In the Japanese commercial legal system, the Articles of Association (Articles of Incorporation) play a vital role. They are not only the legal basis for the establishment of a company, but also the fundamental principle for the operation of a company. According to the Japanese Companies Act, Articles of Incorporation are regarded as the “constitution” of a company, which stipulates the basic organizational structure, operation mode and management system of the company. Without a formally certified Articles of Incorporation, a company cannot be legally registered and conduct business in Japan. Every clause of the Articles of Incorporation is legally binding and has a direct impact on the company’s shareholders, directors and other stakeholders.
For foreign-invested enterprises, it is of special and important significance to formulate a clause that complies with Japanese legal requirements and meets the management needs of the parent company. First, it is the first step for foreign-invested enterprises to understand and adapt to the Japanese business environment. Through the process of formulating the clause, foreign investors can gain an in-depth understanding of Japan’s corporate governance structure and legal requirements, laying the foundation for future operations and management. Secondly, the clause provides flexibility and protection for foreign-invested enterprises in their operations in Japan. For example, by reasonably setting restrictions on share transfers, the control rights of foreign investors can be protected; by carefully specifying the board structure, the parent company can ensure effective management of the Japanese subsidiary.
In addition, the deposit is also an important tool for foreign-invested enterprises to establish credibility and conduct business in Japan. A professional and comprehensive deposit can demonstrate the company’s compliance and credibility to Japanese business partners, regulators and potential customers. It is not only a guide for internal management of the company, but also a business card for external communication and cooperation. For foreign-invested enterprises that plan to develop in Japan for a long time, formulating a detailed deposit is an important foundation for future financing, listing and even mergers and acquisitions.
However, due to the particularity of the Japanese legal system and language barriers, many foreign-invested enterprises often face challenges in formulating articles of incorporation. This article will analyze the key terms of the articles of incorporation in depth, with a special focus on the key points that foreign-invested enterprises need to pay attention to, aiming to help you formulate a compliant and strategic company charter to safeguard your business development in Japan.
Overview of the Articles of Association (Articles of Incorporation)
The Articles of Association, known as “teikan” in Japan, is a document that stipulates the basic matters of a company’s organization and activities, and is also the company’s most important internal rules and regulations. According to Article 26 of the Japanese “Company Law”, the Articles of Association is a legal document that must be drawn up when a company is established. It is not only the legal basis for the establishment of a company, but also the fundamental principle for the operation of a company. It constrains the behavior of shareholders, directors and other relevant personnel internally, and is an important basis for the company to conduct transactions with third parties externally.
The legal basis for the fixed amount is mainly derived from the Japanese Company Law. The law specifies in detail the requirements for the formulation of fixed amounts, necessary matters to be recorded, and the change procedures. It is worth noting that after the implementation of the new Company Law in 2006, the flexibility of fixed amounts has been greatly increased, allowing companies to formulate more personalized regulations based on their own characteristics and needs.
In terms of basic structure, the articles of incorporation of Japanese companies usually include several main parts, such as general provisions, shares, shareholders’ meeting, directors and board of directors, supervisors and board of supervisors (if any), accounting, supplementary provisions, etc. Among them, Article 27 of the Company Law stipulates the absolutely necessary items to be recorded in the articles of incorporation, including the purpose of the company, the business name, the location of the main store, the total number of shares issued at the time of establishment, the amount of capital at the time of establishment, etc. In addition, there are relatively necessary items and optional items to be recorded, allowing the company to supplement and adjust according to actual needs.
In terms of content requirements, the deposit must comply with legal provisions and must not conflict with the Company Law and other relevant laws and regulations. At the same time, the content of the deposit should be clear and specific, avoiding vague or self-contradictory expressions. For foreign-invested enterprises, when formulating the deposit, they also need to pay special attention to the coordination with Japan’s foreign investment-related laws and regulations to ensure that the content of the deposit does not violate relevant regulations such as foreign investment access.
In general, a sound contract is not only a guarantee for the legal operation of a company, but also a reflection of the company’s governance structure and operating strategy. For foreign investors planning to set up a company in Japan, a thorough understanding and careful formulation of the contract will lay a solid legal foundation for the company’s long-term development.
Company purpose clause
Japanese company law has clear and strict requirements for the description of company purpose. The company purpose clause is not only a necessary content of the company’s articles of association, but also the key to defining the company’s legal business scope. According to Japanese law, the company purpose must be specific and clear, and cannot be expressed in too general or vague terms. For example, simply writing “operating various businesses” is not allowed. At the same time, the company purpose should cover all business activities that the company plans to carry out, including the main business and possible ancillary businesses.
In Japan, different industries usually have standardized purpose descriptions. For example, the company purpose of an IT company may include “development, sales and maintenance of computer software”, “information processing services”, etc. A trading company may include “import, export and sale of various goods”. A manufacturing company may list “manufacturing, processing and sales of various products”. It is worth noting that even for companies in the same industry, their specific company purpose descriptions may vary depending on their business scope and strategy.
