A kabushiki kaisha, or "K.K.," is the most typical form of business corporation in Japan, used by all large companies and most small companies that want to have some semblance of being serious. The alternative is to set up a mochibun kaisha.
Until 2006, every K.K. had to start out with at least ¥10 million (about $100,000 US) in paid-in capital, a rule imposed in 1991 for mysterious reasons. This money did not necessarily have to stay within the corporation, but it had to be deposited before the corporation is formed. Any major Japanese bank, such as SMBC or The Bank Formerly Known as Tokyo, would offer a special "capital custody account" to hold on to this money while the paperwork was being shuffled; the fee for this service would around ¥50,000 (about $500 US), deducted from the deposit itself.
This requirement was repealed in 2006 and now a K.K. can be started with just ¥1 in capital. However, because large amounts of paid-in capital became the norm in Japan, most K.K.'s still incorporate with a hefty amount so they don't have the stigma of being obvious newcomers.
The paperwork goes through the government's Legal Affairs Bureau. To start the process, you send the Bureau an application listing the name of the corporation, the amount of capital to be paid in, the names of the directors, and the name and address of at least one "representative director" who will serve as the K.K.'s agent.
Once those basic terms get the green light from the Bureau, you then have to fill out, notarize, and file the K.K.'s articles of incorporation. The most important, and trickiest, part of this phase is laying out the "purpose" of the company. In the United States, corporations are usually set up with a purpose along the lines of "anything which is legal under the laws of this state." Japanese law requires a more specific mission statement, and the statement has to be worded according to a long list of complicated rules regarding what language is OK and what language isn't. For this phase of the process, the businessperson or lawyer usually goes to a specialist, called a judicial scrivener. This information goes to the Legal Affairs Bureau, and the corporation gets registered.
And with that, the process is almost done! The last step is to obtain a corporate seal, which serves as the signature of the company. Once the seal is made, you register it with the Legal Affairs Bureau, and a registration certificate comes back proving that the seal is official. With the seal, you can then open a bank account in the K.K.'s name.
A small K.K. only requires one shareholder and one director. A larger K.K., or one in which shares are freely transferable, must have a three-person board of directors and a separate statutory auditor who oversees the board's activities. The largest public companies must either have a board of auditors or a three committee system similar to those required by American stock exchanges.
A kabushiki kaisha functions similarly to a Western corporation once it is set up. The biggest functional difference lies in that corporate seal. Only the representative director is allowed to use the seal. Since the seal is necessary to enter into a number of transactions—purchasing vehicles and property, for instance—this can make the representative's job oddly important, especially if, as is often the case, they are not a corporate officer. Some corporate presidents hold on to the seal themselves, and then call in the representative when they need to use it: this way, the representative cannot act independently of the company. A foreign company may keep its subsidiary's seal in the hands of a third party, such as a lawyer, who can keep the parent company informed when its Japanese seal is being used. (My former boss, a Tokyo gaiben, had a cabinet full of seals for companies he represented.)
When the representative seals a document on the K.K.'s behalf, they bring the K.K.'s registration certificate and the seal registration certificate with them. This way, the other party or parties can verify the authenticity of the transaction by comparing it to the certificate on file, and by checking the identity of the representative against the data in the K.K.'s registration.
Many Japanese companies have their annual shareholder meetings on the same days and at the same times. This coordination is because of the strength of the yakuza, specifically a breed of gangsters called sokaiya ("meeting men") who try to extort money from corporations in return for not disturbing their meetings.
- Ramseyer and Nakazato, Japanese Law (Chicago 1999)
- Personal experience