One Yen Companies - Part One

One Yen Companies - Part One

Although this column is mainly about getting a job, many people are now opting to create their own jobs by being self-employed. Of course, starting your own company is a daunting task in any country, but in Japan there is always the added hurdle of having to raise either JPY3m or JPY10m in capital to incorporate. Ten million yen (US$80K approx.) is a lot of cash to put up for many of us.

Recently, however, the rules were changed, and in February of 2003 it became possible to start a company with just one yen of capital. Pundits predicted that there would be a flood of one yen companies, but actually the take-up on them has been rather slow. Heretofore, I had believed that the reason for the paucity of one yen companies was because they are hard to incorporate - requiring lots of information to be submitted to the relevant authorities. Then, I heard from Andy Hunne (andy@sentinel-it.net), a local entrepreneur, who told me otherwise. What follows is a short piece written by Andy to me, about his personal experience in setting up a one yen company...

Starting a company in Japan may seem overwhelming as a non-Japanese, not least of all due to the regulations regarding startup capital. A Kabushiki Kaisha (KK) requires a minimum capital investment of 10 million yen, and a Yugen Kaisha (YK) 3 million yen. For those having trouble raising the initial capital, there is a new alternative - the "Kakunin Kaisha".

In an effort to encourage innovation, entrepreneurship and combat rising unemployment, new legislation was enacted by the Diet in February 2003 making two new entities available. These are the Kakunin Kabushiki Kaisha (KKK) and the Kakunin Yugen Kaisha (KYK). Kakunin translates as "confirmation" or "affirmation", and in this context refers to the status of the founder of the company. You must submit a Kakunin-sho (letter of confirmation) to the Ministry of Finance confirming you are not currently doing business, are not a director of a company, nor a "Kojin-jigyo" (self-employed), in order to establish a Kakunin Kaisha.

The regulations state that the founder of a Kakunin Kaisha must not currently be engaged in business, and has not established a company for at least two months prior to the founding of the Kakunin Kaisha. The new structure is aimed at getting students, housewives, salaried employees and the unemployed into business, not as a way for existing business people to start new companies on the cheap. The reasoning is that if you are already in business, then you don't need any help in starting a new company.

This is not to say that you cannot take advantage of the new structures if you already have a company. As long as the founding member (perhaps your husband or wife, for example) is not engaged in business, they could establish a KKK or a KYK and appoint you as the CEO. This is definitely a gray area and clearly is not the intent of the new law, but the majority of Judicial Scriveners and lawyers offering assistance in setting up KKKs and KYKs are advertising this loophole.

Unlike a traditional KK or YK, when you establish a Kakuin Kaisha, you must notify the Ministry of Finance immediately after you commence business, and report the company's financial details within 3 months of the end of each financial year. Documents submitted to the Ministry of Finance become public record, so anybody can examine the financial details of the company. This regulation is to ensure that creditors can easily check on the financial health of the company and highlights probably the biggest disadvantage of the having a Kakuin Kaisha - a perceived lack of trust. You must continue to report each year to the Ministry of Finance until you can increase your capital to that of a KK or YK.

...Continued next week.

As always, my contact details are simply:

terrie.lloyd@daijob.com

Looking forward to getting some enquiries...