[ESTABLISHING A BUSINESS ENTITY IN JAPAN]
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ESTABLISHING A BUSINESS ENTITY IN JAPAN
1. Types of Business Entities 1.1 Description of the types of entities available in each jurisdiction through which to conduct business --- Business entities available for doing business in Japan 1.1.1 Introduction Business formats available for foreign investors to do business in Japan include two types of companies and a branch. Below, please find a brief overview of these formats. 1.1.2 Companies
instance, for companies whose shares may not be freely sold, a Board of Directors system is not compulsory (a single director may execute the business operations of the company). Having said that, a KK is more suitable for an enterprise held by a large number of shareholders; in order to protect their interests, strict corporate governance systems have been set forth in the Companies Act (see also Section 4.1.1 below).
(2) Limited Liability Company
A limited liability company (“GK”) is a recently introduced form of a company which is managed by the investors themselves. Unlike a KK, a GK is not designed based on the principle of separation of management and ownership; as such, generally, a GK is more suitable for smaller companies. In the case of a GK, corporate governance systems are relatively less stringent. For instance, public notice of financial statements is not required. As there are no restrictions on large-scaled investors which choose the GK format, recently, some Japan subsidiaries of giant multinational companies (e.g., Google, Amazon, etc.) have been structured as a GK. Having said that, a GK is more suitable for an enterprise held by a small number of members (owners),
The most frequently used format of a company in Japan is a joint-stock company (in Japanese, “Kabushiki Kaisha”; commonly abbreviated as “KK”). Recently, the format of a limited liability company has also been used (“Godo Kaisha”; “GK”). In these companies, shareholders’ liability is limited to their capital contributions. (1) Joint-stock Company
Conventionally, a joint-stock company (“KK”) is used for larger businesses which raise funds widely from many investors and delegate the management of the company to directors who are considered professionals retained by the shareholders (i.e., there is a separation of management and ownership). Under the recently enacted Companies Act, smaller companies have been allowed to simplify their corporate governance systems. For
ILN Corporate Group – Establishing a Business Entity Series
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