Japanese Law No.1 General Incorporated Association

The law of General Incorporated Association and Foundation（hereinafter the “New Law” ）is slated to come into effect in December 1, 2008. The General Incorporated Association (hereinafter the “GIA”) has attracted Japanese Lawyer’s attention as second vehicle for setting up business because of the simplicity, inexpensive and flexibility.

The GIA is different from the “Kabushiki-Kaisha”(hereinafter the “K.K.”) in the following respect.

1. The GIA is not allowed to aims for the distribution of dividend or residual property.
2. As a result, the provision of the Articles of Incorporation which entitles the member or incorporator of the GIA to receive dividend or residual property is not effective.There are no provisions of capital and member’s equity in this New Law in the first place. But, instead, the GIA can pay remuneration for directors like the K.K.
3. Moreover, there is no restriction on the nature of business: The GIA can do not only commercial activity but also unprofitable activities and public-interest activities unlike in the case of the K.K.

The New Law was enacted as part of the“Public-Interest Corporation Reform" to dissociate the incorporation of the GIA from the authorization of "Public Interest Incorporated Assotiations" (hereinafter the "PIIA"), and allow the association in question to acquire a legal status as a corporation only under the New Law by registration in the Legal Affairs Bureau(General Incorporation).

If the GIA in question want above authorization, the GIA will be able to apply for the authorization any time after incorporation, to be granted it under certain condition and to become the PIIA. 〔Act on Authorization of Public Interest Incorporated Associations and Public Interest Incorporated Foundations(Act No.49 of 2006 )〕 This will grant the GIA certain tax benefits.

But Any GIA may not merge or consolidate with any K.K. Any GIA may not convert to any K.K. and vice versa. It is still now thought that they differ fundermentally in structure in Japan.