JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
2. Establishing and Exiting Early- Stage Companies in the Energy and Infrastructure Industry 2.1 Establishing and Financing a New Company Establishing a New Company The two most common types of business entities cho- sen by entrepreneurs establishing a business in Japan are the kabushiki kaisha (KK) and the godo kaisha (GK). The KK and the GK are commonly used because of the limited liability protection they provide to all of their shareholders and members. The KK is similar to a cor- poration in the US and is the most traditional type of business entity. The GK was introduced in 2006 under the Companies Act, modelled on overseas limited lia- bility companies. While it is common to choose a GK as a special purpose company (SPC) for project devel- opment and financing, entrepreneurs choose the KK to develop a new start-up business because only the shares of a KK (and not membership interests of a GK) can be publicly traded on a Japanese stock exchange, and a KK is suitable for raising outside capital from multiple investors. An investment limited partnership, a vehicle used by many venture capitalists in Japan, cannot invest in a GK under law. For a KK, it typically takes at least one to two weeks to prepare documents for incorporation, notarise the articles of incorporation, and make an application for commercial registration. For a GK, the time required may be shortened by a few days because notarisa- tion of the articles of incorporation is not required. If the initial promoter, director or member is a foreign company or individual, there may be additional time required to prepare and gather necessary documents. The commercial registration usually takes less than one week to complete from the day of the applica- tion, and the day when the application was initially accepted by the local Legal Affairs Bureau retroac- tively becomes the day of incorporation. A KK must have at least JPY1 of initial capital. Early-Stage Financing Providers of early-stage financing to a start-up com- pany include local venture capital firms, such as incubators and seed accelerators, and angel inves- tors. Start-up companies may also seek early-stage
eral hundred MW to even a GW class. Thus, large developers and investors have been very keen to develop large-scale offshore wind projects in recent years. However, many developers and investors are currently struggling with headwinds, including the overly competitive bidding process, rising capex and disruption in supply chains. BESS (Battery Energy Storage Systems) Since the introduction of the Long-Term Decarbonized Power Auction (LTDA), there has been a surge in BESS projects set up by renewable developers and inves- tors. Foreign developers and investors, in particular, have been very active in this space, leveraging their advanced know-how and experience in other mar- kets. The size of BESS projects is typically less than 100 MW per project so far. Hydrogen and Amonia The Japanese government enacted the Hydrogen Society Promotion Act (“the Hydrogen Act”) in late 2024. One of the subsidy schemes under the Hydro- gen Act is a supply-side subsidy structured on the basis of a Contract for Differences (CfD) mechanism, providing financial support for the price gap between the sourcing of low-carbon hydrogen/ammonia as compared to conventional fuels such as LNG and coal. Through this subsidy programme, the Japanese government intends to select attractive hydrogen and ammonia projects which are considered to contribute enough to the development and expansion of new supply chains in Japan toward 2030 and thereafter. In this context, a growing number of hydrogen and ammonia projects can be expected in the near future. The size of these projects could significantly vary from In recent years, projects to build new conventional thermal power plants fuelled by LNG or coal have been scarce, but there have been a number of pro- jects to convert existing thermal power plants that will co-fire with hydrogen or ammonia or to newly build thermal power plants purely fuelled by hydrogen or ammonia. Also, we have seen a number of CCUS pro- jects subject to a new subsidy programme established by the Japanese government. several MW up to several hundred MW. Conventional Thermal Power Plants
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