Godo Kaisha (GK) in Japan
A Godo Kaisha often abbreviated as GK, is a type of business similar to the UK’s private limited company (Ltd) or the American limited liability company (LLC). It has a simplified internal structure which offers limited liability for all investors.
GKs are formed by articles of incorporation signed by their investors. Each investor may provide a capital contribution in the form of money or property. Once the GK’s articles of incorporation and corporate seal have been registered and processed by the Legal Affairs Bureau, the company may open a bank account and sign contracts as a legal business entity.
A GK’s profits are taxed at corporate tax rates, and dividends are taxed at individual tax rates, and a GK may be converted to a KK if all of its members consent unanimously.
Distinguishing Between a Godo Kaisha and a Kabushiki Kaisha:
- All of the members must consent to amendment of the articles of incorporation, whereas in a KK, only a supermajority of shareholders is required.
- All of the members must consent to any transfer of ownership. In a KK, the transfer of shares is unlimited by default.
- All members are representatives of the company by default, unless managers have been appointed. The situation with a KK is that only the representative directors represent the company.
- Major business decisions (such as large asset sales or winding up of the company) may be made informally. With a KK, resolutions of shareholder and board meetings are often required for such major decisions.
- Members may invest any type of asset in exchange for their interest. In order to so this with a KK, an appraisal supervised by a court is necessary.
- KKs have traditionally required a larger capital and procedural investment, and so GKs do not have the same level of prestige. It is necessary for a KK company to raise capital to JPY10 million within 5 years of company incorporation as opposed to JPY3 million for a GK company.
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