Bank accounts for Japanese companies
As in most countries, establishing a new legal entity in Japan does not come with an already opened bank account. It is a separate process, therefore if we weed a corporate bank account we will have to take care of it ourselves.
Unless of course, we hire a legal or a financial consultant to help us choose the bank and explain to us all the nuances concerning opening a corporate bank account for a new company in Japan.
In this small article we would like to focus on a number of pitfalls you may encounter along the way.
And if you are looking for some information on how to open a company in Japan — take a look at our article about registering a Japanese LLC — 合同会社 (Gōdo Kaisha), often abbreviated as GK.
First of all, in order to open a bank account under your company’s name, you, as your company’s shareholder, will have to prove, that your company is actually engaged in any kind of business activity in Japan.
Japanese banks will assume that if you are indeed engaged in business activity in Japan you sign all sorts of contracts and documents with other Japanese companies. Therefore they can ask for that as a means to prove that your company is actually active.
What documents should your company prepare
‘Active company’ — what do they usually mean by that, and what exactly are they looking for.
Well if your company actually provides services, it will sign (if not already signed) all kind of agreements with services providers and/or suppliers, correct? For example:
- Service Agreement,
- Office Space Lease Agreement et cetera.
They will put their seals on the contracts.
The same goes for purchasing goods or other necessary supplies — the Supplier (wholesale for instance) will invoice you for the goods purchased and will put its seal on the invoice/bill/.
So you need to prepare those documents beforehand if you want things to go smoothly. The bank clerks will be looking for those type of documents.
Be advised: it is not a figure of speech — personal and corporate seals are still a very important part of Japanese business culture — so a seal will be used along with signatures as an alternative to signatures or with signatures.
Well if your company actually provides services, it will sign an agreement with other companies, that will put its seal on it. The same goes for purchasing necessary goods or materials for your company. The company will invoice for the goods purchased and will put its seal on the invoice/bill.
Common issues you should be prepared for
Newly-established companies may have quite a hard time opening a business bank account in Japan. Bank employees will immediately assume your company is bogus or not genuine.
There is no workaround if you do not have the above mentioned agreements, bills or invoices.
Unfortunately, it makes opening a bank account in Japanese banks especially hard for companies that use any type of virtual office or shared office. As banks usually look for documents that would confirm, that you are renting office space.
As global interest in doing business in Japan has been rising in the past years, Japanese business practices towards foreign businesses have been changing as well to be more foreign-friendly.
However Japan banks strictly follow the established anti-money laundering laws and standards.
It is still commonplace to deny opening an account if the bank has some doubts (despite having provided the mentioned documents to prove your company is an ‘active’ on).
For instance it may not be easy to open a bank account (even though your company rents exclusive office space) if there are no Japanese executives or directors in your company.
Recently a large international company established a subsidiary in Japan, and it took several months to open a bank account in Japan. Despite the fact, that the said company was renting an exclusive office space (with a monthly fee of ¥300,000), and their clients were well-known and established Japanese legal entities.
Rest assured however, it is still perfectly legal to use shareholder’s personal bank account to receive money from clients to use it to pay for goods or services. So in theory it is not a ‘Catch-22 type of a problem’. A private bank account can be used before the corporate one is established.
Always plan ahead. It may not seem as big deal in Europe, North America or in other regions you may have experience doing business, but in Japan opening a bank account still tend to quite a stressful process.
Here at Tomohiko Akiyama Legal Services, we are ready to arrange everything beforehand, and look into potential problems you may have encounter.
Please do not hesitate to contact us.