The Document That Controls Everything
The 定款 (teikan) is the foundational constitutional document of a Japanese company. Every KK (kabushiki kaisha (株式会社)) and GK (godo kaisha (合同会社)) is governed by it. It sets the company name, business purpose, capital structure, decision-making rules, and share transfer restrictions.
A poorly drafted 定款 creates problems that persist for the company's entire life. Banks refuse transactions because the business purpose clause does not cover the company's activities. Customs authorities challenge import declarations when the 目的 (mokuteki) clause lacks trade-related language. Share transfers stall because the transfer restriction clause was written for a domestic context, not a foreign-owned structure.
This guide covers what the 定款 must contain, how to draft the business purpose clause correctly, and what to get right at incorporation rather than fixing later.
Legal Basis: What the Companies Act Requires
The mandatory contents of a KK 定款 are set out in 会社法第27条 (Companies Act (会社法), Article 27):
(a) 商号 (shogo): The company name, including the designation 株式会社. The name must be expressible in kanji, hiragana, katakana, or Roman letters. Arabic numerals and certain symbols (ampersand, hyphen, period, middle dot, apostrophe, comma) may be included. The name must contain 株式会社 either as a prefix or suffix.
(b) 目的 (mokuteki): The business purpose. Must be specific enough to identify what the company does but broad enough to cover its anticipated activities. Japanese law requires business purpose clauses to be stated as activities, not industries or market positions.
(c) honten no shozaichi (本店の所在地): The location of the head office. For the Articles, it is sufficient to state the municipality (市区町村); the street address is separately registered.
(d) hakko kano kabushiki sosu (発行可能株式総数): The total authorized shares. This is the maximum number of shares the company is authorized to issue. It must be set at incorporation (or within three months for a KK that undergoes a simplified post-registration amendment procedure). At least one share must be issued at incorporation.
(e) shitsu ni sai shite shusshi sareru zaisan no kachi (設立に際して出資される財産の価額): The value of property contributed at incorporation (i.e., the paid-in capital).
For a GK, the mandatory contents under the Companies Act are similar but governance provisions differ materially: GK is governed by members (社員 (shain)) rather than shareholders, and the articles govern member decision-making directly rather than through a board.
The Business Purpose Clause: Where Most Mistakes Happen
The 目的 clause is the most consequential part of the 定款 for day-to-day operations.
Why it matters beyond incorporation
Once registered, the business purpose clause is public information, visible in the Commercial Register (shogyo toki (商業登記)). Banks, customs authorities, tax offices, and commercial counterparties all refer to it. Specifically:
(a) Banks check the 目的 clause when evaluating corporate account applications and when processing specific transactions. A company with a 目的 that says only "consulting" that then asks a bank to process an international trade payment for goods will face scrutiny.
(b) Customs (税関 (zeikan)) may check that an importer's registered 目的 is consistent with the declared import purpose. A mismatch can lead to questioning of the importer of record status.
(c) Tax offices use the 目的 clause when assessing whether expenses claimed as business costs are consistent with the company's registered activities.
(d) Commercial counterparties sometimes use the 目的 as a basic credibility check in due diligence.
What "specific enough" means
Japanese courts have interpreted the business purpose requirement to mean that each stated purpose must be identifiable as a definite business activity. Overly vague clauses like "various businesses" (各種事業) standing alone are not acceptable. The clause must describe what the company does, not merely that it does something.
However, this does not mean every conceivable activity must be listed individually. The standard practice is:
(a) State the core business activities in clear terms.
(b) Add related and ancillary activities.
(c) Close with a catch-all: all business incidental and related to the foregoing (前各号に附帯関連する一切の業務). This catch-all is standard and allows the company to engage in activities reasonably related to its listed purposes without a formal amendment.
Drafting for a trading or market entry company
For a company doing import/export, IOR-type operations, or market entry consulting, the 目的 clause must explicitly cover each material activity. Example clauses appropriate for this profile:
(a) import and export trading of various goods; wholesale and retail sale of various goods (各種商品の輸出入業及び販売業)
(b) consulting services for foreign companies entering the Japanese market (外国企業の日本市場参入に関するコンサルティング業務)
(c) support and agency services relating to customs procedures (通関に関する手続きの支援及び代行業務)
(d) compliance support services relating to various laws and regulations (各種法令に係るコンプライアンス支援業務)
(e) all business incidental and related to the foregoing (前各号に附帯関連する一切の業務)
A 目的 clause missing import/export language for a trading company, or missing consulting language for an advisory firm, creates exactly the kind of operational friction that requires an amendment to resolve.
