JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki, Kosuke Hamaguchi and Akira Komatsu, Nagashima Ohno & Tsunematsu
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1. Corporate Governance Requirements 1.1 Corporate Forms and Governance Requirements The following are the principal forms of corporate/ business organisations in Japan. Explanations found in 1.2 Corporate Governance Legislation and Regu- lation and later sections focus on the joint stock com - pany unless otherwise indicated. Joint Stock Company (Kabushiki Kaisha or KK) A joint stock company is the most commonly used form of corporate/business organisation in Japan. All Japanese listed companies are joint stock companies. This form is commonly used for closely held compa - nies as well. All shareholders of a joint stock company enjoy limited liability up to their respective contribution amounts. This form is not a pass-through entity for Japanese tax purposes. Limited Liability Company (Godo Kaisha or GK) The form of a limited liability company is used only for closely held companies. The governance struc - ture and rights of equity holders (including the alloca - tion of profit distributions among equity holders) can be determined in a flexible manner by the articles of organisation, so this form is suitable for joint ventures and wholly owned subsidiaries. All equity holders of a limited liability company enjoy limited liability up to their respective contribution amounts. This form is not a pass-through entity for Japanese tax purposes.
General Partnership Company (Gomei Kaisha) and Limited Partnership Company (Goshi Kaisha) The form of a general partnership company and that of a limited partnership company are used only for closely held companies, but are not commonly used. General partners in these companies have unlimited liability; limited partners enjoy limited liability. These forms are not pass-through entities for Japanese tax purposes. Limited Liability Partnership (LLP) The form of a limited liability partnership is used for joint ventures. The number of limited liability part - nerships has been increasing but, despite its pass- through nature for Japanese tax purposes, has not become very popular because of some practical inconveniences arising from its lack of legal person - ality. 1.2 Corporate Governance Legislation and Regulation There are various sources of corporate governance requirements for companies in Japan. The following are the principal sources. Companies Act (Act No 86 of 2005, as Amended) The Companies Act, together with its subordinate regulations, provides the basic corporate governance requirements for companies, whether listed or not. The latest major amendment was made in December 2019, and another major amendment is being dis - cussed at the Legislative Council of the Ministry of Justice.
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