Business law
Business organizations
Basic forms:
Sole proprietorship
Corporation
Partnership (General · Limited · LLP)
USA:
Business trust · LLC · LLLP Delaware corporation Nevada corporation
UK/Commonwealth:
Limited company (By shares · By guarantee) (Public · Proprietary)
Civil law countries:
AB · AG · ANS · A/S · GmbH
K.K. · N.V. · OY · S.A.
European Company Statute
Doctrines
Corporate governance
Limited liability · Ultra vires
Business judgment rule
De facto corporation and corporation by estoppel
Piercing the corporate veil
Related areas of law
Contract · Civil procedure

Business corporation (株式会社, kabushiki kaisha^?) is a type of corporation (会社, kaisha^?) defined under Japanese law. Image File history File links Scale_of_justice. ... Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. ... Business organizations or Business Associations is an area of law that covers the broad array of rules governing the formation and operation of different kinds of entities by which individuals can organize to do business. ... A sole proprietorship is a business which legally has no separate existence from its owner. ... A corporation is a legal person which, while being composed of natural persons, exists completely separately from them. ... In the common law, a partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested. ... This article needs to be wikified. ... A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). ... A limited liability partnership (LLP) is a form of business organization combining elements of partnerships and corporations. ... A Massachusetts business trust or MBT is a legal trust set up for the purposes of business in the state of Massachusetts. ... A limited liability company (denoted by L.L.C. or LLC in the US) is a legal form of business company in the United States offering limited liability to its owners. ... This article or section does not cite its references or sources. ... A Delaware corporation is a corporation chartered in the state of Delaware in the United States. ... It has been suggested that this article or section be merged into Nevada. ... A limited company in the United Kingdom is a company whose liability is limited by English law or Scots law. ... In English Law and in many Commonwealth countries, a limited company by shares (limited or Ltd. ... A Company Limited by Guarantee (CLG) is a private company that does not have shareholders or share capital. ... The initials plc after a UK or Irish company name indicate that it is a public limited company, a type of limited company whose shares may be offered for sale to the pubic. ... A Proprietary limited company or abbreviated as under Australian law is a business structure that has at least one shareholder with a limited number of shares. ... Civil law is the predominant system of law in the world, with its origins in Roman law, and sets out a comprehensive system of rules, usually codified, that are applied and interpreted by judges. ... Aktiebolag is the Swedish term for a corporation, i. ... The German term Aktiengesellschaft (IPA /aktsiÉ™ngÉ™zεlʃaft/) (abbreviated AG) means a corporation which is limited by shares, , owned by shareholders. ... An ansvarlig selskap is a Norwegian personal responsibility company model, mainly used in small-to-medium businesses, which translates directly into Responsible Company. This reflects that the participants - or owners - are personally responsible for any outstanding debts the company would aquire. ... An aksjeselskap is the Norwegian term for a stock-based corporation. ... Gesellschaft mit beschränkter Haftung (GmbH or GesmbH) is a type of legal entity created in Germany in 1892. ... The term Naamloze Vennootschap (usually abbreviated NV) is the Dutch terminology for a public limited liability company. ... Osakeyhtiö, directly translated as share corporation, is the Finnish equivalent of Limited company (Ltd or LLC) or Gesellschaft mit beschränkter Haftung (GmbH). ... S.A. is the abbreviation of Société Anonyme in French, Spółka Akcyjna in Polish, Sociedad Anónima in Spanish, Sociedade Anónima in Portuguese, or Naamloze Venootschap (N.V.) in Dutch, generally designating corporations in various countries. ... The Council Regulation on the Statute for a European Company of the European Union (adopted October 8, 2001; OJ L 294, 10 November 2001, pp. ... Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. ... Limited liability (LL) is liability that is limited to a partner or investors investment. ... Ultra vires is a Latin phrase that literally means beyond the power. ... The business judgment rule is a case law-derived concept in Corporations law whereby a court will refuse to review the actions of a corporations board of directors in managing the corporation unless there is some allegation of conduct that (1) violates (a) the directors duty of care, (b... De facto corporation and corporation by estoppel are both terms that are used by courts to describe circumstances in which is a business organization that has failed to become a de jure corporation (a corporation by law) will nonetheless be treated as a corporation, thereby shielding shareholders from liability. ... The corporate law concept piercing (Lifting) the corporate veil describes a legal decision where an officer, director, or shareholder of a corporation is held liable for the debts of the corporation despite the general principle that those persons are immune from suits in contract or tort that otherwise would only... A contract is a promise or an agreement made of a set of promises. ... Civil procedure is the body of law that sets out the process that courts will follow when hearing cases of a civil nature (a civil action). These rules govern how a lawsuit or case may be commenced, what kind of service of process is required, the types of pleadings or... Japanese law was historically heavily influenced by Chinese law and developed independently during the Edo period through texts such as Kujikata Osadamegaki, but has been largely based on the civil law of Germany since the late 19th century. ...

