Outline of
COMPANY LAW

Status of former YK
 

Change to KK
from YK
 
Merit of
TOKUREI YK
 
Establisment of
New KK
 

 Top Page
 
 
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 Outline of New COMPANY LAW
1. No new YK any more, former YK all to be incorporated into KK
Under the new Company Law, new Yugen Kaisha (YK) can not be established any more. The current existing YKs are remained as YK keeping its name of YK.
However, it is legally regarded as a New Kabushiki Kaisha (KK) under the new Company Law.  Those Yks are called TOKUREI YK, or Exceptional YK.

Then, what kind of actions can the owners of YK take now?  The owners of YK are having two options. One is to continue as an Exceptional YK keeping the name of YK on his company’s name, and the other choice is to shift to KK by changing the company’s name to KK.  The latter choice is a BIG GOOD NEWS for those YK owners who were wishing to change their YK to KK, but could not do it because of the annoying procedures such as an increase of equity, etc. The typical YK, like “one director, 3Mil.yen capital and Net Asset less than 10Mil.yen”, now can legally shift to a KK only by conducting the procedure of Change of Company Name. (As a formality, a registration of YK dissolution and a registration of KK establishment are required. But the shift is defined legally as a Change of Company Name under the regulation affiliated to the New Company Law.
 
2. New KK can be established with 1 yen capital. The Minimum Capital Clause abolished.

There was a legal restriction of minimum capital amount of \3 Mil. for YK and \10 Mil. for KK.  Regarding the KAKUNIN KAISHA (so called 1yen company), the minimum was removed, but additional capital increase is legally requested within 5 years after the start.
Under the New Company Law, a complete KK can be established with an initial capital of 1-yen without any additional requirement in the future. You will not have to increase the amount of capital later.

  
3. Big differences between Open Company and Closed Company
The New Company Law stipulates a big difference between a company which has a clause of Restriction of Stock Ownership Transfer on its Corporate Article (TEIKAN), stating like “An approval of the company (or Directors Board) shall be required to transfer the ownership of this company’s Stock.” and a company which does not have this clause. The former company is called “Closed Company” or HIKOUKAI KAISHA, and the latter is called “Open Company” or KOUKAI KAISHA.  On this HP, the following descriptions are mainly for the “Closed Company” which has a Restriction of Stock Ownership Transfer clause.

(Note) So far, the word “Open Company” or KOUKAI KAISHA was used to refer to a company whose stocks are listed on the commercial Stock market. The new Company Law, however, defines “Open Company” or KOUKAI KAISHA as is mentioned above
   
4. KK with one Director, no Auditor is now OK. (Closed Company)
Under the new Company Law, a company’s internal organization can be designed freely by owner(s). If the company is Closed Company, a minimum legal requirement is just to assign one Director, and Auditor is not mandatory to have any more. (Three directors and one auditor were the minimum legal requirement before.)  Consequently, things become very close to the former YK law for the Closed Company.
  
5. Office term extended to 10 years for Directors (Closed Company)

It is now possible for a Closed Company to extend the office term of Director and Auditor up to 10years by stipulating it in its Corporate Article or TEIKAN. (The assignment of Auditor is now alternative, not mandatory, for a Closed Company.)
Under the former Commerce Act, the office terms were 2years for Director and 4years for Auditor in KK, which required periodical registrations every 2 or 4 years for a Director/Auditor renewal.
By this change, the workload of Director/Auditor’s office term renewal which was a legal requirement is now drastically reduced, and moreover the risk of forgetting the registration is now gone. (Forgetting the renewal registration is subject to a legal penalty.)  In addition, the cost of Register fee can be also eliminated.
The office terms, however, shall remain 2 years (director) and 4 years (auditor) unless the extension is stipulated on the Company’s Corporate Article or TEIKAN.
 
6. The Restriction of Similar Trade Name (Company name) abolished.
In the former law, “A survey of Similar Trade Name” was legally required before one can decide his new Company’s name to register. The reason was due to the clause in the Commerce Act called “Restriction of Similar Trade Name”, which prohibited any trade name to be registered when there is another company already registered with the similar trade name for the same business purpose within the same area. The registration of the new company was never accepted when there was a similar trade name company in the area.
Now, this regulation is abolished under the New Company law. One can now register a new company with his favorite company name freely without worrying about other companies trade names.
One and only restriction remaining is that one can not register a new company with a Similar Trade Name on the exactly same address.
And, further more, a registration of new company using a Similar Trade Name which has a purpose to damage any existing company shall not be allowed either.
 
7.”Certificate of Initial Capital Deposit” no more required.
Just “Evidence of Balance” will be OK !!
To establish a new company, a ”Certificate of Initial Capital Deposit” was needed in the support document package to a Register office. The “Certificate of Initial Capital Deposit” was issued from Bank, or Credit Association where the intiator deposited the initial capital of the company. 
As a matter of fact, this process often became the most annoying part for new business starters. Generally the Banks are reluctant to accept new comer’s initial capital deposit.
There used to be many cases that the Bank would not accept the deposit saying there is no prior transactions, etc.  Especially, for foreigners living in Japan, finding a bank was often the most difficult part of the company establishment process.
Under the new company laws, this ”Certificate of Initial Capital Deposit” is no more required.  In stead, just attaching an evidence of bank account balance will be OK.
Accordingly, it is no more required to visit banks asking to accept the initial deposit from now.
 
8. Accounting Councilor or KAIKEI SANYO
There is now no legal requirement to put an auditor under the New Company law, although it was a mandatory to assign one auditor at least in KK beforehand.
In accordance with this change, an Accounting Counsilor or KAIKEI SANYO can be assigned by a stipulation on the Corporate Article or TEIKAN. The mission of this newly born title is to prepare company’s financial report together with the directors and Executive Officers. Only licensed Accountant, CPU or their judicial person can be selected to this position.
For more details for this new position, we may need more time before we can make a  further comment.