Recently, we were asked to incorporate a Japan subsidiary of a foreign corporation. The following is a brief description of the process involved.
Joint-Stock Company (“kabushiki kaisha”, KK) or Limited Liability Company (“godo kaisha”, GK)
When a foreign corporation is to incorporate a Japan subsidiary, it must first decide on whether to incorporate a KK or GK type entity.
The KK is the most common, widely recognized entity type with a long history in the Japanese corporate scene thus carrying an aura of credibility and trust.
Compared to the KK, the GK has a relatively short history, however in recent years it has become a more well-known and trusted entity for business.
Since the initial Articles of Incorporation of a GK do not need to be notarized, compared to a KK, incorporation costs are less and the incorporation process simpler.
Furthermore, after incorporation, as there is no obligation to publicly disclose financial information or any concept of a term of office of directors, compared to a KK, maintenance is simpler and less expensive.
Giving consideration to the lower initial costs and running costs, this client decided to incorporate a GK.
Collect information about the parent company (foreign corporation)
The parent company (foreign corporation) is registered as both the managing member and representative member of a GK. When registering the incorporation of a GK, it is necessary to create an Affidavit which summarizes the details of the parent company.
In order to draft the Affidavit, we requested various documents from the client to gather the necessary information about the parent company.
Appointment of executive manager (“shokumu shikkosha”)
When a corporate entity becomes the executive manager of a GK, since a corporation is not physically able to perform the operations of the GK, it must appoint a natural person as executive manager to perform those operations.
While there is no citizenship or residency requirement for an executive manager, this client chose to appoint one Japan resident Japanese citizen and one foreign resident non-Japanese citizen as executive managers.
Notice to Bank of Japan Pursuant to Foreign Exchange and Foreign Trade Act (FEFTA)
Since a non-resident corporation acquired equity in a Japanese company through the incorporation of the GK subsidiary qualifying as an act of direct inward investment, the relevant notice was filed with the Bank of Japan.
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