there is articles about penalty. But it is rare
case to impose penalty on this matters.(Of course,I will recommend you to carry
out this obligation.)
If you want to carry out this obligation, we recommend
you to use electrical notice.This method is the cheapest way to carry out this
obligation.

(Teacher) Now let’s decide objects of the company. What is objects of this
new company ?

(Student Jack) Let’s import Guns from states and sell it in Japan.

(Teacher) You can register “Importing Guns from states and selling it in
Japan”.But in order to manage such kind of business in Japan, you have to
acquire special permit.Maybe, impossible.So, let’s describe as “Importing
gadgets from foreign country and selling it”.

(Teacher) What is Necessary Documents for setting up company in Japan ?

(Student Jack) Articles of incorporation.In it, we describe trade name, The
objective of the corporation and mailing address, total number of shares
authorized to be issued, stated capital amount.And name of directors and
incorporatorand so on.

(Teacher) Yes,you are smart as much as me. In case of LLC(goudou
kaisha),notarization by notarized public is not necessary.
Fee for notary
public is about 50000 yen. In artcles of incorporation,you have to seal stamp of
40000 yen. It is irrelevant to validity of the article. However if you do not
seal it, it is against law. And nowaday, you can make electrical articles of
incorporation. You do not have to pay 40000 yen in this method.

(Student Nancy) In case of Kabushiki kaisha, notarized by notarized artcles
of incorporation is required. So, setting up Kabushiki kaisha costs more than
Goudou kaisha.

(Teacher) As for stated capital amount(Shihon kin),more than 1 yen is
necessary. How much do you invest in this company,Nancy ?

(Student Jack) I know that incorporator becomes shareholder after setting up
company. What is responsibility of shareholder ?

(Teacher) Responsibility of investors is limited.If the company has
debt,investors have responsibility as long as investors have invested.If you
invest your money of 1 million yen to A company and A company has debt of 10
million yen to cereditor B, you do not have to pay other 9 million yen. And if
you are representative of A company but, not shareholder and A company has debt
of 10 million yen, you do not have to pay the debt.

(Student Nancy) Don’t interrupt me, Jack !!
Well, I am a rich person, I
will invest 100,000,000 yen. Here you are.

(Teacher) You have to deposit this money to bank account of
incorporator(Hokki nin). And then scanned copy of bank book is required. You
have to deposit the money after notarization of articles of incorporation. Do
you know that corporate registration tax is required depend on capital amount ?
It equal to 0.7 % of the share capital amount. And at least you have to pay
150,000 yen. So, in your case, you have to pay 700,000 yen.

(Student Nancy) OK.this time, I am only incorporator,so I will deposit
100,000,000 yen to my bank account.

(Teacher) As for director,you can select plural directors(torishimari yaku).
At least one director is required to setting up Kabushiki kaisha. And their
address can be overseas address. On the other hand, you have to appoint
representative(daihyou torishimari yaku). And their address can be overseas
address. You can appoint plural representative,too. But one of representative
should have address in Japan.

(Student Nancy) We know it.

(Teacher) And even if these representative does not have residential status
for work, company can select them as representative. Status of residence and
qualification as representative is irrelevant. However,even if you are selected
as representative, you cannot get status of residence for working in Japan
automatically.

(Student Jack) What kind of status shoud we have in Japan ?

(Teacher) If you want to work in Japan, you have to submit change of status
of residence suit for working. In order to work in Japan, you need to acquire
certain status of residence.
1 Spouse of Japanese or permanent residence in
Japan
2 Other status of residence

(Student Nancy) Is there any document to provide ?

(Teacher) Signed certificate.If you are living in Japan, you can acquire
Inkan Shoumeisho at municipal city hall.
And when you make your company as
subsidiary company of foreign company(company base on not japanese commercial
law),you need certificate of belows.
1 name of company
2 address of
company
3 name of director
4 address and address of
representative

(Teacher) And Power of attorney(Inin jou) to delegate solicitor setting up
procedure.

(Student Jack) Also, we have to prepare Inkan(seal of newly made company). I will order to make it. By
the way, is there any disadvantage of making company in Japan ?

(Teacher) If you set up company in Japan,even if your company does not yield
profit, you have to pay corporation tax of 70000 yen per a year. Accounting for
final tax return is complex compared to personal business. So, you may need
assistance of certified tax accountant in Japan. I can introduce to you.

(Student Jack) As for articles of incorporation, do you have sample ?

(Teacher) Sure, articles of incorporationThis is sample of articles of incorporation. This is
articles of incorporation of Honda Giken Kogyo Kabushiki Kaisha.

(Student Jack) Hey, I want to ask about Article 4. If when incorporate
Kabushiki Kaisha, shoud we set Board of Directors, Corporate Auditors, Board of
Corporate Auditors, Accounting Auditors ?

(Teacher) No, you do not. You can incorporate Kabushiki kaisha with a
director and this director can be same person with shareholder. if you want to
set Board of Directors, you have to appoint more than 3 directors. In order to
organize Board of Directors, , more than 3 directors are required. Also, whether
shareholder appoint Corporate Auditors or not is your choice.

(Student Jack) As for Article 6. (Total number of shares authorized to be
issued by the Company), what is this ?

(Teacher) Let’s say company A has already issued 10 shares and you have 10
shares, and Total number of shares authorized to be issued by the Company is
1000. And when A company has newly issued 900 shares,your ration of voting will
be down. So, in order to prevent such tragedy, company has to describe this
article.

(Student Nancy) I cannot understand.

(Teacher) In upper case, if Total number of shares authorized to be issued by
the Company is 10 and already issued 10 shares, when A company wants to issue 10
shares, A company has to change articles of incorporation. In order to change
articles of incorporation. agreement of shareholder is required.

(Student Nancy) I have understood.

(Teacher)As for Articles 21, in case of Honda Giken Kogyo Kabushiki
Kaisha,the term of office of Directors shall expire within a year. But if you
describe the the term as 10 years, the article is legal,when all shares of the
company have restrictions on transfer,.

(Teacher) When you make company, you have to decide business year. In article
36, this honda Kabushiki kaisha set business year from April 1 st to March 31th.
This is the most common business year in Japan. Within 3 months, the company
must report tax office about profit of the year to pay tax.

(Student Jack) How much tax shoud we pay ?

(Teacher) It depends on annual profit of the company. Rate of accrued income
tax is about 30 %.

(Student Nancy) Now, We have decided necessary matters to setting up
company. What shall we do next ?

(Teacher) We will rewrite articles of incorporation and submit it to notary
public that has jurisdiction over district of head office. When we go to notary
public, we have to take certificate of seal-impression of incorporator.The fee
for notary public is about 50000 yen.

(Student Jack) After notary public has notarized articles of incorporation,
we submit it with the minutes of the proceedings that provide address of head
office, name of directors and so on. The registration of the company is made
within two weeks after the process of incorporation is finished.

(Teacher) Yes, you are right. The date of submitting documents to the Legal
Affairs Bureau is birthday of the company. As for the Legal Affairs Bureau, each
branch has its own jurisdiction. And when foreigner have shares of company in
Japan, you have to file an after-the-fact report with the bank of Japan.

(Student Jack) Now, We have learned outline about incorporating Kabushiki
kaisha in Japan.

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