The Closely Held Enterprise under Japanese Law
Boston University International Law Journal, Vol. 7, No. 229, 1989
38 Pages Posted: 1 Jun 2009
Date Written: 1989
For fifty years Japan has operated with a dual statutory scheme for small incorporated businesses, but no policy basis for the duality is evident from the Japanese experience. While the limited liability company form is slightly more flexible than the corporation form, it has not been sufficiently more advantageous that even a majority of small businesses adopt it. Moreover, no convincing reason has been offered for denying the same flexibility of treatment to corporations, especially small corporations. The result is a system of mutually coexisting forms with no apparent reasons for statutory distinctions other than historical practice.
The reforms now under consideration by the Ministry of Justice and propounded by the commentators are generally to be applauded. They would solve the most pressing problem of the closely held enterprise – minority shareholder oppression – and would ease the problem of nominal director liability by eliminating or reducing the requirement for nominal directors. The revised statutes would still lack the flexibility of the American statutes (whether general or special) in permitting contractual deviations from many standard operational methods. But at least thus far, Japanese businesspersons have shown little interest in varying such methods by contract in any event.
Nevertheless, while the proposed reforms do not even attempt to make the theoretical case for continuing the dual statutory regime, they would continue to maintain distinctions, even while severely reducing the actual differences in statutory treatment between the corporation and the limited liability company. In sum, the lesson from Japan is that a dual regime is unnecessary, even where it escapes some of the problems that the dual-corporation statutes (in the form of special close corporation legislation) have engendered in the United States. The corollary lesson is that once in place, a dual regime will likely continue long after all reason for its existence has ceased.
Keywords: Japanese Corporate Law, Closely Held Corporations, Japanese Ministry of Justice
Suggested Citation: Suggested Citation