What was a Yugen Kaisha (YK)?
In Japan, limited liability companies of the Yugen kaisha (YK) type may have been founded between 1940 and the beginning of 2006. The YK company form was eliminated in Japan in June 2005 with the passage of the Companies Act. Most YKs were converted by the legislation into KKs, or kabushiki kaisha (KK), which were then replaced by joint-stock companies, or godo gaisha (GG), now the most popular business structure in Japan. The company legislation likewise altered the corporate governance of YKs.
Understanding the Yugen Kaisha (YK)
The German GmbH, the most popular kind of corporation in Germany and a limited liability firm, served as the foundation for the YK corporate structure. Small firms in Japan were often organized using the YK structure, which allowed for a maximum of 50 shareholders. The members and shareholders had to put up 3 million yen in capital. While YKs were not obliged to have a complete board of directors, they were required to have one director.
Godo Gaisha replaced YK after the Japanese Companies Act of 2005, which went into effect on May 1, 2006, prohibited the formation of new YKs.
Japan’s Corporate Entities: The Four Types
- Gomei Kaisha: a cooperative
- Goshi Kaisha, a limited company
- Yugen Kaisha, a business with limited liability
- Kabushiki Kaisha has replaced Godo Gaisha, a joint-stock company.
Although a KK is a regular corporation, a Yugen Kaisha may have been compared to a subchapter S corporation (a limited liability company or LLC) or partnership in the US. A YK is subject to much looser capitalization, accounting, and procedural rules than a KK. Limited liability protects YK owners but limits their ability to transfer shares. The public cannot purchase shares from the corporation.
Japan is a country of tiny companies. Seventy percent of Japanese enterprises employ less than twenty people, and most Japanese companies are created as GGs rather than YKs, according to David Luhmen of Luhmen.org. In Japan, this country values looks and is image-conscious; 2 GGs are seen as more prominent and prestigious.
Requirements for Capitalization for KKs and YKs
In 1991, there was a revision in the capitalization criteria for KKs and YKs. A limited liability corporation (YK) may have been founded for around $1,000 before 1991. The minimum capitalization requirement was raised to $30,000 in 1991, when one dollar was equivalent to ¥100. Additionally, a typical company known as KK requires a minimum capitalization amount of $100,000. At the same time, it climbed from around $4,000.
The YK form was linked to small firms due to its comparatively relaxed incorporation procedures and streamlined structure. However, some large corporations have used the system; YK was ExxonMobil’s primary Japanese subsidiary.
Conclusion
- In the past, Yugen Kaishas (YKs) were a prevalent limited liability business in Japan.
- The Japanese Companies Act of 2005 eliminated the Yugen Kaisha form in 2006.
- After restructuring, YK enterprises became joint-stock companies known as kabushiki kaisha, which godo gaisha eventually replaced.