Usage in language

Both kabushiki kaisha and the rendaku form kabushiki gaisha are used. The "K" spelling is much more common in the names of companies and in English-language legal literature, whereas the "G" pronunciation is more common in Japanese. Rendaku (連濁, lit. ...

In Japanese, "kabushiki gaisha" can be used as a prefix (e.g. 株式会社電通 Kabushiki Gaisha Dentsū) or as a suffix (e.g. トヨタ自動車株式会社 Toyota Jidōsha Kabushiki Gaisha). It is often abbreviated as "(株)," its first character. Dentsu Building in Shiodome, Tokyo Dentsu Inc. ... Toyota Motor Corporation - Wikipedia, the free encyclopedia /**/ @import /skins-1. ...

Many Japanese companies translate the phrase "kabushiki kaisha" as "Co., Ltd." while others use the more Americanized translations Corporation or Incorporated. English texts often refer to kabushiki kaisha as "joint stock companies"; while this is close to a literal translation of the term, the two are not the same, and as a result the Japanese government now endorses "business corporation" as an official translation.^[1] A joint stock company is a type of business partnership in which the capital is formed by the individual contributions of a group of shareholders. ...

History

The first kabushiki kaisha was the First National Bank of Japan, incorporated in 1873. 1873 (MDCCCLXXIII) was a common year starting on Wednesday (see link for calendar). ...

Rules regarding kabushiki kaisha were set out in the Commercial Code of Japan. During the American occupation following World War II, the occupation authorities introduced revisions to the Commercial Code based on the Illinois Business Corporation Act of 1933, giving kabushiki kaisha many traits of American corporations.^[2] At the end of the Second World War, Japan was occupied by the Allied Powers. ... Combatants Major Allied powers: United Kingdom Soviet Union United States Republic of China and others Major Axis powers: Nazi Germany Italy Japan and others Commanders Winston Churchill Joseph Stalin Franklin Roosevelt Harry Truman Chiang Kai-Shek Adolf Hitler Benito Mussolini Hideki Tojo Casualties Military dead: 17,000,000 Civilian dead...

Over time, Japanese and U.S. corporate law diverged, and K.K. assumed many characteristics not found in U.S. corporations. For instance, a K.K. could not buy back its own stock (a restriction which still stands), issue stock for a price of less than ¥50,000 per share (effective 1982), or operate with paid-in capital of less than ¥10 million (effective 1991).^[3] It has been suggested that shareholder be merged into this article or section. ...

On June 29, 2005, the Diet of Japan passed a new Corporation Code (会社法, kaisha-hō^?), which took effect on May 1, 2006.^[4] The new law greatly affected the formation and function of K.K.'s and other Japanese business organizations, bringing them closer to their contemporary counterparts in the U.S. June 29 is the 180th day of the year (181st in leap years) in the Gregorian Calendar, with 185 days remaining. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ... This article is about the Japanese legislature. ... May 1 is the 121st day of the year in the Gregorian calendar (122nd in leap years). ... 2006 (MMVI) is a common year starting on Sunday of the Gregorian calendar. ...

Formation

A kabushiki kaisha may be started with capital as low as ¥1, making the total cost of a K.K. incorporation approximately ¥240,000 (about US$2,000) in taxes and notarization fees. Under the old Commercial Code, a K.K. required starting capital of ¥10 million (about US$87,000); a lower capital requirement was later instituted, but corporations with under ¥3 million in assets were barred from issuing dividends, and companies were required to increase their capital to ¥10 million within five years of formation. ^[5] Dividends are payments made by a company to its shareholders. ...

The main steps in incorporation are:

1. Preparation and notarization of articles of incorporation
2. Receipt of capital, either directly or through an offering

The incorporation of a K.K. is carried out by one or more incorporators (発起人, hokkinin^?, sometimes referred to as "promoters"). Although seven incorporators were required as recently as the 1980s, a K.K. now only needs one incorporator, which may be an individual or a corporation. If there are multiple incorporators they must sign a partnership agreement before incorporating the company. The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the Charter) are the primary rules governing the management of a corporation, and are filed with a state or other regulatory agency. ... In politics, a capital (also called capital city or political capital — although the latter phrase has a second meaning based on an alternative sense of capital) is the principal city or town associated with a countrys government. ... In the common law, a partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested. ...

