A Guide to Subsidiary Dissolution Procedures

Dissolving a foreign-owned subsidiary in Japan can be a complex process, but understanding the procedures and the required documents can make it more manageable. In this article, we will break down the necessary steps to dissolve a foreign-owned subsidiary in Japan and the documents that need to be submitted to the tax office during this process. So, What is the meaning of 'Subsidiary dissolution procedures'? ACC Group will address your question.

1. What are the procedures for dissolving a subsidiary?

Dissolving a subsidiary, which is a company owned and controlled by another company (the parent company), involves specific procedures that need to be followed. The exact steps can vary depending on the jurisdiction and the specific circumstances of the subsidiary.

2. Understanding the Logic Behind Dissolution and Liquidation

The dissolution and liquidation procedures for a foreign-owned company in Japan may initially appear daunting. To comprehend this process better, it's essential to start with the initial setup, which provides a clear foundation.

In Japan, when establishing a foreign subsidiary, you must conduct a name pre-check and register the company with the Legal Affairs Bureau. When deciding to close the subsidiary, you need to submit a declaration to the Legal Affairs Bureau twice—once when deciding to dissolve and another after the liquidation is complete.

After approval from the Legal Affairs Bureau for the establishment of the foreign subsidiary, you must complete various registrations with institutions such as the National Tax Agency, local tax offices, and local administrative authorities. This includes obtaining various numbers such as the National CIT number, local CIT number, JCT number, local administrative authorization number, import/export number, and a bank account.

During dissolution, all of these registered numbers need to be canceled, and the relevant authorities must be notified. Tax declarations are required during the liquidation period, followed by another tax declaration after the liquidation is completed. These registered numbers' cancellation must also be processed with institutions like the National Tax Agency, local tax offices, and local administrative authorities, with relevant tax declarations attached.

3. Step-by-Step Procedures for Dissolving a Company in Japan

Step 1: Resolution of Dissolution at the Shareholders' Meeting

If you plan to dissolve the company by normal liquidation (as opposed to special liquidation), you need to pass a resolution at the shareholders' meeting. The resolution requires the attendance of shareholders holding more than half of the voting rights, with the approval of more than two-thirds of the attending shareholders, which is called a special resolution. If your company's articles of incorporation don't specify otherwise, you will also appoint a "liquidator." The liquidator carries out the dissolution and liquidation procedures.

Step 2: Registration of Dissolution and Appointment of Liquidator

Within two weeks from the date of dissolution, you must register the dissolution and appointment of the liquidator with the Legal Affairs Bureau. Please note that registration license tax is required for this registration. Minutes of the shareholders' meeting are also necessary for both dissolution registration and liquidator appointment registration.

Step 3: Notification of Dissolution

After registering with the Legal Affairs Bureau, you must notify various authorities, such as the tax office, city hall, social insurance office, etc., about the company's dissolution. The notification form is called the "change notification form," which can be downloaded from the websites of these public institutions or obtained at their respective counters. You will also need a certificate of registered matters for notification.

Step 4: Preparation of Inventory and Balance Sheet by Liquidator

The liquidator is responsible for preparing an inventory and balance sheet of the company's assets as of the dissolution date, which requires approval at a shareholders' meeting. This document will be stored within the company.

Step 5: Creditor Protection Procedure

To protect the rights of creditors to receive payment, the company must contact creditors and post a notice in the official gazette. Creditors have a specified period to submit their claims.

Step 6: Final Tax Return for Dissolution

Within two months from the date of dissolution, you must file a final tax return for the period from the beginning of the business year to the date of dissolution. This return is often for a period less than a year.

Step 7: Distribution of Residual Property

The liquidator will determine the company's claims and liabilities, collect unrecovered accounts receivable, pay off accounts payable and borrowings, and distribute any remaining property to shareholders.

Step 8: Final Tax Return for Liquidation

After determining the residual property, you must file a final tax return for liquidation within one month. Be aware that you may need to pay taxes if there is income during the liquidation period.

Step 9: Approval of Financial Statements

The liquidator prepares a financial statement and obtains approval at a shareholders' meeting, signifying the completion of the liquidation and the official dissolution of the company.

Step 10: Registration of Liquidation Completion

Within two weeks from the approval of the financial statements at the shareholders' meeting, you must register the completion of liquidation with the Legal Affairs Bureau. This step officially dissolves the company.

Step 11: Notification of Liquidation Completion

Finally, you must notify the tax office, city ward, town, village office, and prefectural tax office of the completion of liquidation. This notification involves submitting the "change notification form" and a "certificate of registered matters."

4. Required Documents for Dissolution

Throughout the dissolution process, several essential documents must be submitted to the tax office:

• Notice of Dissolution: Submit this document after the dissolution and liquidator appointment registration. It involves the "change notification form" and is submitted to the tax office, city hall, social insurance office, etc.

• Final Tax Return for Dissolution: This return must be filed within two months from the date of dissolution. It covers the period from the beginning of the business year to the date of dissolution and requires the "final tax return (dissolution business year)" and a "certificate of all history items (copy)." It is submitted to the tax office.

• Final Tax Return during Liquidation: If the liquidation extends beyond one year from the date of dissolution, you must file a final tax return for the liquidation business year within two months from the end of that year. The documents required are the "final tax return (liquidation business year)," which is submitted to the tax office.

• Notice of Liquidation Completion: After completing the liquidation registration, submit the final notice of liquidation completion. This document includes the "change notification form (notice of liquidation completion)" and a "certificate of registered matters (certificate of all closed matters)." It is submitted to the tax office, city ward, town, village office, and prefectural tax office.

In summary, dissolving a foreign-owned subsidiary in Japan involves several steps and requires careful attention to detail. Ensuring that all necessary documents are submitted to the relevant authorities is crucial to completing the process successfully.

5. Conclusion

Dissolving a foreign-owned subsidiary in Japan is a comprehensive process that requires a clear understanding of the steps involved and the documents required. By following the outlined procedures and submitting the necessary documents, you can navigate this process effectively.

For more information on dissolving a foreign-owned subsidiary in Japan or for assistance with the procedure, you can contact Andrea Kyu, who is fluent in both Japanese and Mandarin, at Onarimon Yusen Building in Tokyo.

FAQs

1. What is the process of subsidiary dissolution?

Subsidiary dissolution is the legal procedure of closing down a subsidiary company, which is typically a company owned or controlled by a larger parent company.

2. Why might a parent company choose to dissolve a subsidiary?

Reasons for dissolving a subsidiary can include changes in the parent company's strategic direction, financial difficulties of the subsidiary, or the successful completion of the subsidiary's purpose.

3. How is the decision to dissolve a subsidiary made?

The decision to dissolve a subsidiary is typically made by the parent company's board of directors, in accordance with corporate governance rules and legal requirements.

4. What are the key steps in the subsidiary dissolution process?

The steps may vary depending on the jurisdiction and the specific circumstances, but they generally include board resolutions, notification to stakeholders, settling debts, and filing dissolution documents.