Entering the Japanese Market
Many foreign corporations have considered entering the Japanese market, however often times because of unfamiliarity with local laws as well as the rather complex and unique registration procedures required, such companies begin their foray into Japan with an entity type that is not suited for their needs.
As there are several entity types which a foreign corporation may choose from when starting business in Japan, it is strongly recommended to seek the advice of a specialist to determine which is the most appropriate form.
The three main entity types are as follows: (1) Representative Office, (2) Japan Branch and (3) Subsidiary.
1. Representative Office
The Representative Office is often established by a foreign corporation prior to actually entering the Japanese market to perform market research and other preparatory activities.
As the concept of a Representative Office does not exist in the Companies Act, the Representative Office does not require registration and can be established without performing any specific procedures.
Since the activities which a Representative Office can engage in are limited to preparation and support, it may not directly engage in revenue generating activities and is restricted to things such as market research, information collection, procurement of parts and business promotion (advertising).
If you expect to be directly engaged in revenue generating activities in Japan, you will need to register either a Japan branch or a subsidiary.
Finally, a Representative Office may not open bank accounts or lease office properties under its name.
2. Japan Branch
In general terms, the Japan office of a foreign corporation as prescribed in the Companies Act is referred to as a “Japan Branch”.
A Japan Branch is considered as a part of the foreign corporation and therefore it alone does not have independent legal status and therefore any credits and liabilities arising from acts of the Japan Branch are directly attributable to the foreign corporation.
The Japan Branch may open bank accounts and lease office properties under its name.
Procedures to establish a Japan Branch
Collect information pertaining to the foreign corporation (client)
Collect documents (Articles of Incorporation, incorporation certificates, annual returns etc) describing the details of the foreign corporation for registration of the Japan Branch
Confirm details to be registered for the Japan Branch (SHIMAX)
Examine and review foreign corporation documents and verify details to be registered for registration of the Japan Branch
Determine matters to register (client)
Head office of foreign corporation to decide matters such as the Japan representative, address of the Japan branch and branch establishment date. Note that the branch may not engage in sales activities until completion of registration of the Japan Branch
Prepare Affidavit (SHIMAX)
When registering a Japan branch, a document certifying the details to be registered that has been notarized in the country where the foreign company was incorporated is required. SHIMAX will prepare an Affidavit summarizing the details of the head office which should then be notarized by a Notary Public in the home country.
Notarize Affidavit/Execute documents (client)
Affidavit prepared by SHIMAX should be notarized in the home country. Other documents will need to signed and/or stamped.
File registration application (SHIMAX)
Application to register the Japan Branch is filed with the Legal Affairs Bureau office with jurisdiction over the address of the Japan Branch. Registration will complete about 1 to 2 weeks after filing of the application.
3. Subsidiary (Japanese entity)
A subsidiary refers to an entity incorporated in Japan through investment by a foreign corporation. In such case, the foreign corporation becomes the parent company and controls the subsidiary as its shareholder (or member in the case of a GK).
Since a subsidiary is a separate legal entity from the parent company, credits and liabilities resulting from the activities of the subsidiary are attributed to the subsidiary and the parent company is only liable as a shareholder up to the limit prescribed by law.
A subsidiary is of course able to open bank accounts and lease office property under its own name.
Subsidiary Incorporation Procedures
The following are some points to keep in mind when incorporating a subsidiary.
- What documents should be submitted in lieu of the registration certificate and seal certificate during the registration process of the subsidiary?
- Since the foreign corporation will not have a bank account in Japan for deposit of the initial capital, whose account will be used for this purpose?
- What documents will be submitted in lieu of the personal seal certificate and personal ID of non-Japan resident officers?
For details regarding overall incorporation procedures, please refer to the following pages.
Incorporation Steps – Joint Stock Company (KK)
Incorporation Steps – Limited Liability Company (GK)
The legal professionals at SHIMAX LEGAL have a wealth of experience assisting foreign corporations with their entry to the Japanese market. All legal documents for incorporation will be created with English reference translations and consultation can of course be provided in English.