Yugen kaisha

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A yūgen kaisha (Jp. 有限会社, lit. "limited company," abbrev. Y.K.) is a form of business organization in Japan.

Yugen kaisha are based on the German GmbH and were implemented in Japan in the Limited Company Law (有限会社法) of 1940. The Corporations Act, implemented on May 1, 2006, replaced the yugen kaisha with a new form of company called godo kaisha, based upon the American limited liability company.　Following the implementation, no new YKs were allowed in Japan, but pre-existing YKs were allowed to continue their operations as kabushiki kaisha under special rules. [1]

The pronunciation can be either yugen-gaisha or yugen-kaisha depending on the location in Japan, but the "K" spelling is much more common in English language company names and legal literature.

[edit] Structure

As of 2005, a Y.K. can have up to 50 investors, called members (社員, shain^?). The members were required to provide at least ¥3 million in capital contributions, with each investment unit (持分, mochibun^?) valued at no less than ¥50,000. The minimum capital amount was much more permissive than the ¥10 million minimum for a kabushiki kaisha. A Y.K. was also not required to issue certificates for investment units, whereas stock certificates were required for a K.K.

Unlike a K.K., a Y.K. does not need to have a board of directors or statutory auditors: the minimum requirement is one director (取締役, torishimariyaku^?).

Because of its simplified structure and relatively lax incorporation requirements, the Y.K. form is associated with small businesses. However, some larger companies have used the form: ExxonMobil's principal Japanese subsidiary, for instance, is a Y.K. with paid-in capital of ¥50 billion (US$420 million).[2] In addition to simplified corporate governance, a Y.K. receives some tax benefits under foreign laws such as the U.S. Internal Revenue Code.