|The current laws concerning to the companies
are provided in the Japanese Commercial code, both the
laws The Yugen Kaisha law (the "YK Law") and
the Special Measurement Law concerning the audit of Kabushiki
Kaisha (the "Special Measurement Law") will
be rescinded, when the new Corporate Law and the Coordination
Law will take effect, which shall be around May 2006.
Among other things, the new law would
repeal the YK law and provide that any YKs in existence
as of the effective date of the new law would continue
as KKs under the new corporation law (i.e., existing
YKs will be automatically reformed as a KK as a matter
of legal characterization under Japanese law). A KK
that has been reformed from a YK pursuant to this law
must include the phrase "Yugen Kaisha" in
its corporate name, and is referred to as a "Special
Yugen Kaisha" (Tokurei Yugen Kaisha). The new law
would also allow a Special Yugen Kaisha to retain indefinitely
its governance structure under the repealed YK Law.
This means that, practically speaking, there would be
few differences between the old YK and the new Special
Yugen Kaisha that is a KK.
The new law creates a new juridical
limited liability company, the Godo Kaisha. The tax
character of this entity has not yet been determined.
Under the new law, small and medium
sized enterprise will find it very difficult to establish
a limited company.