Procedures for Incorporation of a Stock Company

Incorporation of a joint stock company

Determination of basic matters

There are two ways to incorporate a stock company: incorporation by promoter, in which only the promoter invests capital and becomes a shareholder, and incorporation by subscription, in which stock underwriters other than the promoter are recruited. As described below, the procedure for incorporation by subscription is more complicated, so incorporation by promoter is more common for small and medium-sized companies.

When incorporating a joint stock company, a promoter is first required. Any one person can be the promoter, but he or she must subscribe to at least one share. The promoters hold a promoters’ meeting to decide whether to incorporate by promoter or by subscription, the company’s trade name, head office address, business purpose, whether shares are transferable, the company’s organizational design, the amount of capital, the promoters’ contribution, contribution in kind, whether share certificates will be issued, the price per share, total shares authorized, directors, public notice method, business year, and other matters related to shares. The amount of capital, amount of capital contribution by the promoters, capital contribution in kind, whether or not share certificates will be issued, price per share, total number of shares authorized to be issued, directors, method of public notice, business year, etc.

Drafting the articles of incorporation

The promoter must prepare articles of incorporation. There are rules regarding the matters to be included in the articles of incorporation, which are classified as absolute, relative, and optional.

Absolute matters

These are matters that must be included in the articles of incorporation. If even one of these is missing, the articles of incorporation will not be effective. Specifically, the articles of incorporation must include the trade name, purpose, address of the head office, the amount of property to be contributed upon incorporation or the minimum amount, name (or name in the case of a company) and address of the promoter, and the total number of shares authorized to be issued.

Relative matters

Relative matters are those matters which, although the articles of incorporation are valid even if there is no provision for these matters in the articles of incorporation, must be included in the articles of incorporation to be valid if decided. These include: contributions in kind, subscription of assets, restrictions on transfer of shares, shortening of the period for convening general meetings of shareholders, term of office of directors, organization of the company, and method of public notice.

Optional matters

These are matters that are not included in the Articles of Incorporation and may be stipulated in rules established by the General Meeting of Shareholders or the Board of Directors, but are included to clarify the contents of the Articles of Incorporation. These include matters related to the method of operation of the company, such as the time of convening an ordinary general meeting of shareholders, who has the right to convene the meeting, quorum requirements, etc., the fiscal year, and the number of directors.

Certifying the articles of incorporation

The articles of incorporation prepared by the promoters must be certified by a notary public. The certification is performed at the notary public office located at the Legal Affairs Bureau that has jurisdiction over the location of the head office of the incorporated company. A draft of the articles of incorporation can be sent to the notary public in advance to have the content and format checked by a notary public. At the notary public’s office, bring three copies of the articles of incorporation with the seals of all promoters, certificates of registered seals of all promoters, personal seals, and a letter of attorney if you wish to authorize an agent to act on your behalf. If the promoter is a corporation, a certified copy of the corporate register of the corporation, the corporate seal of the corporation, and a certificate of seal impression are also required. The cost for certification of articles of incorporation is approximately 52,000 yen. In addition, 40,000 yen is required for the cost of stamps to be affixed to the articles of incorporation in the case of paper articles of incorporation, but not in the case of electronic articles of incorporation.

Preparing the seal

A corporate seal is necessary for the preparation of the incorporation documents. For registration, a seal that fits within a square of not less than 1 cm and not more than 3 cm is registered. Although only the company’s personal seal is registered at the time of registration, it is also useful to have a bank seal or company seal in addition to the registered seal.

Payment of capital

After the articles of incorporation are authenticated, all founders pay or transfer the capital into their personal accounts. If there is more than one promoter, the money should be transferred to the account of one of the promoters. It is not sufficient that the account has a balance equivalent to the amount of the investment; there must be a new deposit of the amount of the investment. When applying for registration, a document certifying that payment has been made must be prepared and submitted along with a copy of the bankbook (cover page, next page after opening the cover page, and the page where the deposit is recorded).

In the case of incorporation by subscription

The process is the same as in the case of incorporation by promoter until the articles of incorporation are prepared by the promoter, the articles of incorporation are certified by a notary public, the promoter subscribes for shares, and the promoter makes his/her capital contribution. The promoter subscribes for at least one share and makes a capital contribution. After the terms of the offering are agreed upon by all the promoters, the promoter conducts an offering, the persons who wish to subscribe for shares respond to the offer, and the promoter who accepts the offer allocates shares to the subscribers. The share underwriter pays the full amount to be paid in. Once the full payment has been made, the promoter must also prepare additional necessary documents, such as a certificate of custody of the paid-in amount at a financial institution, a notice of shares to be offered at the time of incorporation, and a stock subscription certificate. In the case of a subscription incorporation, a founding meeting is held after the completion of payment for the shares offered at the time of incorporation and the election of founding directors is held. The directors at the time of incorporation will appoint the representative director at the time of incorporation, and the representative director at the time of incorporation will make resolutions on matters related to the incorporation of the company.

