JAPAN Law and Practice Contributed by: Akira Matsushita and Hideki Ben, Mori Hamada
1. Types of Company, Share Classes and Shareholdings 1.1 Types of Company The Companies Act provides for four types of com- pany: • stock company ( kabushiki kaisha ); • general partnership company ( gomei kaisha ); • limited partnership company ( goshi kaisha ); and • limited liability company ( godo kaisha ). The most popular form of company is the stock com- pany (ie, it comprises a significant majority of compa- nies), followed by the limited liability company. Unless otherwise stated, reference to a “company” in this arti- cle means a “stock company”. 1.2 Types of Company Used by Foreign Investors A stock company ( kabushiki kaisha ) or a limited liability company ( godo kaisha ) is generally used by foreign investors. 1.3 Types or Classes of Shares and General Shareholders’ Rights The Companies Act outlines the rights of general shareholders. Additionally, it allows companies to issue different classes of shares with differing rights by defining the specific rights and matters that can be differentiated among the different classes – such as the right to receive dividends or residual assets or voting rights – in their articles of incorporation. The most common class of shares is preferred shares with preferential rights for dividends and residual assets. These are often accompanied by rights to convert preferred shares to ordinary shares. While pre- ferred shares are often issued by any type of company (including listed companies), especially for financing purposes, preferred shares are frequently used by start-up companies. 1.4 Variation of Shareholders’ Rights The Companies Act adopts the principle of equal- ity of shareholders; thus, a company must treat its shareholders equally in accordance with the features and number of shares they hold. As discussed in 1.3
Types or Classes of Shares and General Sharehold- ers’ Rights , a company can issue different classes of shares with differing rights by setting out these rights in its articles of incorporation; however, the company must treat its shareholders holding the same class of shares equally in accordance with the number of this class of shares they hold. In addition, a company that is not a public company (ie, a transfer of shares of such company is restricted under its articles of incorporation) may include in its articles of incorporation a provision providing that each shareholder shall receive different treatment with respect to: • the right to receive dividends of surplus; • the right to receive distribution of residual assets; and • the right to cast a vote at a shareholders’ meeting. 1.5 Minimum Share Capital Requirements Under Japanese law, there are no minimum share capital requirements for companies. 1.6 Minimum Number of Shareholders For companies established under Japanese law, there is no minimum number of shareholders and no requirements for shareholders to be resident in Japan. As a general rule, there are no requirements for share- holders to invest in Japanese companies. Under the Foreign Exchange and Foreign Trade Act (FEFTA), foreign investors must submit prior notification to the Minister of Finance and the competent minister for the target company’s business and wait for a speci- fied period if: • foreign investors intend to acquire any shares of a private company (except if a foreign investor intends to acquire shares of a private company from another foreign investor unless the acquisi- tion may have a potential risk of harming Japan’s national security) or 1% or more of the shares or voting rights (including through proxies) of a listed company; and • the target company engages in certain restricted businesses identified in the FEFTA, including busi- nesses related to national security, public order,
121 CHAMBERS.COM
Powered by FlippingBook