Amending the 目的: what it costs
A 定款 amendment for a KK requires:
(a) A special resolution (tokubetsu ketsugi (特別決議)) of the shareholders, requiring at least two-thirds of votes cast at a meeting where shareholders holding at least one-half of total voting rights are present (会社法).
(b) Registration of the amendment at the Legal Affairs Bureau (法務局 (homusho)) within two weeks of the resolution.
(c) Payment of the registration tax (toroku menkyo zei (登録免許税)) of ¥30,000.
(d) Judicial scrivener (司法書士 (shihoshoshi)) fees of approximately ¥30,000 to ¥50,000 for preparation and filing.
Total cost: approximately ¥60,000 to ¥80,000, plus management time. Write the 目的 broadly at incorporation. Amendment is avoidable.
For a GK, the amendment process is simpler (member resolution, no notarization required), but the registration tax and filing apply.
KK vs. GK: Structural Differences in the 定款
KK 定款 structure
A KK 定款 contains both mandatory items (per 会社法第27条) and commonly adopted optional provisions:
Mandatory provisions:
- Company name (商号)
- Business purpose (目的)
- Head office location (本店所在地)
- Total authorized shares (発行可能株式総数)
- Initial capital contribution amount
Commonly adopted optional provisions:
- Share transfer restriction clause (株式の譲渡制限) - restricts share transfers to board or shareholder approval; effectively keeps the company private
- Director term limits (取締役の任期)
- Governance model selection (see Governance section)
- Fiscal year (事業年度)
- Distribution of dividends (剰余金の配当) provisions
Notarization required: A KK 定款 must be notarized by a notary public (公証人 (koshonin)) before filing. This adds approximately ¥50,000 in fees and takes a few days. Electronic filing can reduce the stamp duty but still requires electronic notarization.
GK 定款 structure
A GK (合同会社) 定款 is structurally simpler. There is no notarization requirement, which reduces cost and timeline. The GK's governance is more flexible: members can self-govern per the articles without appointing formal directors or statutory auditors.
GK mandatory items:
- Company name including 合同会社 designation
- Business purpose (目的)
- Head office location
- Names and addresses of members (社員)
- Capital contribution of each member
GK articles also typically cover: member decision-making rules (ordinary decisions vs. unanimous decisions), manager appointment, member admission and withdrawal, profit and loss distribution ratios.
Share Transfer Restriction Clause: Critical for Foreign-Owned Companies
Most private KKs adopt a share transfer restriction clause (株式の譲渡制限) in the 定款. This requires board or shareholder approval before shares can be transferred to a third party.
Why this matters for foreign-owned structures:
(a) Prevents unwanted share transfers. Without a restriction clause, a Japanese shareholder could transfer shares to a third party, including a competitor, without the foreign parent's consent.
(b) Required for simplified governance. A KK with transfer restrictions is treated as a "non-public company" (hi-kokai kaisha (非公開会社)) under the Companies Act. Non-public companies have access to simpler governance structures and longer director terms (up to 10 years vs. 2 years for public companies).
(c) FEFTA interaction. Share transfers by non-residents of a company in a designated industry trigger FEFTA (外為法) pre-notification or post-reporting obligations, regardless of whether the 定款 restricts transfers. However, the restriction clause can slow inadvertent transfers that might trigger compliance issues.
The standard restriction clause requires board approval for share transfers. For a wholly foreign-owned KK with a sole director who is the representative director, this effectively means the foreign parent controls share transfers through its control of the board.
Director Term Provisions
For a KK, director terms are set by the 定款 or by law:
- Public company (公開会社): Maximum 2-year term for directors; 4 years for statutory auditors.
- Non-public company (non-public KK, typical for foreign-owned private companies): Director term can be extended to up to 10 years.
