Recent changes to company registration practices

1. Removal of residency requirements for representative directors of joint stock companies

The Ministry of Justice issued a notice on March 16, 2015 containing the following information.

The treatment in the Answer Minshi No. 4974 dated September 26, 1984 from the Fourth Section Chief of the Civil Affairs Bureau and the Answer Minshi No. 1480 dated March 11, 1985 from the Fourth Section Chief of the Civil Affairs Bureau shall be abolished, and from this day forward, applications to register the incorporation of a domestic stock company in which none of the representative directors reside in Japan and to register the appointment or reappointment of the representative director of such stock company shall be accepted.

Although there was no residency requirement for representative directors under the Companies Act, registration practices required that at least one of the representative directors of a stock company be a person with a domicile in Japan under the treatment in the Answer Minshi No. 4974 dated September 26, 1984 from the Fourth Section Chief of the Civil Affairs Bureau and the Answer Minshi No. 1480 dated March 11, 1985 from the Fourth Section Chief of the Civil Affairs Bureau. In other words, it has effectively been a requirement that one or more of the representative directors be a resident. However, with the above notice, this requirement has been abolished. It is understood that the elimination of the above requirement applies not only to joint stock companies, but also to special limited liability companies.

The elimination of the above requirement is thought to be advantageous to foreign companies that are considering establishing a subsidiary in Japan and to foreign companies that already have a subsidiary in Japan, in that they do not have to search for a resident representative director and are able to control the subsidiary in Japan with members of the parent company alone.

Although not limited to non-resident representative directors, dismissing a director without justifiable cause may result in a claim for damages (Article 339(2) of the Companies Act), and even where the director position itself is not dismissed but simply demoted to a regular director, the measures to reduce remuneration may be deemed invalid if remuneration is reduced (Fukuoka High Court, Dec. 21, 2004). In addition, when a previous representative director is dismissed and a new representative director is selected, it is possible that the company’s registered seal must be filed in the name of the new representative director. Therefore, when selecting a non-resident representative director, it is necessary to pay attention to the risk of claims for damages in cases involving the dismissal or demotion of the incumbent, to beware of the term of office and position of the new representative director in cases where there is a possibility that they will be dismissed in a short period of time, and to consider the possibility that the procedures may take more time than expected.

2. Institution handling payments

When applying to register the incorporation of a joint stock company, it is necessary to attach a document certifying that payment has been made as the performance of contributions (Article 34.1 of the Companies Act) for promotive incorporation.

In this case, the following two documents, which are sealed together, can be treated as “documents of payment”.

  1. A document certifying the amount paid into the institution handling payments (prepared by the representative director at the time of incorporation or the representative executive officer at the time of incorporation)
  2. A copy of the bankbook for the account at the institution handling payments, or a detailed transaction list or other document prepared by the institution handling payments

This “institution handling payments” includes not only the head office and branch offices of Japanese banks in Japan, but also the Japanese branches of foreign banks (banks established with the approval of the Prime Minister). Overseas branches of Japanese banks are also included in “institution handling payments”.

Since it is difficult for a non-resident to open a bank account at the head office or branch of a Japanese bank in Japan, it is convenient for a non-resident to use a Japanese branch of a foreign bank or an overseas branch of a Japanese bank as the “institution handling payments” when the representative director at the time of incorporation is a non-resident. It should be noted that a bank that is a local corporation established by a Japanese bank under foreign law is not considered to be an overseas branch of a Japanese bank and is not considered to be an “institution handling payments”.

3. Change in attachments for registering appointment of officers and resignation of representative director

Due to revisions of the Regulation on Commercial Registrations, the documents to be attached for registering the appointment of officers and the resignation of the representative director have been changed as of February 27, 2015.

(1) Change in attachments for registering appointment of officers

The term “officers” here refers to directors, auditors and executive officers. Since “appointments” do not include reappointments, identity verification documents are considered unnecessary when registering reappointments. Identity verification documents are also unnecessary when the certificate of seal impression of the officer concerned is attached to the application for registration.

  1. Before the change
  • Application form for registration
  • Letter of acceptance of appointment

2. After the change

  • Application form for registration
  • Letter of acceptance of appointment
  • Identity verification document (any of the following documents)

A) Certificate of items stated in resident register (copy of certificate of residence)

B) Copy of family register

C) Copy of juki card (one with their address on it; must photocopy the back of the card too, and have the applicant write “This is a true copy.” and affix their name and seal to it.)

D) Copy of driver’s license (must photocopy the back of the card too, and have the applicant write “This is a true copy.” and affix their name and seal to it.)

E) Copy of passport (one with their address on it; the applicant must write “This is a true copy.” and affix their name and seal to it.)

F) Copy of residence card (the applicant must write “This is a true copy.” and affix their name and seal to it.)

G) A signature certificate (issued by the authorities of the applicant’s home country with the applicant’s address written on it.)

The signature certificate in (g) is acceptable if prepared as follows (where Country A is their home country):

  • Prepared by the authorities of their home country located in their home country (e.g., a government agency of Country A in Country A)
  • Prepared by the authorities of their home country located in Japan (e.g., the embassy of Country A in Japan)
  • Prepared by the authorities of their home country located in a third country (e.g., the embassy of Country A in Country B)
  • Prepared by a notary in their home country (e.g., a notary in Country A)

If there are unavoidable circumstances that prevent one from obtaining a signature certificate from the authorities of their home country, the following signature certificates may be acceptable:

  • A signature certificate prepared by the authorities of the country of residence
  • A signature certificate prepared by a notary of the country of residence
  • A signature certificate prepared by a notary in Japan

(2) Change in attachments for registering resignation of representative director who submitted seal

The term “representative director” here refers only to the representative director who submitted a seal. For applications to register the resignation of a representative director who did not submit a seal, resignation letters affixed with their personal seal will be accepted as usual.

Further, the attached documents after the change will be required even for registering the resignation of a representative director who submitted a seal.

1) Before the change

  • Application form for registration
  • Letter of resignation

2) After the change

  • Application form for registration
  • Letter of resignation (personal registered seal or company registered seal is required)
  • Certificate of seal impression, if the individual’s registered seal is affixed to the letter of resignation

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