What is a Representative Director & What Are Their Responsibilities?
In previous years, any non-resident wishing to create a Kabushiki Kaisha, or K.K. company, in Japan was required to have a local representative director who lived in the country. While this requirement has since been relaxed, a representative director still has a role for foreign companies that want to incorporate in Japan.
The Japanese government changed its requirements for starting a K.K. company to encourage and simplify foreign investments. Today, all you need is a resident incorporate who holds at least one share in your company at the time of incorporation. They can transfer that share to you immediately after formation.
Before that change, the representative director played a much more active role in the company’s day-to-day operations. That does not mean this role is now obsolete; far from it. If you want to open a branch office for your company, you will still need a resident representative and a registered address. Many companies choose to open a branch office in Japan (as opposed to a representative office) because it allows them to engage in full-scale business activities without an initial capital requirement. And if you want to open any other type of company, having a resident serve as your surrogate is an important cultural consideration you may choose to make regardless of any legal requirement.
Having a resident represent you can be a brilliant public relations move as you work to build your overseas business. Other business-people in the area will appreciate your commitment to respecting Japanese business culture. While it is no longer illegal to operate a company without fulfilling this role, it may prevent you from making any headway in the Japanese business community and destroy your chances of success.
What Are The Advantages of Outsourcing the Representative Director in Japan Function?
There are two main advantages to outsourcing this critical role: Corporate Governance and Risk Management:
If the company names an employee of the company as a representative, it may be difficult to negotiate this person’s resignation in case of disagreement. This is because a representative in Japan has a lot of power. The representative may also commit your Japanese subsidiaries to contracts and make other decisions without your approval. Choosing a representative in the early stages of your incorporation in Japan is a huge decision; if you make the wrong choice, it could be disastrous for your company. When you outsource this role, it makes it much simpler for you to make changes in the future
Taxation:A Representative Director is more heavily taxed than a regular employee; for example:
- Bonuses are not tax-deductible unless strict conditions are met
- Housing is not fully tax-deductible
What is a Japanese Registered Seal?
A registered seal, also known as a hanko or inkan in Japan, is a carved stamp that can be used to sign documents. While you may have a personal Hanko to sign documents, your business will also have one you or your representative director can use. In Japan, a registered seal is based on a long tradition. Many business communities see it as a sign of respect, especially for foreigners. While you may not have any issues signing your name on documents as you would in the United States, your Japanese colleagues may be more likely to see you as a severe businessperson if you hire a representative director and use a registered seal.
What is a Registered Address?
Having a registered address is a requirement for all business entities in Japan. You may choose to have your own office as a registered address and conduct business activities there through your representative, or you may decide to outsource this function to a local business.