On November 30 2018, partial amendments to the Ordinance for Enforcement of the Notary Act (Amended Ordinance) came into force. The Amended Ordinance aims to identify the beneficial owners of companies and improve transparency in order to prevent money laundering or terrorism financing activities. According to the Amended Ordinance, when making an application to a notary for the authentication of articles of association to incorporate new joint-stock companies (kabushiki-kaisha), general incorporated associations (ippan-shadan-houjin) or general incorporated foundations (ippan-zaidan-houjin), applicants must declare to the notary: (i) the beneficial owner of the company; and, (ii) that the beneficial owner is neither a member of criminal organisations nor an international terrorist, and where there is any reasonable doubt the notary will request the applicant to provide explanations.
A beneficial owner, as defined by the Act on the Prevention of the Transfer of Criminal Proceeds, means any of the following persons in the case of a joint stock company:
(a) if there is any natural person who directly or indirectly owns more than 50% of the total voting rights of the company (except where it is obvious that the natural person does not have an intention or ability to substantially control the company), such natural person;
(b) if (i) there is no natural person who falls under (a) above and, (ii) there is any natural person who directly or indirectly owns more than 25% of the total voting rights of the company (except where it is obvious that the natural person does not have an intention or ability to substantially control the company), such natural person;
(c) if (i) there is no natural person who falls under (a) or (b) above and, (ii) there is any natural person who has a predominant influence on the business of the company through investments, financing, deals with or any other relationship with the company, such natural person; and,
(d) if there is no natural person who falls under (a), (b) or (c) above, the representative director of the company.
The Amended Ordinance has been subject to criticism in that it only applies to the case of a new company being incorporated and does not cover the change of the beneficial owner of the company. However, it will have a certain impact on the practice involving the establishment of a new company in Japan, therefore, it would be wise to keep a close watch on practices carried out under the Amended Ordinance.
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Kohei Asano |