Setting a 10-year director term in the 定款 eliminates the recurring shareholder resolution required to re-elect the director every 2 years. For a foreign-owned single-director KK, this materially reduces administrative burden.
Practical implication: Most foreign-owned private KKs should adopt the maximum 10-year director term in the 定款 at incorporation. Failure to do so means a shareholder resolution every two years to re-elect the director, which requires documentation, notarization of the shareholder resolution if the director is overseas, and Legal Affairs Bureau filing.
Fiscal Year
The fiscal year (jigyo nendo (事業年度)) is set in the 定款. Japan does not mandate a specific fiscal year; companies may choose any 12-month period.
Common choices:
(a) January to December: Aligns with most international parent companies; simplifies consolidated reporting.
(b) April to March: The traditional Japanese fiscal year; used by most large Japanese companies and the government. Aligns with Japanese tax filing deadlines and bank fiscal year reviews.
(c) Other periods: Any 12-month period is valid. Some companies choose a fiscal year that avoids the peak period for their industry.
Tax filing deadline: Corporate tax returns are due within two months of the fiscal year end. Extensions are available for valid reasons but are not automatic.
Practical note: If the foreign parent has a December fiscal year and the Japan subsidiary is a material entity for consolidated reporting purposes, adopting a January-December fiscal year at incorporation avoids complications in closing the subsidiary's books on a different timeline.
Electronic vs. Paper 定款
For KK incorporation, there are two notarization routes:
(a) Paper 定款 (紙定款 (kami teikan)): Physical document signed and sealed, taken to the notary. Requires payment of a ¥40,000 stamp duty in addition to notary fees. Total notarization cost: approximately ¥90,000.
(b) Electronic 定款 (電子定款 (denshi teikan)): Filed electronically via the judicial scrivener's certified software. The ¥40,000 stamp duty is waived. Total notarization cost: approximately ¥50,000. The savings are real but require a scrivener with electronic filing capability.
For GK, there is no notarization requirement for either route. GK articles are filed directly with the Legal Affairs Bureau. The ¥40,000 stamp duty is still technically applicable to GK articles on paper; electronic GK articles avoid it.
Common Drafting Mistakes
Overly narrow business purpose. Stating only one activity (e.g., "software development") when the company plans to import hardware, provide consulting, and resell products. Each requires its own 目的 clause entry. An amendment costs ¥60,000 to ¥80,000 and management time.
Omitting the catch-all clause. Every 定款 for an operating company should close the 目的 section with 前各号に附帯関連する一切の業務. Without it, related activities not explicitly listed may be challenged.
Setting a 2-year director term by default. Not specifying the term in the 定款 of a non-public KK results in the default 2-year term. The shareholder resolution burden every 2 years is avoidable by setting 10 years at incorporation.
Virtual office address conflicts. The registered address must be a genuine, verifiable address in Japan. A virtual office registered address may satisfy the Legal Affairs Bureau but will not support a Business Manager (keiei kanri (経営管理)) visa application. If visa is a possibility, use a physical dedicated office from the start.
Choosing a company name that conflicts. The Companies Act does not require global uniqueness of company names, but the Legal Affairs Bureau will reject a name that is identical to another company registered at the same Legal Affairs Bureau in the same municipality. Pre-screen the name before drafting the 定款.
Summary
The 定款 is not a form to fill in - it is the structural decision that governs your Japan company for its entire life.
Key drafting decisions:
- business purpose (目的): Write broadly. Cover all material activities explicitly. Always include the catch-all clause. Amendment is expensive and requires a shareholder special resolution.
- Share transfer restriction: Adopt for every private KK. Keeps the company non-public, enables 10-year director terms, and prevents unwanted transfers.
- Director term: Set 10 years in the articles for a non-public KK. Avoids recurring re-election resolutions.
- Fiscal year: Align with the parent company's reporting cycle unless there is a specific reason to choose otherwise.
- Notarization route: Electronic 定款 saves ¥40,000 in stamp duty. Use a scrivener with electronic filing capability.
This article is an informational overview, not legal advice for any specific incorporation. Consult a licensed judicial scrivener (司法書士) or attorney (弁護士) for your specific transaction.