It is particularly important for foreign-invested enterprises to formulate a company purpose that is both flexible and compliant. On the one hand, the purpose clause needs to fully cover the company’s business plan in Japan, including short-term and long-term businesses; on the other hand, it is also necessary to leave room for possible future business expansion. A common strategy is to add a catch-all clause such as “all businesses related to the above” after the specific business description. In addition, foreign-invested enterprises also need to pay special attention to the possible access restrictions or special requirements of certain industries in Japan, and ensure that the company purpose is consistent with these regulations.
It is worth mentioning that although the company purpose should be comprehensive, it should not be too lengthy or all-encompassing. Too broad a company purpose may cause doubts from the registration authority, resulting in the rejection or delay of the registration application. Therefore, when drafting the company purpose, foreign-invested enterprises are advised to consult professionals familiar with Japanese company law, such as administrative scriveners or lawyers, to ensure that the company purpose can meet both business needs and Japanese legal requirements.
Finally, it is important to emphasize that the company purpose is not just a legal form, it actually defines the company’s business scope. Business conducted beyond the scope of the company purpose may face legal risks. Therefore, foreign-invested enterprises should regularly review their company purpose to ensure that it is always consistent with the actual business and make timely modifications when necessary. This forward-looking management can not only ensure compliance with regulations, but also provide legal protection for the company’s continued development and business expansion.
Company Name Clauses
When setting up a company in Japan, the choice of company name (trade name) is not only related to the corporate image, but also involves legal compliance and business strategy. Japanese company law has clear regulations on company names, and understanding these requirements is particularly important for foreign-invested enterprises.
First, the legal requirements for Japanese company names are relatively strict. According to Japanese company law, the company name must include a statement of the company type, such as 株式会社 (stock corporation) or 會計會社 (limited liability company). These words are usually located at the beginning or end of the company name. In addition, words that may mislead the public, such as “bank” and “insurance” and other restricted words, may not be used in the name unless the company is actually engaged in related business and has obtained the corresponding license. It is worth noting that Japanese law allows the use of katakana or English letters as part of the company name, which provides more options for foreign-funded enterprises.
Japanese law is relatively lenient regarding the use of foreign names. A company can register a foreign name as its official trade name, as long as it can be correctly pronounced in Katakana and complies with other naming rules. Many foreign-owned companies choose to use their original English name supplemented with Katakana phonetic notation, which maintains brand consistency while complying with Japanese legal requirements. However, it is important to note that even if a foreign name is used, the company type (such as Co., Ltd.) must still appear in Japanese.
In terms of trade name protection and brand strategy, Japan adopts the principle of “first come, first served”. Once a company name is registered in a specific region, other companies cannot use the same or extremely similar names in the same region or the same industry. Therefore, when choosing a company name, foreign-invested enterprises should not only consider brand recognition, but also conduct sufficient trade name duplication checks. It is worth mentioning that if a company plans to conduct business in multiple regions, it is best to consider registering the trade name nationwide to obtain broader protection.
For multinational companies, the company name strategy in Japan also needs to consider global brand consistency. Many companies choose to incorporate their global brand elements into the Japanese name while complying with Japanese naming rules. This approach can maintain brand unity while adapting to the local market, and is an effective strategy to balance globalization and localization.
Finally, it is recommended that foreign-invested enterprises consult local Japanese legal experts or administrative scriveners when deciding on a company name. They can provide professional advice to ensure that the company name not only complies with legal requirements but also effectively conveys the corporate image and values, thus laying a good foundation for the company’s long-term development in the Japanese market.
Our location terms
The home address clause plays an important role in the Japanese company charter, and its legal significance cannot be ignored. First of all, the home address is the company’s legal residence, and all official documents and legal notices will be sent to this address. It also determines the company’s jurisdiction court, which has an important impact in the event of a legal dispute. In addition, the home address is directly related to the company’s tax location, which affects the company’s tax declaration and payment. For foreign-invested enterprises, correctly selecting and registering the home address is the first step to ensure the compliance of the company’s operations.
In recent years, virtual offices have become increasingly popular in the Japanese business environment, providing companies with more flexible options. However, using a virtual office as the company’s main store address has certain feasibility and risks. From a feasibility perspective, Japanese law does not prohibit the use of a virtual office as a company address, and many start-ups and small foreign companies choose this method to reduce initial costs. However, risks should not be ignored: some banks may be cautious about opening accounts for companies using virtual offices; license applications for certain special industries (such as finance and medical care) may require a physical office address; in addition, frequent changes of address may affect the company’s credit. Therefore, companies need to weigh the pros and cons and make choices based on their own circumstances.
For foreign-invested enterprises, choosing a store address requires comprehensive consideration of multiple factors. First, the convenience of the geographical location is crucial, especially for companies that need to meet with customers and partners frequently. Secondly, the reputation of the address is also worth considering. Addresses in certain well-known business districts may bring additional credibility points to the company. Furthermore, the cost factor cannot be ignored, especially for foreign-invested enterprises in the start-up stage. A wise strategy is to choose a lower-cost virtual office or shared office space in the early stage of the company, and then gradually transition to an independent office space as the business stabilizes and expands. At the same time, foreign-invested enterprises also need to consider the possibility of future business expansion and choose an address plan that can flexibly cope with the company’s growth.
