What’s a Godo Kaisha?
2022.04.13Update
A Godo Kaisha (a “GK”), which some people call a “Japanese LLC,” is a relatively new type of entity that came into existence in May 2006 with the abolition of the incorporation of new yugen kaisha type companies and is an alternative to setting up a joint-stock company (kabushiki kaisha, “KK”).
Structure
A GK is made up of members (“shain”), each of whom must invest at least one yen into the company. Members can be thought of as the “shareholders” of the company. Management and executive decisions of the GK are made by Managing Members (“gyomu shikko shain”) who are selected from amongst the regular members. These Managing Members would be something similar to a director in a stock company. One or more Representative Members (“daihyo shain”) are selected from amongst the managing members with the power to legally represent the company. For those familiar with a Japanese kabushiki kaisha (stock company), a representative member would be similar in function to a representative director. Therefore, while in a stock company there can be a separation between a shareholder and a director, in a GK, all “directors” must also be a “shareholder.”
Voting and Profit Sharing
“Shareholder” voting is handled quite differently in a GK and stock company. While in a stock company, shareholders have votes in proportion to how much they invested in the company, in a GK all members in principle are treated equally for voting (one member one vote) regardless of the amount invested. Similarly, by stating so in the Articles of Incorporation, profit distribution by a GK can be freely specified instead of being dependent on the proportion invested by each member.
This type of flexibility makes the GK a good choice for a small group of individuals who are closely involved in the operations of the business. However, for those seeking to attract outside capital investment, the one member one vote structure may not be desirable to investors seeking voting rights and profit distributions in relation to the amount which they have invested (voting and profit distribution rights proportionate to the number of shares held). For such cases a KK may be the better choice.
Setup and Other Matters
The GK is popular these days because of its lower setup costs and registration taxes. As with all Japanese entity types, a GK requires that you can provide an address in Japan to register as the registered company address. (Note that if you are not currently a resident of Japan and intend to use the GK to sponsor your own Business Manager visa, the company will need to be registered at an actual physical office property.)
Since there is no requirement to convene annual shareholder meetings and there is no concept of a term of office in a GK, from the on-going running perspective, there are no cyclical legal obligations for the GK which makes its administration easier.
For purposes of visa applications, there is no difference between a GK and a KK. For example, a person can incorporate a GK and use it to apply for a Business Manager visa (assuming that the requirements for the Business Manager visa are met).