A Japan KK (株式会社) reduces registered capital by passing a shareholder resolution (ordinary or special, depending on purpose), running a creditor protection procedure (債権者保護手続) that includes an Official Gazette (官報) notice and a minimum one-month objection window, then filing the change with the Legal Affairs Bureau (法務局). A GK (合同会社) follows the same creditor-protection step but decides internally among members rather than through a shareholders' meeting.
Why Would a Foreign-Owned KK or GK Want to Reduce Capital?#
Companies reduce capital to right-size the balance sheet after a line of business winds down, to absorb accumulated losses against paid-in capital, or to move into a lower band of the capital-based per capita inhabitant tax (均等割). Many foreign-owned entities over-capitalized at formation, often to clear the JPY 30,000,000 capital threshold commonly associated with the Business Manager visa, as discussed in our guide on yen appreciation and the Management Visa capital threshold. Once that threshold has served its purpose, or the business has restructured, the original capital figure can become a drag rather than an asset.
The per capita inhabitant tax (均等割) is partly capital-banded, meaning the flat annual tax a company owes depends in part on where its registered capital falls relative to statutory bands set by local tax authorities. Current band figures are not quoted here because they change and because the applicable band also depends on employee headcount and the specific municipality and prefecture; a Licensed Tax Accountant (税理士) should confirm current bands before a capital reduction is sized for tax effect. The mechanism, not the number, is what a buyer needs to understand before deciding whether a reduction is worth the procedural cost.
What Shareholder Approval Does a KK Need to Reduce Capital?#
A KK generally needs a special resolution (特別決議) of the general meeting of shareholders (株主総会), approved by at least two-thirds of the votes of shareholders present at a meeting where a majority of total voting rights is represented, unless the Articles of Incorporation (定款) set a higher threshold. There is one narrower exception: if the reduction only offsets an accumulated deficit, up to the amount of that deficit as recorded at a regular annual general meeting, an ordinary resolution is enough. Boards cannot approve a capital reduction on their own authority in either case; shareholder action is mandatory because capital reduction touches the capital figure creditors and the public registry both rely on.
A GK has no 株主総会 at all. Capital and membership-interest changes in a GK are decided among the members (社員) according to the Articles of Incorporation, which by default require unanimous member consent for matters that alter the company's capital structure unless the articles specify a different threshold. This is one of the structural differences covered in our KK vs GK comparison: a GK's governance is closer to a partnership contract than to a shareholder meeting, and that carries through to how a capital reduction gets approved internally even though the external creditor-protection step is the same for both entity types.
What Is the Creditor Protection Procedure for a Capital Reduction?#
The creditor protection procedure (債権者保護手続) requires the company to publish a notice in the Official Gazette (官報) stating the content of the capital reduction and informing creditors that they may raise an objection within a stated period of not less than one month. Alongside the Gazette notice, the company must also send an individual notice to each known creditor, unless it publishes through both the Official Gazette and an additional method, such as electronic public notice, in which case the individual notice to known creditors can be omitted. This dual requirement exists because a capital figure functions as a disclosed solvency marker that creditors may have relied on when extending credit, so the law gives them a defined window to object before the reduction becomes effective.
If a creditor objects within the window, the company generally must either repay that creditor, provide adequate security, or arrange equivalent protection, unless the reduction poses no risk of harming that creditor. Skipping or shortening this procedure is not an available shortcut regardless of how small the reduction is or how solvent the company appears; the statutory minimum period applies uniformly. Companies planning a reduction should build the one-month-plus objection window, plus the lead time to prepare and place the Gazette notice, into their internal timeline from the outset.
Can Capital Be Reduced to a Nominal Amount, or to Zero?#
Under current Companies Act (会社法) rules there is no statutory minimum capital figure for a KK or GK, so a reduction down to a nominal amount such as JPY 1 is structurally possible once the shareholder or member approval and creditor protection steps are complete. A reduction all the way to zero capital is a different, more specialized transaction: it typically appears as one step inside a restructuring where the old capital is extinguished and new capital is reissued in the same sequence, sometimes called a full capital reduction and reissue, rather than as a standalone way to simply shrink an over-capitalized but otherwise healthy company. For the right-sizing scenario most foreign-owned KK and GK entities face, such as walking capital back down from a visa-driven JPY 30,000,000 figure to a level that matches current operations, a partial reduction to a specific target figure is the relevant mechanism, not a reduction to zero.
