JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
1. Introductory 1.1 Forms of Corporate/Business Organisations
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 com - panies 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 partnerships 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 personality. 1.2 Sources of Corporate Governance Requirements There are various sources of corporate govern - ance 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 subordi - nate regulations, provides the basic corporate governance requirements for companies, wheth - er listed or not. The latest major amendment was made in December 2019. Financial Instruments and Exchange Act (Act No 25 of 1948, as Amended) (FIEA) The FIEA, together with its subordinate regu - lations, requires listed companies and certain other publicly held companies to make disclo - sures related to corporate governance in various filings.
The following are the principal forms of corpo - rate/business organisations in Japan. Explana - tions found in 1.2 Sources of Corporate Gov- ernance Requirements and later sections focus on the joint stock company 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 companies as well. All sharehold - ers 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 structure and rights of equity holders (includ - ing the allocation 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 lim - ited liability company enjoy limited liability up to their respective contribution amounts. This form is not a pass-through entity for Japanese tax purposes.
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