Resident Directors No Longer Necessary for Corporations in Japan

April 27, 2015

BY TOSHIYUKI ARAI, TIMOTHY A. MACKEY, KOTA KIKUCHI & SACHIKO TANIGUCHI

On March 16, 2015, the Ministry of Justice in Japan (the “MoJ”) repealed an old policy and announced they would accept incorporation applications with respect to all forms of Japanese corporate entities regardless of whether that entity has a local director or not.[1] This step was taken as part of the current Abe administration’s stated intention to relax certain regulations and encourage foreign investment into the Japanese economy. Effectively, a foreign entity looking to set up in Japan can now choose between appointing a local representative, registering as a foreign company, and incorporating in Japan without necessarily appointing any one resident in Japan as a director of such company.

Strictly speaking, there was never any statutory requirement that there be at least one resident of Japan acting as a director in order to incorporate a Japanese corporate entity. The MoJ (acting in its role as administrator of the incorporation of corporate entities) implemented the previous policy requiring one director be a resident in Japan based on the rationale that such policy protected the rights of stakeholders and creditors of the company.[2] A discussion unit of the Abe administration and the MOJ recently concluded that the old policy made the process to incorporate a Japanese corporate entity unnecessarily cumbersome for non-Japanese investors looking to set up in Japan.[3] The most obvious practical hurdle was that a person wishing to enter Japan and stay for a short period in order to establish the business of a new Japanese company was unable to obtain a visa unless they were able to provide a copy of the corporate registry of the Japanese company. The only way for such a person to obtain the correct visa to achieve their goal was to first appoint a local director and incorporate the entity in Japan prior to such person coming to Japan and setting up the business.

The amendment to this policy by the MoJ is one of the few structural reforms which the Abe administration has implemented so far in its efforts to boost Japan’s competitiveness though the Abe administration’s so-called “three arrows”, the other facets of which have been a massive fiscal stimulus and aggressive monetary easing by the Bank of Japan.

The MoJ and the Regulatory Reform Council of the Abe administration have indicated that further discussions with respect to relaxing the issuance of visas and registration of foreign companies are taking place. The Paul Hastings Tokyo office includes Japanese lawyers that can assist in Japanese law commercial needs. We plan to issue further alerts in relation to any upcoming reforms of this nature.

***

[1] http://www.moj.go.jp/MINJI/minji06_00086.html We conducted an enquiry to the MoJ and confirmed that the new policy is applicable to all types of corporate entity.

[2] Remark of Noguchi, Commercial Manager of the MoJ, Minutes of the 4th Working Group Discussion dated December 1, 2014.

[3] Minutes of the 4th Working Group Discussion dated December 1, 2014.

Click here for a PDF of the full text