Other requirements when forming a Japanese kabushiki kaisha

Other requirements when forming a Japanese kabushiki kaisha

Prior to 1992, forming a company with foreign owners required prior notification to the Ministry of Finance. In most cases this notification lead to immediate approval by the Ministry of Finance, but many US business people thought that prior notification was unnecessary.

Thus, in 1992 the system of prior notification was changed to after the fact notification. There are still some industries, namely agriculture, aerospace, petroleum and defense where prior notification is necessary.

Also, in the case of a joint venture, a copy of the joint-venture agreement must be submitted to the Japan Fair Trade Commission within 30 days after execution of the agreement. If the Fair Trade Commission finds that the agreement will reduce competition, it may require unfavorable changes, so you should ensure that the agreement has an escape clause that will allow you to call off the agreement if the FTC's demands are excessive.

The FTC has a pre-clearance procedure that can be used to check for the FTC's acceptance of a plan. In general, price maintenance schemes will not be allowed. The FTC will generally not object to restrictions on reverse-engineering, non-disclosure clauses and non-compete clauses.

Other than possible problems from the FTC, there are few regulations regarding direct investment. For example, there are no local content laws and no local equity requirements. Companies also may freely repatriate dividends, subject to a withholding tax.

The total cost of setting up a kabushiki kaisha will run about $10,000. About half of this goes to the attorney, and about half is needed for taxes, notarization and registration fees. And don't forget that you'll need about $100,000 in initial equity capital.

So now that you've set up your company, there are some procedural things that you must do. For example, KK's must have annual shareholders' meetings, and board meetings must be held quarterly. Note that these meetings can be held in Japan or overseas.