A company liquidation in Japan, also named winding up, refers to the procedure through which the assets of a business entity are liquidated and the entity is closed, or deregistered.
In this article, our company formation advisors in Japan explain the different aspects involving such a procedure in the country.
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Company liquidation procedure in Japan
In order to effectuate a company liquidation in Japan, the following procedure is required:
- Preparing the assets inventory and the balance sheet on the dissolution date, as well as the acquisition of approval decided in the shareholder meeting;
- Drawing up a public notice which should contain a report on credits and a notification forwarded to the known creditors. Our company registration consultants in Japan can offer more details on this public notice;
- Submitting the dissolution notification of the business entity to the government tax agency. This is an important step in winding up a company in Japan;
- Filing a final return for the dissolution business year;
- Collecting the credits, liabilities repayment and conversions into cash of real estate;
- Determining and distributing the residual assets;
- Making up a statement of accounts for the business year of the liquidation and an approval acquisition of the liquidation completion;
- Submitting the final returns for the business year of the liquidation;
- Registering the liquidation completion;
- Submitting the liquidation completion notification to the government tax agency.
Our team can help you open a company in Japan or liquidate it, depending on your business goals.
| Quick facts | |
|---|---|
| Types of company liquidation in Japan |
– ordinary liquidation, – special liquidation, – bankruptcy proceedings |
|
Initiating ordinary company liquidation |
By passing a liquidation resolution at the shareholders’ meeting. |
|
Ordinary company liquidation process |
– appoint liquidator, – register resolution with the Legal Affairs Bureau, – inform creditors, – prepare financial statements, – notify tax authorities, – settle outstanding debts, – prepare final report, etc. |
| Documents needed for ordinary liquidation |
– liquidation resolution, – inventory of assets, – balance sheets, – liquidation public notice, – liquidation final report, etc. |
| Notice for creditors |
Must be published in Kanpō (Official Gazette) only once. |
| Role of liquidator |
– prepares the inventory for the company’s assets, – determines assets’ worth, – settles the outstanding debts, – sales and distributes assets, – prepares the final report, etc. |
| Appointing the liquidator |
Our specialists in company formation can act as liquidators. |
| Removal of the liquidator |
If a liquidator is removed, a new liquidator can be appointed and registered with the Legal Affairs Bureau. |
| Distribution of assets to shareholders |
Is based on the priority of claims and the shareholders’ ownership in the company. |
| Special liquidation – characteristics |
Applies only to stock companies (kabushiki kaisha). Our company registration specialists offer assistance. |
| Documents for creditors proving their claims |
– invoicing documents, – contracts, – statement of accounts, – notices related to the debt, etc. |
| Regulatory framework for company liquidation |
The Companies Act |
| Duration of company liquidation |
6 months |
| Alternative to company liquidation |
Restructuring through various procedures. |
| Assistance |
We can help you open a company in Japan or liquidate it, depending on your business strategy. |
Special liquidation procedures in Japan
Special liquidation procedures in Japan can be accessed only by stock companies. If a debtor wishes to go through such procedures, the debtor’s shareholders have to pass a resolution for the dissolving of the debtor first.
This resolution needs the positive vote of two-thirds or more of the shares, after which the business must name a liquidator. Our Japan company formation specialist can provide further details on this matter.
Our team can provide more details about how stock businesses can close their company in Japan. We also invite you to watch a short video about the required steps:
Liquidation of Japanese subsidiaries
Foreign parent companies can wind up their companies in Japan as well. The foreign company must terminate all transactions, contracts, and employment relationships to liquidate a Japanese subsidiary. This ensures that the subsidiary ceases all business operations.
Afterward, the company must pass the resolution for dissolution and initiate the formal process of liquidating a company in Japan. The subsidiary cannot conduct or fulfill any financial or contractual obligations for 2 months after the resolution is adopted.
Our specialists in company registration in Japan recommend that in order to avoid complications, the subsidiary should resolve all its debts and contractual obligations with creditors before the dissolution resolution is passed. The aim is that the parent company becomes the only remaining creditor. If the subsidiary has any debts, the parent company is responsible for managing these obligations. This can extend the process of closing the company in Japan. The parent company can provide a loan to the subsidiary to cover the remaining debts or it can negotiate with creditors to reduce the debt amount.
Bankruptcy proceedings in Japan
Bankruptcy, or hasan in Japanese, is a process recommended for companies who are unable to pay their debts. This legal procedure involves liquidating the company’s assets to pay off creditors. It is essentially a form of company liquidation in Japan for insolvent companies.
Both debtors and creditors can initiate bankruptcy proceedings. When creditors file a petition, it’s called an “involuntary petition.” There is no specific minimum debt amount a creditor must hold to file the petition.
The Japanese district court will order the beginning of bankruptcy proceedings for the company if the company is unable to pay its debts due to a lack of financial ability or if its debts exceed the value of its assets. This formal procedure of winding up a company in Japan is more complex, but our team can provide support for debtors.
After the court starts the bankruptcy proceedings, the company cannot make any payments to creditors. Payments are managed by a court-appointed trustee (liquidator), who handles the distribution of assets as outlined in the Bankruptcy Act.
The liquidator will convert the assets into cash, examine and validate creditor claims, and report on the bankruptcy status.
We offer more legal advice on Japanese company formation, liquidation, and bankruptcy proceedings if you are interested.
Statistics about liquidated companies in Japan
If you wish to know more about company liquidation in Japan, we have prepared some statistics on this subject from 2023 and 2022:
- 8,690 cases of bankruptcy were registered in 2023;
- 2,940 companies in the service sector went bankrupt in 2023;
- 1,693 construction companies declared bankruptcy in 2023;
- In 2022, approximately 3.3% of the businesses in Japan closed down.
If you are interested in more of our services, we can also help with issues related to immigrating to Japan. We can assist interested individuals in obtaining Japanese residency.
Our immigration lawyers in Japan can offer more details on this matter.
For more about a company dissolution in Japan, or if you are interested in setting up a company in Japan, we can help you with the right guidance. Please contact us for assistance.