Japanese Corporation Law
The New Company Law abolished the Yugen Gaisha organization type and simplified procedures surrounding corporate establishment in general. This, as well as introducing the LLC and LLP, is intended to encourage the creation of new businesses in Japan.
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History
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Post-war Japan first passed corporate reform laws in the 1950´s, which moved from a stakeholder friendly "zaibatsu" system to a more American-style of system, with public corporations balancing power by providing shareholders the right to monitor the management of the companies. What emerged after shares were sold to corporate purchasers was a new system entirely, which remained as the norm until the more recent reforms of 2006.
Yugen Gaisha
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With the passing of New Company Law, it is no longer possible to establish a Yugen Gaisha, or limited company, though all existing YGs remain as Exceptional YGs, and have the right to reestablish as a Kabushiki Kaisha with a change of corporate name. If the business chooses to remain an Exception YG, it is not required to publicly publish balance sheets.
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Kabushiki Kaisha
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Under the New Company law, a balance sheet must be published annually in a newspaper or in the Official Gazette, KANPO. Traditionally, 10 million yen had to be provided within five years of startup of a KK, or risk being dissolved. With the new legislation, no minimum capital is required.
LLC and LLP
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Limited Liability Corporations, also referred to as LLC or Godo Kaisha, as well as Limited Liability Partnerships, or LLPs are not required to publish annual balance sheets. These are new organizations created with the new law, with no shareholders. Both organization types can be converted to Kabushiki Kaisha status with a signed agreement of all corporate members, or partners.
Simplification
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With the new law, trade name verification checks, and minimum start up capitals are no longer required. The number of board directors decreased from a mandatory three to a required minimum of one, and with the board of directors liability now only enforced in the case of negligence. These were intended to simply the process starting a new company.
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References
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