Application for registration

After the Articles of Incorporation have been authenticated and the capital has been paid in, an application for registration is filed with the competent Legal Affairs Bureau. The date of application for registration (the date of receipt by the Legal Affairs Bureau) is the date of incorporation of the company. Required documents for application for registration include an application form for registration, certified articles of incorporation, letters of acceptance of appointment of directors, certificates of seal registration of directors, documents certifying payment of capital, and a seal registration certificate. If the articles of incorporation do not state the address of the head office down to the lot number, or if the articles of incorporation do not specify the number of shares to be allotted to the promoter, the amount to be paid in, or the amount of capital or capital reserve, a promoter’s decision letter is required. If there is a contribution-in-kind, a letter of transfer of assets contributed in kind by the promoter making the contribution-in-kind, an investigation report by the directors at the time of incorporation, and a certificate regarding the recording of the amount of stated capital must also be submitted. The registration tax is 7/1000 of the amount of capital, or 150,000 yen per case if this amount is less than 150,000 yen. The registration tax can be paid by either purchasing revenue stamps and affixing them to the stamp affixed to the application form for registration, or by transferring the tax to an account designated by the Legal Affairs Bureau and affixing the receipt from the bank to the stamp. The application for registration is filed within two weeks from the date the payment of the capital contribution is completed. The registration process takes from one to two weeks to complete.

Establishment of a limited liability company

When establishing a limited liability company (Godo Kaisha), it is necessary to determine the basic matters of the company and prepare articles of incorporation in the same way as for a joint stock company. The absolute matters to be stated in the articles of incorporation of a limited liability company include the trade name, business purpose, location of the head office, names and addresses of the limited liability company’s members (persons who invest in the company), a statement indicating that the members are limited liability partners, the purpose of the partners’ investment, and the amount or valuation basis of the investment. Relative matters include the executive and representative partners, the method of refund of investments, reasons for dissolution, and the duration of the company, while optional matters include the method of public notice, business year, and compensation for directors. Unlike a joint stock company, a limited liability company does not need to have its articles of incorporation certified by a notary public.

Payment of capital

After the articles of incorporation are prepared, the capital is paid in, and a copy of the bankbook and a certificate of payment are prepared. Unlike a joint stock company, a limited liability company can make payment directly to the limited liability company without going through a financial institution.

Application for registration

After payment of the capital is completed, an application for registration is filed with the Legal Affairs Bureau. Required documents include an application form for registration, articles of incorporation, a certificate of seal registration of the representative member, a document certifying the payment, and a seal registration certificate. If the Articles of Incorporation do not specify the detailed location of the head office, the representative partners at the time of incorporation, and the amount of capital at the time of incorporation, a written determination of the representative partners, the location of the head office, and the amount of capital is required. The registration tax is 7/1,000 of the amount of capital, but if this amount is less than ¥60,000, the minimum registration tax is ¥60,000.

Comparison of costs related to incorporation

The following is a summary of the costs required to establish a joint stock company or limited liability company.

		Joint Stock Company	Limited Liability Company
Articles of Incorporation (notary public’s office)	Notary public’s fee	50,000 yen	Not required
	a certified copy of the articles of incorporation	1,000 yen *Normally, two copies are required, one for application for registration and the other for safekeeping.	Not required
	Stamp tax	40,000 yen *Not required in case of electronic authentication	40,000 yen *Not required in case of electronic authentication
Legal Affairs Bureau	Registration and license tax	7/1000 of capital Minimum 150,000 yen	7/1000ths of capital Minimum 60,000 yen
	Cost of a certified copy of registration	600 yen per copy	600 yen per copy
	Certificate of seal impression	450 yen per copy	450 yen per copy

Legal fees

Kuribayashi Sogo Law Office has handled the incorporation of many types of companies, including joint stock companies and limited liability companies. We also handle the establishment of Japanese subsidiaries of foreign corporations, the establishment of branch offices, and the opening of sales offices. The basic fee for incorporation of a company initiated by a person domiciled in Japan is 300,000 yen. In cases where a foreign corporation is the promoter of the incorporation of a company (incorporation of a subsidiary of a foreign company), the basic fee is 500,000 yen (excluding translation of the articles of incorporation of the parent company).

Legal fees for incorporation of a company (excluding consumption tax)

	Joint Stock Company	Limited Liability Company
In the case of a Japanese incorporator	300,000 yen	300,000 yen
Subsidiary of a foreign corporation	400,000 yen	300,000 yen

Establishment of branch office, opening of business office

	Establishment of branch office	Notification of establishment of business office
In the case of a Japanese corporation	200,000 yen	200,000 yen
Branch office or business office of a foreign corporation	200,000 yen	200,000 yen