In addition, foreign-invested enterprises should also note that certain types of businesses (such as trading companies) may need to be registered with the customs, and the choice of the store address is particularly important. It is recommended to consult legal and business experts before deciding on the store address to ensure that the address is in compliance with Japanese regulations and can meet the company’s long-term development needs. In general, the choice of the store location should be part of the company’s overall strategy, and it is necessary to fully consider legal compliance, business needs, cost control and future development.
Company capital terms
The Japanese Company Law abolished the minimum capital requirement in 2006, a change that had a profound impact on the establishment of companies. Before this, a joint-stock company needed to have a capital of at least 10 million yen, while a limited company needed 3 million yen. The abolition of this requirement has greatly lowered the threshold for starting a business, making the “one-yen company” possible. For foreign companies, this means that they can enter the Japanese market at a lower cost and flexibly adjust their initial investment strategies. However, it is worth noting that although there is no longer a minimum requirement in law, reasonable capital is still crucial in actual operations.
Capital setting has a significant impact on a company’s credit and business expansion. In the Japanese business environment, capital is often seen as an important indicator of a company’s strength and reputation. Higher capital can enhance the confidence of customers, suppliers and partners, and is conducive to establishing business relationships and obtaining more favorable trading conditions. For companies that need to apply for specific industry licenses or participate in government bidding, appropriate capital is even more essential. In addition, banks will also use capital as an important reference factor when evaluating loan applications. Therefore, although the law allows the establishment of a company with low capital, it is still very important to set up reasonable capital from the perspective of long-term business development.
For foreign-invested enterprises, formulating capital strategies requires more careful and comprehensive considerations. First, it is necessary to evaluate the actual funds required for initial operations and ensure that there are sufficient funds to support daily operations and business expansion. Second, it is necessary to consider the characteristics of the industry and the competitive environment. For example, in the manufacturing or high-tech industries, higher capital may be more conducive to establishing the company’s image and obtaining large projects. Third, it is necessary to weigh the tax impact. Although high capital may bring more advantages, it may also increase the tax burden, such as the calculation basis of enterprise tax.
A balanced strategy is to set up a moderate amount of capital at the beginning of the company’s establishment, and increase the capital through capital increase as the business develops and needs change. This gradual approach can both meet the initial operational needs and reserve space for subsequent development. At the same time, foreign-invested enterprises should also consider the composition of capital, such as a combination of different methods such as cash investment and intellectual property investment. For some high-tech companies, using technology or patents as investment may be an effective strategy.
Finally, it is recommended that foreign-invested enterprises consult local legal, accounting and business experts when deciding on capital setting, and formulate the best capital strategy based on the company’s specific situation and long-term development plan. Reasonable capital setting is not only related to the company’s initial operation, but also an important foundation for shaping the company’s image, expanding business and achieving long-term development.
Share-related terms
In the terms of a Japanese company’s contract, stock-related clauses are one of the most critical parts, especially for foreign-invested enterprises. Its importance is self-evident. First of all, stock transfer restriction clauses are an important protection mechanism for many companies, especially non-listed companies. This clause can prevent shares from falling into the hands of unwelcome third parties and maintain the stability and control of the company. Usually, this clause stipulates that the transfer of shares requires the approval of the board of directors, or that existing shareholders have the right of first refusal. For foreign-invested enterprises, this clause can help maintain the original equity structure and prevent Japanese partners from arbitrarily transferring shares, thereby protecting the interests of foreign investors.
Secondly, Japanese company law allows the establishment of different types of shares, which provides flexibility for corporate governance and financing. In addition to common shares, companies can also issue preferred shares, shares without voting rights and other types of stock. For foreign-funded enterprises, the rational use of stock can attract local investors or employees to participate while maintaining control. For example, shares with no voting rights but with priority dividend rights can be issued to Japanese partners, which not only guarantees the control of the foreign party, but also meets the Japanese party’s demands for economic interests.
Finally, foreign-controlled companies need to take Japan’s foreign investment review system into special consideration when designing share-related clauses. Foreign shareholdings in certain sensitive industries may be restricted, so the upper limit of foreign investors’ shareholdings needs to be clearly stipulated in the clauses. In addition, if there are plans to introduce Japanese strategic investors or go public in the future, corresponding flexibility should also be reserved in the clauses. It is worth noting that in recent years, the Japanese government has strengthened its review of foreign investment, especially in areas involving national security. Therefore, when setting share-related clauses, foreign-controlled companies should not only consider commercial needs, but also fully consider regulatory requirements to ensure long-term compliance operations.
In summary, the design of share-related clauses is directly related to the company’s control, financing capabilities and compliance. Foreign-invested enterprises should, with the assistance of professional consultants, carefully design these clauses based on their own business characteristics and development strategies in order to achieve long-term success in the Japanese market.