Articles of incorporation

The articles of incorporation of a K.K. must include, at a minimum:

1. The name of the company
2. The purposes of the company
3. The location of its head office
4. The value or minimum amount of assets received in exchange for the initial issuance of shares
5. The name and address of the incorporator(s)

The purpose statment requires some specialized knowledge, as Japan follows a strict ultra vires doctrine and does not allow a K.K. to be formed "for any purpose," as is legal in most of the English-speaking world. Judicial or administrative scriveners are often hired to draft the purposes of a new company. Ultra vires is a Latin phrase that literally means beyond the power. ... Judicial scriveners ), also known as shiho-shoshi lawyers, form a legal profession in Japan. ... Administrative scriveners ), also known as gyosei-shoshi lawyers, form a legal profession in Japan. ...

Additionally, the articles of incorporation must contain the following if applicable:

1. Any non-cash assets contributed as capital to the company, the name of the contributor and the number of shares issued for such assets
2. Any assets promised to be purchased after the incorporation of the company and the name of the provider
3. Any compensation to be paid to the incorporator(s)
4. Non-routine incorporation expenses which will be borne by the company

Other matters may also be included, such as limits on the number of directors and auditors. The Corporation Code allows a K.K. to be formed as a close corporation (非公開株式会社, hikōkai kabushiki kaisha^?), in which case the board of directors must approve any transfer of shares between shareholders; this designation must be made in the articles of incorporation.

The articles must be sealed by the incorporator(s) and notarized by a notary public, then filed with the Legal Affairs Bureau in the jurisdiction where the company will have its head office. An Embossed Notary Seal. ...

Receipt of capital

In a direct incorporation, each incorporator receives a specified amount of stock as designated in the articles of incorporation. Each incorporator must then promptly pay their share of the starting capital of the company, and if no directors have been designated in the articles of incorporation, meet to determine the initial directors and other officers.

The other method is an "incorporation by offering," in which each incorporator becomes the underwriter of a specified number of shares (at least one each), and the other shares are offered to other investors. As in a direct incorporation, the incorporators must then hold an organizational meeting to appoint the initial directors and other officers. Any person wishing to receive shares must provide an application to the incorporator, and then make payment for their shares by a date specified by the incorporator(s). In banking, underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower, such as employment history, salary, and financial statements; publicly available information, such as the borrowers credit history, which is detailed in a credit report; and the lender...

Capital must be received in a commercial bank account designated by the incorporator(s), and the bank must provide certification that payment has been made. Once the capital has been received and certified, the incorporation may be registered at the Legal Affairs Bureau. A commercial bank is a type of financial intermediary and a type of bank. ...

Structure

Board of directors

Under present law, a K.K. must have a board of directors (取締役会, torishimariyaku kai^?) consisting of at least three individuals. Directors have a statutory term of office of two years, and auditors have a term of four years. Close companies can exist with only one director, with no statutory term of office.

At least one director is designated as a representative director (代表取締役, daihyō torishimariyaku^?), holds the corporate seal and is empowered to represent the company in transactions. The representative director must "report" to the board of directors every three months; the exact meaning of this statutory provision is unclear, but some legal scholars interpret it to mean that the board must meet every three months. At least one director and one representative director must be a resident of Japan.^[4]

Directors are mandatories (agents) of the shareholders, and the representative director is a mandatory of the board. Any action outside of these mandates is considered a breach of mandatory duty.^[6] Mandate can mean: An obligation handed down by an inter-governmental body; see mandate (international law) The power granted by an electorate; see mandate (politics) A League of Nations mandate To some Christians, an order from God; see mandate (theology) The decision of an appeals court; see mandate (law) The... Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, authorizes the other, the agent, to represent her or his legal interests and to perform legal acts that sometimes bind the principal. ...

Auditing and reporting

Every K.K. with multiple directors must have at least one statutory auditor (監査役, kansayaku^?). Statutory auditors report to the shareholders, and are empowered to demand financial and operational reports from the directors.

K.K.s with capital of over ¥500m, liabilities of over ¥2bn and/or publicly-traded securities are required to have three statutory auditors, and must also have an annual audit performed by an outside CPA. Public K.K.s must also file securities law reports with the Ministry of Finance. Certified Public Accountants (CPAs) are accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA. In Canada, public accountants are known as Chartered Accountants or Certified General Accountants. ...

