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What is involved in shutting down a company? What paperwork has to be filed?

August 3, 2012

If a decision is made to shut your company down, it will be necessary to follow certain procedures under Japanese corporate law for dissolution and liquidation of a Japanese stock company.

The first step that is required is to have the company elect to dissolve itself, which should be passed as a special resolution at a shareholders’ meeting. This approval requires no less than two-thirds of the votes of shareholders who are present at the shareholders’ meeting. Japanese corporate law further requires the presence of shareholders who possess a majority share of votes of shareholders entitled to exercise their votes at the shareholders’ meeting.
Following this election to dissolute, existing directors will no longer have directorial capacity. Instead, they will be “former directors”. Former directors will become the liquidators of the company by default, unless stated otherwise in the company’s Articles of Incorporation or determined by a resolution at the shareholders’ meeting. A company can have one or more liquidators.

Necessary Paperwork for dissolution:

  • Minutes of the Shareholders’ Meeting (approving the company’s dissolution, fixing the date of dissolution, and appointing a liquidator)
  • Registration of Dissolution to be filed with the Legal Affairs Bureau (within 2 weeks following the date of dissolution)
  • Notification of Dissolution to be filed with the Tax Office
  • Submission of tax return for dissolution and due within two months after the date of dissolution (one month extension is possible with Application of Extension)
  • Tax payment due within two months after the date of dissolution

Once a company is dissolved, it will continue to exist as a corporate entity but with the sole purpose of liquidating itself. The dissolved company will no longer be able to conduct business in the same manner as it did prior to the dissolution.

Liquidators are required to give public notice to the company’s creditors without delay. The notice should instruct creditors to submit any claims within a specified time period. The Notice Period should be no less than two months from the date of submission of said notice. In addition to the public notice, liquidators must also notify all of the company’s creditors to submit their claims.

Then, the company must resolve its outstanding liabilities and receivables, after which they should determine the residual assets and distribute to shareholders. If the company has excessive liabilities or has difficulties to shutting itself down, the company can use a legal system to initiate a special liquidation. Different procedures listed here would be followed.

Necessary Paperwork for liquidation:

  • Public Notice of Dissolution
  • Direct Notice of Dissolution
  • Updated Financial Statement Report
  • List of Assets
  • Minutes of the Shareholders’ Meeting (to approve the financial statement report)
  • Registration of Liquidation to Legal Affairs Bureau
  • Notification of Liquidation to Tax Office
  • Submission of tax return for liquidation and tax payment, due within one month following the determination of residual assets or the date of the previous day of the last distribution of residual assets, whichever is earlier.

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