General Meeting of Shareholders Clauses
The general meeting of shareholders is the highest decision-making body of a company and occupies an important position in Japanese company law. The provisions on general meetings of shareholders in the articles of incorporation directly affect the company’s governance structure and decision-making efficiency. First, regarding the rules for convening and holding general meetings of shareholders, the articles of incorporation usually stipulate the convener (usually the board of directors), the deadline and method of convening the notice. Japanese company law requires that the notice of convening a general meeting of shareholders must be issued two weeks before the meeting, but the articles of incorporation can shorten this period to as short as one week. For non-listed companies, if all shareholders agree, even written notice may not be issued. The articles of incorporation can also stipulate the venue for the general meeting of shareholders, which is particularly important for foreign-funded enterprises, which can choose a more convenient location in Japan.
The feasibility of written resolutions and video conferences has been a topic of great concern in recent years, especially after the COVID-19 pandemic. Japanese company law allows the adoption of written resolutions, that is, all shareholders unanimously agree on a resolution in writing, which can be regarded as the resolution of the general meeting of shareholders. This method greatly improves the efficiency of decision-making, especially for companies with a small number of shareholders. Regarding video conferences, the 2021 Industrial Competitiveness Enhancement Act was revised to allow completely online general meetings of shareholders. The possibility of video conferencing can be clearly stipulated in the clauses, but attention should be paid to technical details such as ensuring the identity authentication of participating shareholders and the fairness of the exercise of voting rights.
For multinational companies, holding shareholder meetings presents special challenges, and the terms and conditions can be arranged accordingly. For example, it can be stipulated that meetings be conducted in both Japanese and English (or other relevant languages), and that bilingual materials be provided. The terms and conditions can also specify how to handle cross-time zone participation, such as allowing for video-recorded participation and post-confirmation of voting results. In addition, the terms and conditions can be set flexibly in the fiscal year and shareholder meeting time to facilitate overseas shareholder participation, taking into account factors such as international remittances and local holidays.
It is worth noting that although the clause can be flexibly arranged within the legal framework, certain core provisions must not be violated. For example, certain major matters (such as mergers, major asset transfers, etc.) must be approved by a special resolution of the general meeting of shareholders, which cannot be changed in the clause. Therefore, when drafting the clause, it is recommended to hire professionals familiar with Japanese corporate law and international business to ensure that it meets both legal requirements and the actual needs of cross-border operations.
By carefully designing the relevant provisions of the shareholders’ meeting, the efficiency and flexibility of corporate governance can be greatly improved, creating favorable conditions for cross-border operations. This can not only protect the rights and interests of shareholders, but also lay a solid institutional foundation for the long-term development of the company.
Board structure clause
Japanese company law stipulates a variety of corporate governance structures, one of the most critical choices is whether to set up a board of directors. For foreign-funded enterprises, this decision will have a profound impact on the company’s operations and decision-making efficiency.
First, let’s look at the choice of a company with a board of directors vs. a company without a board of directors. Companies with a board of directors are called “Kaisha with a Board of Directors”, and are usually suitable for larger companies or those with plans to go public. This structure requires at least three directors and one supervisor, and decisions must be made through board meetings. In contrast, a company without a board of directors can have only one director, and the decision-making process is more flexible. For small and medium-sized foreign companies that are new to the Japanese market, a non-board of directors structure may be more suitable because it simplifies management processes and reduces operating costs. However, as the company grows in size, converting to a company with a board of directors may become a necessary choice to improve corporate governance and market credibility.
Regarding the appointment of foreign directors, Japanese law does not have any nationality restrictions, which is good news for foreign companies. However, there are a few key points to note: First, at least one representative director must have a domicile in Japan. This does not mean that they must be Japanese nationals, but they need to have a residential address in Japan. Second, foreign directors need to obtain appropriate visas, such as a “business management” visa. In addition, although the law does not require the board of directors to speak Japanese, considering daily operations and communication with Japanese customers and suppliers, it is recommended that at least one director is fluent in Japanese.
Finally, let’s talk about the power and responsibilities of a representative director. A representative director plays a vital role in a Japanese company, equivalent to a CEO or general manager. They have the power to sign contracts, conduct transactions, and represent the company in legal matters on behalf of the company. However, this power also comes with great responsibility. Representative directors are primarily responsible for the company’s business decisions and may face shareholder lawsuits if the company suffers losses. For foreign-invested companies, it is particularly important to carefully select a representative director. The ideal candidate should not only understand the company’s global strategy, but also be familiar with Japan’s business environment and laws and regulations.
In general, the design of board structure clauses needs to balance efficiency, compliance and long-term development needs. When formulating these clauses, foreign-invested enterprises should take into account the company’s current size, future development plans, and Japan’s unique business culture. It is recommended to consult professionals familiar with Japanese corporate law and foreign-invested enterprise operations before making a decision to ensure that the corporate governance structure meets both legal requirements and the actual needs of the enterprise.
