Setting Up A Godo Kaisha in Japan
Jul 16, 2021
A Limited Liability Company (Godo Kaisha, hereinafter referred to as “GK”) is a relatively new type of company in Japan, established in 2006 by the new Companies Act. It is essentially modeled on the limited liability company in the US.
A GK is relatively simple and less costly to set up compared to a KK and provides more flexibility to members with respect to methods of decision making about operations, distribution of profits and other internal matters.
A GK is constituted by limited liability members. Each member invests an amount into the GK and is liable for debts and obligations of the GK to the extent of the amount of their investment. Unless otherwise stated in the Articles of Incorporation, each member has a duty to operate the business affairs of the GK, and also possesses representative rights.
Procedure for establishing a GK
A GK is legally formed upon the registration of incorporation, which requires first that the articles of incorporation be prepared and capital contributions made by its initial members. It is possible for a GK to be incorporated by one member, but there needs to be at least one representative member who is a resident of Japan.
The general steps for incorporation are outlined below. The time required is about one month after determination of profile of company to be established.
Determining the kind of Godo-Kaisha you want to incorporate
Before applying to register a Godo-Kaisha, it is first necessary to determine its profile. The Legal Affairs Bureau requires that this profile contain basic and essential information about the Godo Kaisha. For example, the name of the GK, its location in Japan and its business objectives should be included.
Searching for similar corporate names
A corporate name must be provided for in the articles of incorporation and be registered. The corporate name must be expressed in Japanese characters, but a foreign language translation of it may also be provided for in the articles of incorporation.
As it is illegal to register a corporate name similar to one already registered by another company engaging in the same kind of business activities within the same ward, it is essential that you confirm the non-existence of the registration of similar corporate names before filing an application for registration of your company. This can be done at the Legal Affairs Bureau.
Obtaining equity participant certificates
It is necessary to submit registration certificates for companies in Japan that intend to become equity participants in the GK. If applicable, the application must also include seal certificates for the individuals and companies in Japan that will become members.
When a member is a foreign-owned corporation, an Affidavit summarizing details of the corporation (including the trade name, location of head office, business purposes, capital, shares, officers) must be submitted to the Legal Affairs Bureau. The Affidavit must be notarized by a Notary Public or consular office in the home country of the corporation. The registration certificates for those companies must be notarized as well.
Affidavits regarding signatures of representatives of foreign companies that will be members are also required.
Drafting the articles of incorporation
The articles of incorporation are the important documents that determine how the company will be managed. Note that while the Articles of Incorporation of a Stock Company must be notarized by a Notary Public before having legal effect, the Articles of Incorporation of a Godo Kaisha do not require Notary Public notarization.
Articles of incorporation list “absolute matters” and “relative matters.” Absolute matters are matters that must be stated for the articles of incorporation to be valid, and relative matters are matters that do not have legal effect unless stated in the articles of incorporation.
Purpose, trade name, place of principal office, names and addresses of members, statement that all members are limited liability members, and the purpose and value of members’ contributions.
Relative entries may be freely determined provided that they do not contravene the Companies Act.
Submitting proof of initial investment by members
Applicants must submit proof that each member of the GK has made the initial investment stipulated in the articles of incorporation. This investment will have to be made into a Representative Members’ bank account. This is because the GK bank account cannot be opened until after registration is complete.
Applying to the Legal Affairs Bureau
Generally, the documents required to be submitted with the application are the Articles of Incorporation, proof of paid in capital, and personal seal of the Representative Member. In order to register the company seal, the registered seal certificate (or a notarized signature certificate) of the Representative Member is required.
Obtaining the certificate of registration and company seal
Once registration of establishment has been completed for a Japanese branch office or a subsidiary company, a certificate on registered company information can be obtained from the Legal Affairs Bureau. This will take about 2 weeks. The certificate on registered company information is a document officially certifying a company’s registered information.
The certificate on registered company information must ordinarily be presented whenever opening a bank account, filing notifications with administrative authorities, purchasing assets for which name registration is required (real estate, securities, vehicles, telephone lines, etc.), and concluding important agreements with business partners.
Opening a bank account
Once the GK is registered, it will be time to open a bank account. This may or may not go smoothly depending on the Japanese bank account with which the account is opened. Due to the anti-money laundering law in Japan, Japanese banks are quite strict regarding due diligence. This can be problematic for brand new companies applying to open a bank account. This process can take one to several weeks. It is also entirely possible that a Japanese bank will refuse the application altogether.
Notifying the Bank of Japan regarding the acquisition of stock
Foreign investors who intend to make direct domestic investment must file either a subsequent report or prior notification thereof, as the case may be, with the Minister of Finance and the competent Minister(s) in charge of the industry concerned (via the Bank of Japan). It is expected that in most cases a subsequent report is sufficient.
When prior notification is required a Notification concerning Acquisition of shares/equity must be filed with the bank of Japan within a period of 3 months prior to the date when application for registration of incorporation is proposed to be made. It is necessary for the specified waiting period relating to such notification to expire before funds for payment of the subscription may be remitted to Japan from abroad. Within 30 days of the incorporation of the company, a Report concerning Acquisition of Shares (Equities) must also be filed. When a foreign investor is a non-resident, this filing must be made by his attorney-in-fact resident in Japan.
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