How Long Should a Director’s Term Be When Starting a Company in Japan?

Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant in Japan.

I assist foreign business owners who may have difficulty dealing with Japanese accounting and tax procedures.

When establishing a Kabushiki Kaisha (KK) in Japan, one point to consider is the term of office of its directors.

Should you choose a short term or a longer one? Let’s look at some practical points.

Director Changes Require Registration

In a Japanese Kabushiki Kaisha (KK), directors are registered in the commercial registry.

When a director’s term expires, the company generally needs to complete the necessary corporate procedures and register the appointment or reappointment of the director.

This involves registration costs, and additional professional fees may apply if you ask a judicial scrivener to handle the procedure.

Failing to complete a required registration by the deadline may also result in a penalty.

How Long Can a Director’s Term Be?

For a typical Kabushiki Kaisha, a director’s term is generally up to two years.

However, for a company that restricts the transfer of all of its shares, the articles of incorporation may extend the director’s term up to ten years.

Many small owner-managed companies in Japan use this type of structure and choose a longer director’s term.

How Should You Choose the Term?

For a small company wholly owned and managed by one person, a longer term may be practical because it reduces the frequency of reappointment procedures and related registration costs.

For example, if there is no plan to bring in outside shareholders, a ten-year term may be a reasonable choice when legally available.

On the other hand, if the company has several shareholders or plans to bring in outside investors, a shorter term may provide more flexibility in reviewing or changing the management structure.

The appropriate term therefore depends on the ownership and management structure of the company.

What About a Godo Kaisha (GK)?

The rules above mainly concern directors of a Kabushiki Kaisha (KK).

A Godo Kaisha (GK) has a different management structure and does not have the same statutory director term system as a KK.

Therefore, if you are deciding between a KK and GK when starting a business in Japan, this is one of the differences to keep in mind.

Koshida Accounting and Tax Office assists foreign business owners in Japan with accounting and tax matters.

Through our network of specialists, we can also connect clients with professionals who handle company registration and other legal procedures.

If you are planning to establish a company in Japan, please feel free to contact us through the inquiry form.