Auditors (Supervisors) Related Articles
The system of supervisors (competent auditors) is an important part of the corporate governance structure in Japan, and the requirements and responsibilities of the supervisors are important in the company’s articles of association. According to the Japanese Company Law, not all companies are required to set up supervisors. Generally speaking, small and medium-sized joint-stock companies with capital of less than 500 million yen and total liabilities of less than 20 billion yen can choose whether to set up supervisors. However, large companies and listed companies are usually required to set up supervisory boards.
The main duties of auditors include supervising the performance of directors’ duties, reviewing the company’s financial situation, attending board meetings and expressing opinions, etc. They have the right to inspect the company’s books and documents, investigate the company’s business and property conditions, and report to shareholders’ meetings when they find misconduct by directors. Auditors play a key role in protecting the interests of shareholders and ensuring that companies operate in compliance with regulations.
For foreign-invested enterprises, whether to set up auditors or not requires comprehensive consideration of multiple factors. First, the company size and legal requirements must be considered. If the company is small, it may choose not to set up auditors and adopt other forms of internal control mechanisms. Second, the company’s long-term development plan must be considered. If the company plans to go public in Japan or expand on a large scale, setting up auditors in advance may help to establish a sound corporate governance structure.
In addition, foreign companies also need to consider cultural differences and communication issues. Auditors usually need to have a deep understanding of Japan’s legal and business environment, so choosing the right person can be a challenge. Some foreign companies choose to hire local Japanese professionals as auditors to ensure that their duties are performed effectively.
It is worth noting that even if they choose not to set up an audit committee, foreign-invested enterprises should establish corresponding internal control and supervision mechanisms to ensure the compliance and transparency of the company’s operations. This may include setting up an internal audit department and introducing external audits.
In general, the design of the clauses related to the auditors should be based on the actual needs and compliance requirements of the company. When formulating these clauses, foreign-invested enterprises are advised to consult Japanese legal experts to ensure that they comply with both legal requirements and the actual management needs of the company. Regardless of whether or not to set up auditors, establishing a sound corporate governance structure is crucial for the long-term development of foreign-invested enterprises in Japan.
Accounting related terms
Accounting-related clauses are an integral and important part of a company’s articles of association, and have a direct impact on the company’s financial management and profit distribution. In Japan, these clauses mainly involve the setting of the business year, the provisions of surplus fund distribution (profit distribution), and, especially for foreign-invested enterprises, profit remittance strategies.
First, regarding the setting of the business year, Japanese law allows companies to freely choose their fiscal year. Although many Japanese companies choose to use April 1 to March 31 of the following year as their business year to match Japan’s fiscal year, foreign-invested enterprises can set it based on the parent company’s accounting cycle or industry characteristics. For example, some industries may be more suitable for using the calendar year (January 1 to December 31) as their business year. It is worth noting that once determined in the contract, changing the business year will require a formal contract amendment procedure.
Secondly, the provisions on profit distribution are another key point. Japanese company law allows companies to stipulate in the articles of incorporation that profit distribution shall be decided by the board of directors without having to hold a general meeting of shareholders every time. This provides companies with greater flexibility. However, foreign-invested enterprises need to be aware that overly loose profit distribution provisions may attract the attention of Japanese tax authorities, especially on the issue of transfer pricing. Therefore, it is recommended to clearly stipulate the basic principles and procedures for profit distribution in the articles of incorporation to balance flexibility and compliance.
Finally, for foreign-invested enterprises, profit remittance strategy is an issue that requires special attention. Although Japan does not have strict restrictions on profit remittance, a reasonable profit remittance strategy is crucial to avoiding tax risks. In the terms of the agreement, it is possible to consider setting up clauses that allow for various forms of profit remittance, such as dividends, royalties, management fees, etc. At the same time, the tax treaty between Japan and the country where the parent company is located should also be taken into account to maximize tax benefits.
In general, when formulating these accounting-related clauses, foreign-invested enterprises need to find a balance between Japanese legal requirements, business operational needs, and international tax considerations. It is recommended to hire professionals familiar with Japanese corporate law and international taxation to assist in designing clauses that comply with Japanese regulations and meet the needs of the company’s global strategy. This will not only ensure the compliance of the company’s operations, but also lay a solid financial foundation for the company’s long-term development.
Announcement Method Clauses
The announcement method clause is an integral part of the company’s articles of association. It stipulates how the company releases important information to the public, such as financial statements, notices of shareholders’ meetings, etc. Japanese company law mainly provides two types of announcement methods: electronic announcement and official gazette announcement. Choosing the right announcement method is crucial to the company’s compliance and information transparency.
Electronic announcements are a method that the Japanese government has vigorously promoted in recent years. It allows companies to publish announcements through their own websites, which has the advantages of low cost, high efficiency, and wide information dissemination. However, companies that adopt electronic announcements must ensure the continuous accessibility of information, and usually require the announcement content to remain on the website for at least 5 years. In addition, companies are required to conduct an electronic announcement survey performed by a certified public accountant or auditing firm once a year to ensure the reliability of the system.
