Godo Kaisha is a company structure that was established upon the passing of the new Company Law in 2006. The use of GKs is increasing in Japan, and here we give brief outline of some of the key points about them.
1. Cannot become a listed company
According to the Securities Listing Regulations, rule 205 aims at “domestic stocks, etc.” which, according to rule 2(79) means “a domestic stock or a preferred equity investment security”. In this sense, a GK cannot be vehicle for listed company.
So, I am not willing to explain such system in this blog.
However, as the number of GKs is has been increasing recently, and there are a number of famous foreign companies that have established their subsidiaries in Japan as GKs, I decided to write a little about it.
The number of registered GKs over the last few years has been as follows:
19,808(2014) 14,581(2013) 10,889(2012) 9,130(2011)
Some examples include Apple Japan, Cisco system, P&G Maxfactor etc.
On the other hand, the number of registered KKs over that time has been:
86,639(2014) 81,889(2013) 80,862(2012) 80,244(2011)
2. Why are GKs popular?
– The cost of establishment for GKs is cheaper if the article of incorporation is simple.
– The internal management is flexible
Please note that in Japan we have no pass through system in GK unlike with respect to LLCs in the USA
3. Similarities between GKs and KKs
Both are composed of limited liability associates (ss104, 580), are legal entities (s3), have the duty to create accounting documents and to keep them (s435, s617), must allow the right of review and copy to creditors (ss442, 625) and have similar procedures for creditor protection (ss449, 627).
Furthermore, if all of the shares in a KK are subject to restriction of transfer of shares, regardless of the value of contribution, the Articles of Incorporation may decide various treatment against each shareholder (s109). This is similar to GKs (s621).
4. 5 major differences
– GKs do not need to have notarization by a notary public.
– Registration tax is 60,000, duty stamp 40,000, totaling 100,000 yen for GKs. In comparison, for KKs, registration tax is 150,000, duty stamp is 40,000 and notarization will cost at least 50,000, totaling at least 240,000 yen.
2) Directors and officers etc
GKs do not to have statutory auditors and accounting auditors while a KK needs to have shareholder meetings and have directors (s326) in addition to a statutory auditor or accounting auditor in certain cases (e.g. s328).
The managing associate in a GK is not limited to a physical person but may be a legal person (s598).
Associates may execute their activities by agreement among the associates (s590), and may also give a mandate to executive associate (s591).
KKs shall publish accounting reports (s440), while GKs do not need to do so.
5) Share transfer
As GKs have a strong relationship amongst associates, in principal, the transfer of shares requires consent from all associates (s585). For GKs, in certain cases associates may remove shares from the company (s606).
FINALLY, Please note that for a GK, in principal, modifications to the Articles of Incorporation require consent from all associates (s637), so please be careful to find appropriate associates.