Using a General Purpose Business Content in Japan

September 13, 2019

Question:

Using a General Purpose Business Content

Answer:

We generally recommend specifying your company purpose(s).

Explanation:

A company should state its purpose(s) in its articles of incorporation (Companies Act, Article 27) and listed its register.

As the register is accessible to the public, anyone can confirm certain details such as who companies are transacting with, as well as their creditor(s), the safety of transactions is higher in Japan.

There are certain rules that dictate how the company should decide its purpose(s). Generally, the purpose(s) should be specific, clear, and legal.

Currently, there is no clear standard on how “specific” the purposes should be. For reference, the United States allows registering the purpose “transaction of any lawful businesses for which corporations may be incorporated in the State of ___”.

After listing down the specific purpose(s) of the company, large enterprises tend to include purposes along the lines of “any and all lawful business”, “all other commercial business”, or “any and all business other than each of the foregoing” in their certified copy of register.

As for whether problems would arise during the incorporation process if the only stated purpose of the concerned company would only be “any lawful business”, there will be a need to continue the process while confirming with the notary office and Legal Affairs Bureau. However, simply stating “any lawful business” as a company purpose may not be suitable as a disinterested person (third party individual) would not be able to understand the purpose of the company; as a result, if the company’s purpose is recorded in the register and released to the public, it would not provide the benefit of a more secure transaction.

Furthermore, when engaging a business industry that requires government approval such as restaurant management, one requirement to obtain approval is to check whether the purpose of managing a restaurant is recorded in the company’s certified register. Should a company only include in its list of purpose(s) “any lawful business”, obtaining approval may become difficult. As such, it is better to be specific in recording your business’ purpose(s). articles of incorporation.