How do you close down your business in Japan?
If you decide to withdraw your business in Japan you have two options for closure, either dissolution or selling your business. Different rules will be applied depending on the types of business entity.
As a legally independent entity, K.K. and G.K. are required to take strict procedures to protect the creditors, who will no longer be able to chase payments. On the other hand, procedures for closing a branch office is relatively simple because the creditors are able to claim the head office of a foreign company after the branch closure.
Dissolution will be resolved by a special resolution at the general meeting of shareholders. The company will appoint a liquidator who will arrange a fair distribution of company’s assets for the benefit of its creditors. Then, the company will register dissolution and appointment of a liquidator with the Legal Affairs Bureau. The liquidator prepares the assets list and the balance sheet at the point of dissolution, and makes an announcement on the Official Gazette that the company starts the insolvency process. Each known creditor must be informed individually. At least two months are given for the creditors to declare their outstanding claims. After distributing to the creditors, the liquidator distributes the residual assets to the shareholders, and register the completion of liquidation with the Legal Affairs Bureau. G.K. will take the same steps for the liquidation process.
In the case of a branch office, the foreign company will close the branch office and the representatives of Japan will resign. If there remained outstanding claims against the Japan branch, the foreign company will continue to be responsible. The foreign company must make immediate payments, if the creditors demand so, within one month after the announcement of the resignation of Japan representatives on the Official Gazette.
② Sell your business
In the case of K.K., you just sell out the shares.
You can sell the equity of G.K. as well. However, some buyers such as investment funds who do not directly operate the business may want you to transform G.K. to K.K. beforehand. Transformation requires you to undertake the creditor protection procedures, including announcement on the Official Gazette and direct notification to creditors.
If you sell your branch office, it would be an asset purchase transaction. Unlike selling shares, you need to sell each asset and transfer each contract including employment agreement.
We provide legal services for the process of Dissolution or selling your business.
Please feel free to consult us if you need the process of Dissolution or selling your business.