In contrast, official gazette announcement is a traditional method of announcement. It requires companies to publish announcements in official gazettes designated by the government. Although this method is more formal, it also faces the problems of high cost and limited coverage. For some special statutory announcements, such as announcements of capital reduction of companies, even if electronic announcements are chosen as the main method, they may be required to be published in the official gazette at the same time.
For foreign-invested enterprises, there are several special factors to consider when choosing a method of announcement. First, if the parent company is located overseas, electronic announcement may be a more convenient option because it facilitates cross-border management and information synchronization. Second, certain industries (such as the financial services industry) may have special announcement requirements, and foreign-invested enterprises need to pay special attention to these industry-specific regulations.
In addition, foreign companies also need to consider language issues. Although legally, announcements must be in Japanese, many foreign companies choose to provide an English version at the same time so that international investors and partners can understand. Although this practice is not mandatory, it helps to improve the company’s international transparency.
It is worth noting that no matter which announcement method is chosen, foreign-invested enterprises should establish a strict internal control system to ensure the accuracy and timeliness of the announcement content. Given Japan’s high standards for corporate information disclosure, it is often a wise choice to hire local professionals familiar with Japanese laws to assist in handling announcement matters.
In general, electronic announcements are becoming the first choice for more and more foreign-invested enterprises due to their efficiency and cost advantages. However, when making a choice, companies should consider their own scale, business nature, technical capabilities and long-term development strategies. Regardless of which method is chosen, ensuring the compliance of announcements and information transparency is a key step for foreign-invested enterprises to establish a good corporate image in the Japanese market.
Supplementary Terms and Other Important Terms
In the company’s financial statements, by-laws and other important clauses often contain key management and operating rules, the most important of which are the procedures for changing the financial statements and the provisions related to the dissolution and liquidation of the company. Although these clauses are not often used, they are crucial to the company’s long-term operations and risk management.
The procedure for changing the terms and conditions usually requires a special resolution of the shareholders’ meeting. According to the Japanese Company Law, a special resolution requires the approval of more than two-thirds of the voting rights held by shareholders attending the shareholders’ meeting. Some major changes, such as the amendment of clauses to increase shareholder liability, may even require the unanimous approval of all shareholders. When designing this clause, foreign-invested enterprises need to take into account the complexity of cross-border communication and decision-making. They can clearly stipulate in the terms and conditions the possibility of holding shareholders’ meetings electronically or adopting written resolutions to increase operational flexibility.
Regarding the provisions on company dissolution and liquidation, the specific circumstances that lead to the dissolution of the company are usually listed in the clauses, such as dissolution by resolution of the general meeting of shareholders, elimination due to merger, bankruptcy, etc. At the same time, the method of selecting the liquidator will also be stipulated. For foreign-invested enterprises, it is particularly important to clearly stipulate the rights and obligations of the overseas parent company in this part of the clauses, such as specifying that the liquidator shall be appointed by the overseas parent company. In addition, considering the complexity of cross-border liquidation, arbitration clauses can be added to the clauses, and appropriate arbitration institutions and applicable laws can be selected so that disputes can be resolved efficiently when they occur.
It is worth noting that the design of these clauses must not only comply with Japanese legal requirements, but also match the actual operational needs of the company and the wishes of shareholders. Therefore, when drafting these clauses, it is recommended to hire professionals familiar with Japanese corporate law and foreign-invested enterprise operations to provide advice to ensure that the clauses are both legal and compliant and can effectively protect the interests of the company and shareholders. At the same time, as the company’s business develops and the external environment changes, these clauses may also need to be adjusted in a timely manner, so it is also wise to establish a regular review mechanism.
Special Notes for Foreign-invested Enterprises
When setting up a foreign-invested enterprise in Japan, the drafting of the company’s articles of association (articles of incorporation) requires special attention to several key points. First, the handling of foreign investor information is a sensitive and important issue. The articles of incorporation usually need to clearly record the information of major shareholders, including the name, nationality and address of the foreign investor. However, considering privacy protection and business confidentiality, only the necessary basic information can be listed in the articles of incorporation, and the detailed information can be kept in the shareholder register.
In addition, if the foreign investor is a legal person, attention should also be paid to the provision and translation of proof of its legal status in its home country.
Secondly, the impact of foreign investment review on the terms of the contract cannot be ignored. According to Japan’s Foreign Exchange and Foreign Trade Law, foreign investment in certain areas requires prior declaration or review. This may affect the setting of the company’s purpose clause in the terms of the contract. It is recommended that when drafting the terms of the contract, carefully study whether the proposed business belongs to the field that needs to be reviewed. If so, it may be necessary to make appropriate adjustments to the relevant business description in the terms of the contract to ensure that it complies with Japanese legal requirements and does not cause unnecessary review obstacles. At the same time, considering the possibility of future business expansion, some flexibility can be reserved in the company’s purpose, but be careful not to be too broad in wording.
