Prerequisites to establish a company in Japan from overseas

Recently, I have received an increasing number of inquiries from overseas companies wishing to establish a subsidiary in Japan. In this article, I have listed the frequently asked questions and my general answers.

Q1: Should a Representative Director of a Japanese subsidiary be a Japanese resident?

A1. It is not mandatory. However, I strongly recommend that at least one Japanese resident to be appointed as a Representative Director at least at the time of incorporation.

Explanation: There are no “nationality” or “country of residence” requirements to become as a Representative Director of a Japanese company (Joint Stock Company “Kabushiki-Kiasha” or LLC “Godo-Kaisha”).
Therefore, it is possible for an overseas resident (e.g., Directors or employees of a overseas parent company) to be a representative of a Japanese subsidiary.
On the other hand, if he/she is a non-resident, it is almost impossible to open an account of the established company at a financial institution, unless the company is a world-renowned listed company.

Therefore, it is recommended that at least one Representative Director residing in Japan to be appointed when establishing a Japanese subsidiary, at least until a Japanese bank account is opened.

For your information, it is possible to appoint more than one Representative Director for such subsidiary.
Therefore, there is an option to appoint both Representative Director residing in Japan and foreign resident Directors (e.g., officers, employees, etc. of the parent company, etc.) in advance, and make the local Representative Director to step down from the position as soon as the establishment procedures have been completed.
Note: The registration needs to be submitted for the resignation of such Representative Director.

Points to note when dispatching employees from the parent company to Japan.

It is of course possible to dispatch an employee from the parent company to serve as the local Representative Director at the time of establishment. In such case, you need to consult with an administrative scrivener beforehand for visa preparation procedures.
Also, please note that in order to obtain a business management visa, the capital amount of the incorporated company must be at least 5 million yen.

Q2. Should Japanese bank account be needed prior to an establishment?

A2. Yes (with some exceptions).

Explanation: When an overseas company establishes a Kabushiki-Kaisha or Godo-Kaisha in Japan, in most cases, the parent company makes a monetary contribution at the time of establishment. In such cases, the capital contribution must be completed prior to incorporation, and only one of the following accounts can be designated as such account.

1. a Japanese branch of the Bank of Japan (e.g., Japanese Bank , Tokyo Branch)
2. an overseas branch of the Bank of Japan (e.g., Japanese Bank , Shanghai Branch)
3. a Japanese branch of an overseas bank (e.g., Chinese Bank , Tokyo Branch)
with an account name of following:
i. Incorporators
ii. Directors/ Executive Managers
iii. Third Persons (Only when A and B is not applicable)

Note: The account of the established company can be created only after the corporation is established.

Therefore, unless the corporation has a branch account at a Japanese financial institution in its home country, in principle, it is required to have a Japanese bank account as a remittance account at the time of incorporation. In this regard, the most common methods used by foreign companies to establish a business in Japan are as follows:

A. Transfer to the Japanese bank account of the local Director.
B. Transfer to the Japanese bank account of a local partner (agent company, lawyer, tax consultant corporation, etc.)

Q3. Can the registered head office be a virtual office?

A3. Yes, but it is not recommended.

Explanation: If the head office of the Japanese subsidiary is a virtual office, there is an increased risk that Japanese financial institutions would not open a corporate account for the subsidiary. Also, if the head office is a virtual office, it will not be possible to dispatch employees to Japan by obtaining a ” Business Management Visa”.

In this regard, it is recommended to rent a “rental office”, which is generally less expensive than leasing an ordinary office.
However, it is very difficult for foreign companies to conclude such a lease agreement from overseas without having a local agents. In this regards, it is essential to find some local partners to accompany with for the process of Japanese incorporation.

MK@ 08/11/2022