Can We Show Proof of Capital Contribution through Bank Balance in Japan

September 27, 2019

Question:

I plan to put-up a company in Japan. I heard that one of the requirements for the “Business Manager” visa is for the company to have a capital of more than 5 million Japanese yen. Right now, my deposit account has a balance of over 5 million JPY. Can I simply provide a copy of my passbook as proof of capital?

Answer:

You will need to temporarily withdraw 5 million JPY and then deposit that amount back into your account.

Explanation:

The incorporator must pay the entire sum or deliver all properties other than monies relating to the incorporator’s contribution fully in money or in kind immediately at the time after the subscription for shares issued at incorporation. (Companies Act, Article 34 (1).)

For example, in the case of a company with a capital of 5 million Japanese yen, one may be led to think that there would be no problem with determining the number of shares issued to the incorporator and how much contribution would be needed based on the amount that is already in the bank (in this case, 5 million JPY).

However, if an incorporator tries to prove the contribution or existence of capital simply by showing a bank balance of 5 million JPY, there is clear indication if amount corresponds to an actual amount in cash or a credit claim (a claim where a credit institution has granted credit in the form of a loan).

To remedy this, the contribution of capital should be done at an immediate date after the date the number of incorporator’s subscribed shares and the amount needed as payment for the shares has been decided. This contribution transaction ― either as a deposit or a transfer ― must reflect this date.

In this case, if the current balance in the bank account amounting to 5 million yen will become the company’s capital, then all the incorporator has to do is to withdraw the amount of 5 million yen after the number of subscribed shares and amount for payment has been decided. Once the 5 million yen is withdrawn on-the-spot, the incorporator has to re-deposit the amount back into the account. Alternatively, it is also possible to transfer the same amount from a different savings account under the same name from a different financial institution to the account that will be used for the incorporation process.