Finally, the feasibility and precautions of bilingual contracts deserve attention. In Japan, only the Japanese version of the contract is legally recognized, but in order to facilitate foreign investors’ understanding and daily use, many foreign-invested enterprises will prepare both Japanese and foreign language (usually English) versions of the contract. This approach is feasible, but there are a few points to note: First, the two language versions must be consistent, especially in the translation of key terms. Second, it should be clearly stipulated in the contract that if there is any ambiguity between the Japanese version and the foreign language version, the Japanese version shall prevail. Finally, it is recommended to hire a professional legal translator to do the translation work to ensure the accuracy of the terminology and the consistency of the legal effect.
It is crucial for foreign-invested enterprises to formulate a document that complies with Japanese legal requirements and meets the needs of foreign investors. It is not only a basic document for the establishment of the company, but also an important basis for the future operation and management of the company. Therefore, when drafting and revising the document, it is recommended to seek the help of professionals who are familiar with Japanese corporate law and foreign investment policies to avoid potential legal risks and operational obstacles. Through a carefully designed document, foreign-invested enterprises can lay a solid legal foundation for their long-term development in Japan.
Modification and update of deposit
As the fundamental law of a company, the company’s fixed terms are not static. As the company develops and the external environment changes, it is often necessary to revise the fixed terms. Common reasons for revision include: the expansion of business scope requires the addition of business projects, the change of equity structure leads to the adjustment of share transfer restrictions, the expansion of the company requires the change of the board structure, the introduction of new financing methods such as the issuance of new shares or corporate bonds, etc. In addition, changes in laws and regulations may also require the company to revise the fixed terms accordingly to ensure compliance.
The procedure for modifying the terms of the company is clearly defined in the Japanese Company Law. Usually, the modification of the terms of the company must be approved by a special resolution of the general meeting of shareholders, that is, more than two-thirds of the voting rights held by the shareholders present must agree. For some major modifications, such as changes in the rights of different types of shareholders, the approval of the class shareholders’ meeting may also be required. After the modification is approved, the company needs to submit an application for change registration to the Legal Affairs Bureau within two weeks. It is worth noting that some modifications, such as changes in the company name and the location of the main store, require other related procedures.
For foreign-invested enterprises, the modification of the fixed amount may bring special impacts. First, some modifications may trigger foreign investment review, such as significantly increasing the business scope to involve sensitive industries. Second, modifications involving changes in the equity structure may affect the company’s foreign ownership, and thus affect the business license of certain industries. Third, changes in the profit distribution method may affect the profit remittance strategy, and tax impacts need to be considered. In addition, foreign-invested enterprises need to pay special attention to whether they comply with the relevant laws and regulations of the country where the parent company is located when modifying the fixed amount.
In practice, foreign-invested enterprises are advised to consult local Japanese legal experts and administrative scriveners in advance when making changes to the terms and conditions. They can help evaluate the necessity and feasibility of the changes and ensure that the changes comply with Japanese legal requirements and meet the actual needs of the company. At the same time, they should also pay attention to maintaining communication with the legal department of the parent company to ensure that the modified terms and conditions do not conflict with the group policy.
Regular review and timely update of company deposits is not only a legal compliance requirement, but also an important means for companies to maintain vitality and adapt to market changes. For foreign companies operating in Japan, flexible and prudent management of company deposits can lay a solid legal foundation for the company’s continued development in the Japanese market.
Case Study
Successful foreign-invested enterprise clause design cases are often reflected in their flexibility and foresight. Take a US technology company successfully established in Tokyo as an example. Its clause cleverly balances the requirements of Japanese law and the company’s global strategic needs. The company not only includes the current software development business in the company’s purpose clause, but also foresightedly adds descriptions related to artificial intelligence and blockchain, providing a legal basis for future business expansion. In the share transfer restriction clause, they adopted a design that requires board approval, which not only ensures the stability of the company’s control, but also reserves space for the introduction of strategic investors.
Another case worth learning from is a European food company established in Osaka. They paid special attention to the design of the board structure in the contract, adopted the form of a company-based board, and clearly stipulated that at least one director must be resident in Japan. This not only meets Japan’s management requirements for foreign-funded enterprises, but also effectively improves the company’s operating efficiency and decision-making speed in the Japanese market. At the same time, they chose electronic announcements in the announcement method clause, which not only saved costs but also improved the efficiency of information disclosure.
However, foreign-invested enterprises often make mistakes when designing the terms of service, which leads to operational difficulties in the future. A common mistake is that the company’s purpose clause is too narrow. For example, when a US company focusing on online education established a subsidiary in Japan, it only stated “providing online education services” in the terms of service. When they wanted to expand into offline training and education consulting business, they found that they needed to revise the terms of service, which consumed a lot of time and resources. This lesson tells us that when drafting the company’s purpose, we should be moderately broad to leave room for future development.
Another common mistake is to ignore the language regulations for shareholder meetings and board resolutions. Some foreign companies take it for granted that they can conduct corporate governance entirely in English, and end up having trouble submitting documents to Japanese government agencies. A wise approach is to clearly stipulate in the terms of the agreement that meetings and resolutions can be conducted in both Japanese and English, and provide Japanese translation when necessary.