Under the new Company Law, public and other non-close K.K.s may either have a statutory auditor, or a nominating committee (指名委員会, shimei iinkai^?), auditing committee (監査委員会, kansa iinkai^?) and compensation committee (報酬委員会, hōshū iinkai^?) structure similar to that of American public corporations.

Close K.K.s may also have a single person serving as director and statutory auditor, regardless of capital or liabilities.

A statutory auditor may be any person who is not an employee or director of the company. In practice, the position is often filled by a very senior employee close to retirement, or by an outside attorney or accountant.

Officers

Japanese law does not designate any corporate officer positions. Most Japanese-owned kabushiki kaisha do not have "officers" per se, but are directly managed by the directors, one of whom generally has the title of president (社長, shachõ^?). The Japanese equivalent of a corporate vice president is a department chief (部長, buchõ^?). Traditionally, under the lifetime employment system, directors and department chiefs begin their careers as line employees of the company and work their way up the management hierarchy over time. This is not the case in most foreign-owned companies in Japan, and some native companies have also abandoned this system in recent years in favour of encouraging more lateral movement in management. A vice president is an officer in government or business who is next in rank below a president. ... Lifetime employment or Permanent employment (jap. ...

Other legal issues

Taxation

Kabushiki kaisha are subject to double taxation of profits and dividends, as are corporations in most countries. In contrast to many other countries, however, Japan also levies double taxes on close corporations (yugen kaisha and godo kaisha). This makes taxation a minor issue when deciding how to structure a business in Japan. As all publicly-traded companies follow the K.K. structure, smaller businesses often choose to incorporate as a K.K. simply to appear more prestigious. Double taxation is a situation in which two or more taxes must be paid for the same asset or financial transaction. ... A yūgen kaisha (Jp. ... A gōdō kaisha (合同会社), abbreviated GDK, is a type of business organization in Japan modeled after the American limited liability company (LLC). ...

In addition to income taxes, K.K.s must also pay registration taxes to the national government, and may be subject to local taxes.

Derivative litigation

Generally, the power to bring actions against the directors on the corporation's behalf is granted to the statutory auditor.

Historically, derivative suits by shareholders were rare in Japan. Shareholders have been permitted to sue on the corporation's behalf since the postwar Americanization of the Commercial Code; however, this power was severely limited by the nature of court costs in Japan. Because the cost to file a civil action is proportional to the amount of damages being claimed, shareholders rarely had motivation to sue on the company's behalf. A Shareholders derivative suit is an action brought by a shareholder not on its own behalf, but on behalf of the corporation, on grounds that the corporation is being cheated by corrupt actions from within. ...

In 1993, the Commercial Code was amended to reduce the filing fee for all shareholder derivative suits to ¥8,200 per claim. This led to a rise in the number of derivative suits heard by Japanese courts, from 31 pending cases in 1992 to 286 in 1999, and to a number of very high-profile shareholder actions, such as those against Daiwa Bank and Nomura Securities ^[7] 1993 (MCMXCIII) was a common year starting on Friday of the Gregorian calendar and marked the Beginning of the International Decade to Combat Racism and Racial Discrimination (1993-2003). ... Resona Holdings, Inc. ... Nomura Securities Co. ...

See also

• Yugen kaisha
• Godo kaisha
• Gomei kaisha
• Goshi kaisha

A yūgen kaisha (Jp. ... A gōdō kaisha (合同会社), abbreviated GDK, is a type of business organization in Japan modeled after the American limited liability company (LLC). ...

Footnotes

1. ^ "法令用語「日英対訳辞書」まとまる 政府検討委," Asahi Shimbun, March 18, 2006. (summary)
2. ^ Ramseyer, Mark, and Minoru Nakazato, Japanese Law: An Economic Approach (Chicago: University of Chicago Press, 1999), p. 111.
3. ^ Ramseyer, op. cit., p. 123.
4. ^ ^a b Japan External Trade Organization, "Investing in Japan: Incorporating Your Business."
5. ^ Terrie Lloyd, "One Yen Companies - Part Two," Work in Japan.com.
6. ^ Yamazaki Bakery K.K. v. Iijima, 1015 Hanrei Jiho 27 (Tokyo Dist. Ct., March 26, 1981).
7. ^ West, Mark D. "Why Shareholders Sue: The Evidence from Japan," Journal of Legal Studies 30:351 (2001).