Key points:
(a) A KK approves a capital reduction by special resolution of the general shareholders' meeting in most cases, or by ordinary resolution only where the reduction offsets an accumulated deficit up to the deficit amount at a regular annual meeting; a GK approves it through member consent under its Articles of Incorporation.
(b) The creditor protection procedure requires an Official Gazette notice plus individual notice to known creditors, with a minimum one-month objection period before the reduction takes legal effect, and individual notice can be dropped only if the company also publishes through an additional method such as electronic public notice.
(c) Once the objection period closes without an unresolved creditor objection, the company files the capital change with the Legal Affairs Bureau, typically within a short statutory window after the effective date, and registration and license tax applies to that filing.
How Does the Legal Affairs Bureau Filing Work After Approval?#
After the creditor protection period closes and any creditor objections have been resolved, the capital reduction becomes effective on the date set in the resolution, and the company files the change with the Legal Affairs Bureau (法務局) that holds its corporate registry. This filing updates the registered capital figure on the company's certificate of registered matters (登記事項証明書), which is the document banks, counterparties, and government agencies check when they want to confirm a company's current capital rather than the figure quoted in older materials. Registration and license tax (登録免許税) applies to this filing; the specific amount depends on the filing category and current tax schedule at the time of filing, so it should be confirmed with a Judicial Scrivener (司法書士) or Licensed Tax Accountant (税理士) rather than assumed from a prior transaction.
Companies that raised capital for a specific threshold, as covered in our capital increase guide, should treat a later reduction as a mirror-image procedure with the same creditor-facing rigor, not a lighter-weight correction. The registry does not distinguish between a reduction made for tax efficiency and one made to signal financial distress; the public filing looks the same either way, which is part of why some companies time a reduction to coincide with other filings or a fiscal year boundary. Structuring that gets handled case by case; the procedural steps above do not change based on the underlying business reason. For foreign-owned entities running this process for the first time, pairing it with the entity's broader company setup and governance support reduces the risk of a missed creditor notice or a resolution passed at the wrong threshold.
Frequently Asked Questions#
Does reducing capital in a KK require all shareholders to agree, or just a majority?
It requires a special resolution of the general shareholders' meeting, which under the Companies Act needs approval by at least two-thirds of the votes present at a meeting where a majority of total voting rights is represented, not unanimous consent. The narrow exception is a reduction that only offsets an accumulated deficit up to the deficit amount at a regular annual meeting, which can pass by ordinary resolution instead. Unanimous shareholder agreement is not the default legal bar for either case.
How long does a capital reduction take from resolution to registration?
Plan for the shareholder or member approval step, then a creditor objection period of not less than one month after the Official Gazette notice runs, then the Legal Affairs Bureau filing once the reduction is effective. Add lead time before the Gazette notice for drafting and placement, since the notice itself has to run before the one-month clock starts. The total timeline is typically measured in months rather than weeks once all steps are sequenced correctly.
Can a foreign-owned company reduce capital below the Business Manager visa threshold after the visa is already granted?
Capital can be reduced below the JPY 30,000,000 figure associated with the Business Manager visa once the visa has already been granted, but a reduction that takes current capital below the threshold the visa relied on can affect a subsequent renewal review. This is an immigration-side question separate from the Companies Act mechanics covered here, and it should be checked against current visa conditions before the reduction is finalized, not after.
Conclusion#
Reducing registered capital in a Japan KK or GK is a defined statutory procedure, not a simple accounting adjustment: it runs through shareholder or member approval, a creditor protection window measured in a minimum of one month, and a Legal Affairs Bureau filing that updates the public registry. The mechanics are the same whether the motive is tax efficiency, balance sheet cleanup, or correcting an over-capitalized formation figure, and skipping the creditor-facing steps is not an available shortcut at any capital size.
This article is informational only and does not constitute legal, tax, or regulatory advice. Consult a qualified advisor before acting on the content. Last updated: October 2026.