Another lesson comes from a foreign e-commerce company that is rapidly expanding in Japan. In the early days, they chose a structure without a board of directors to simplify the process. However, as the business scaled up, this structure limited their decision-making efficiency and financing capabilities. This tells us that the design of the subscription should take into account the company’s long-term development plan, not just the current situation.
In general, successful foreign-invested enterprise settlement cases have demonstrated a deep understanding of the Japanese legal environment and forward-looking considerations for the company’s future development. Those failed cases remind us that settlement design cannot be rushed, and it is necessary to fully consider the long-term impact and seek professional legal advice when necessary. Only in this way can a solid legal foundation be laid for the company’s continued development in Japan.
Expert advice
Designing a company charter (article) that complies with Japanese law and meets the needs of foreign capital requires finding a balance between legal compliance and business flexibility. First, it is important to ensure that the articles contain all the necessary clauses required by Japanese company law, such as company name, purpose, location of the main office, etc. At the same time, on top of these basic requirements, they can be customized according to the specific needs of foreign-invested enterprises. For example, in the company purpose clause, a broader description can be used so that the articles do not have to be frequently revised when the business expands in the future. For the share transfer restriction clause, a solution can be designed that protects the company’s control without excessively restricting investment flexibility.
In designing the board structure, foreign-invested enterprises can consider adopting a model that meets Japanese corporate governance requirements and reflects the management style of the parent company. For example, an executive director system can be set up to meet Japanese legal requirements while maintaining decision-making efficiency. For profit distribution clauses, a mechanism that is conducive to cross-border fund allocation can be designed on the premise of complying with Japanese laws. In addition, considering language factors, it can be clearly stipulated in the terms that English and other foreign languages can be used for communication and document preparation within the company, which will greatly improve the work efficiency of foreign managers.
However, designing such a clause that is both compliant and practical can be a challenge for foreign-invested enterprises that are not familiar with the Japanese legal environment. This highlights the importance of seeking professional help. It is recommended to hire a legal expert or administrative scrivener who is familiar with Japanese corporate law and foreign-invested business to assist in the drafting and review of the clause. These professionals can not only ensure the legal compliance of the clause, but also provide customized advice based on the company’s specific circumstances to avoid potential legal risks.
Professional consultants can also help companies understand the long-term impact of the terms of the deposit, especially in terms of the company’s future development, financing, equity changes, etc. Their experience can help companies foresee potential problems and pre-set resolution mechanisms in the deposit. In addition, in the communication and application process with Japanese authorities, the assistance of professional consultants can greatly improve efficiency and reduce the risk of rejection due to non-compliance of documents.
In general, a good down payment should be able to meet the strict requirements of Japanese law while providing sufficient flexibility for the company’s operations and development. By seeking professional help, foreign companies can ensure that their down payments are not only legal and valid, but also lay a solid foundation for the company’s long-term development in Japan. Although this investment may increase some costs in the early stage, it is definitely worth it in the long run and can help the company avoid many potential legal disputes and operational obstacles.
In the Japanese business environment, the Articles of Association (Articles of Incorporation) are not only a legal document, but also the cornerstone and compass of the company’s operations. Through the detailed analysis of this article, we can clearly see that from the company’s purpose to the share structure, from the board of directors to the profit distribution, every clause of the Articles of Incorporation is shaping the company’s basic framework and operating rules. For foreign-funded enterprises, it is self-evident to formulate an Articles of Incorporation that not only meets the requirements of Japanese law but also meets the control needs of the parent company.
It is particularly noteworthy that the deposit is not only related to the daily operation of the company, but also directly affects the long-term development of the company. For example, a reasonably set company purpose clause can provide flexibility for future business expansion; and a carefully considered share transfer restriction clause can protect the company’s control while reserving space for future capital operations. For multinational companies, how to balance the local legal requirements of Japan and the global strategic needs in the deposit is an issue that needs to be carefully considered.
In addition, we also need to realize that the fixed amount is not static. As the company grows and the external environment changes, timely modification and updating of the fixed amount is a necessary measure to maintain the company’s competitiveness. Therefore, establishing a mechanism for regular review and update of the fixed amount is crucial for the company’s continued healthy development.
For foreign companies that are entering or planning to enter the Japanese market, a deep understanding of Japanese corporate law and local business practices, and accurately reflecting these understandings in the contract, is a key step to successful operation. This will not only ensure that the company operates in compliance with regulations, but also lay a solid institutional foundation for the company’s long-term development in the Japanese market.
In general, a well-formulated company code is the foundation of good corporate governance and the guarantee of a company’s steady development. It not only regulates the company’s internal operations, but also defines the basic rules for the company’s interaction with the outside world. Foreign-invested enterprises that intend to set up or already operate in Japan are advised to pay attention to the formulation and maintenance of codes. You may consider seeking the assistance of professional legal counsel and company secretaries to ensure that the codes meet both legal requirements and the company’s actual needs. Only corporate governance based on a sound code can provide strong support for the company’s sustainable development in a rapidly changing business environment.
