II. Procedure for Setting Up a K.K.
V. Procedure for Setting Up a K.K.
Most Japanese corporations are in either the Kabushiki Kaisha (`KK`) or
Yugen Kaisha (`YK`) forms, and since setting up a KK is most popular among
both Japanese and foreign investors, we will explain about setting up a
KK in this WebPage.
Steps
Incorporators
The Commercial Code specifies that there must be an incorporator in order
to incorporate a K.K. Only one incorporator may incorporate a K.K. The Commercial
Code does not restrict who can be an incorporator, so generally, any entity
can be an incorporator. A corporation can be an incorporator as long as
its involvement in the incorporation process is within the purposes of the
corporation specified in its Articles of incorporation. There are no restrictions
on foreigners being an incorporator.
Articles of Incorporation (Teikan)
The first step for the incorporator(s) is to make and execute the articles
of incorporation. The provisions of the articles of incorporation can be
divided into 3 legal categories: Category 1 (necessary provisions) consists
of provisions that must be included in the articles of incorporation and
legal for the articles of incorporation to be valid. Category 2 (relative
provisions) consists of provisions that will not affect the validity of
the articles of incorporation, but those that will affect the legal relationship
of the company. Category 3 (optional provisions) consists of provisions
that will affect neither the validity of the articles of incorporation nor
the legal relationship of the company, but those that will make the running
of the corporation more convenient and efficient.
Articles of incorporation must be in Japanese and should include the following
provisions:
1) Purpose(s) of KK
The Office of Corporate Register in Japan (Homu-Kyoku) will not accept all
purpose clauses (which are commonly used in the U.S.), and the articles
of incorporation should be specific as to the purpose(s) of the K.K. If
the provisions of the purpose clause include vague or ambiguous words, Homu-Kyoku
will require you to correct the provisions. Thus, you should consult with
Japanese attorneys, legal subscriber (Shiho Shoshi) or Homu-Kyoku on this
point. Homu-Kyoku has an information table, and consulting with them is
the least expensive method, but you should be able to speak and write Japanese
to communicate with a staff of the Homu-Kyoku. You are encouraged to include
in the purpose clause all potential types and kinds of dealings that the
business might be interested in, since amendments to the articles of incorporation
will need the approval of shareholders and incur costs.
2) Corporate Name
There are several guidelines for the corporate name.
a) The name must include `Kabushiki Kaisha`, in such ways as `Kabushiki
Kaisha XXX` or `XXX Kabushiki Kaisha`
b) The part of the name (the above XXX part) should be in Japanese language,
at least in Katakana. `Kabushiki Kaisha` should be in Chinese character
(Kanji).
c) If a corporation of any similar name is already registered or such name
is reserved at Homu-Kyoku (reserving a name for one year is allowed, for
a fee) in the same venue at the Homu-Kyoku where the new corporation is
planning to have its registered office, Homu-Kyoku will reject the application
for registration in such a name. Therefore, you should first check if there
is a corporation of similar name in the same venue at the Homu-Kyoku. Also,
you should check with the Patent Office if there is a similar trade name
or service name registered there. In addition, you should refrain from using
well-known trade names, because even if such name is not registered at Homu-Kyoku
or Patent Office, the one who has used such a name could protest against
you under the Law for Preventing Unfair Trade for your use of such a name
in the same industry.
3) The Number of Shares to be issued
Authorizing the issuance of only one share is not prohibited by the Commercial
Code, but there is an indirect restriction from minimum capital amount mentioned
in (6) below. Also, this number should not be more than four times as many
as the number of shares already issued.
4) Amount of Valued Share
The minimum value per share is Yen 50,000. There are few cases where unvalued
shares are issued; in such case the price of such unvalued share should
be at least Yen 50,000.
5) Deleted.
6) The Number and Kinds of Shares issued at the time of incorporation
The minimum capital amount of KK is Yen 10,000,000 (Yen 3,000,000 for Yugen
Kaisha), and the value of a share times the number of shares issued at the
time of incorporation should be Yen 10,000,000 or more.
7) Deleted.
8) Address of Principal Office
There is no system to register a business address separately from registered
address.
9) Way of Public Notice.
In certain situations, Commercial Code requires KK to make a public notice,
and it should do it in the way provided for in articles of incorporation.
Many corporations provide the notice by Government Gazette to save costs.
Others designate a certain national daily newspaper, such as Nihon Keizai
Shimbun, Mainichi, Asahi, etc. Notice in local newspapers, non-daily newspapers
or newspapers in a particular industry will not meet the notice requirement.
10) Names and Addresses of Incorporator(s)
11) Others
If the following situation occurs during the process of incorporation, the
provisions to set the procedures and details are to be included in articles
of incorporation in accordance with Article 168.
a) whether any incorporator will receive any reward or benefit.
b) whether any incorporator will submit any asset or benefit other than
cash at the time of incorporation of the KK
c) whether KK will assign any of the assets of KK after incorporation
d) whether KK will pay any cost for setting up KK, except the commission
of Notary Public for notarization of Articles of Incorporation and the commission
of bank for handling the receipt of the amount of shares.
The articles of incorporation becomes effective after being sealed by incorporators
and notarized before a Japanese Notary Public. Its costs are detailed in
the next section.
After creating the articles of incorporation, the incorporators shall invite
subscriptions for shares. The incorporators must receive payments for the
shares. For registration before Homu-Kyoku, you need the certificate of
a bank to certify that the amount of capital is received by a particular
account for KK.
After all the payments have been made, the incorporators must convene a
constituent general meeting. In the constituent general meeting, officers
shall be appointed. In case the situations provided in Article 168 occurs
as mentioned above, the incorporators must apply to the Court for an appointment
of an inspector to investigate particulars mentioned in Article 168.
Finally, the registeration of the company must be made within two weeks
of the date of when a constituent general meeting has been completed or
if applicable when the procedure mentioned in Art 173 (Investigation by
inspector, etc.) or 173-2 (Investigation of procedure for incorporation)
has been completed. When all these steps are taken, the incorporation process
is completed.
Copyright 1996, Nakamura & Associates, Tokyo, Japan