Business Purposes in Articles of Incorporation: Drafting and Changes

Business purposes (事業目的) must be stated in a company’s articles of incorporation (定款) and are also recorded in the commercial register. The registrar does not examine how specific they are, but the wording is checked in licence applications, in the Business Manager visa (経営・管理ビザ) review and when opening a bank account. The basic rule is to list every planned business in commonly understood language.

What business purposes are

Under the Companies Act, the purposes are a mandatory item in the articles of incorporation, alongside the trade name and head office location. Articles without them have no effect. The purposes are registered at incorporation, and anyone can check them in the certificate of registered matters (登記事項証明書).

Under the Civil Code, a juridical person holds rights and assumes obligations within the scope of the purposes set out in its articles of incorporation. Case law interprets this scope broadly, but in practice the rule is to add a purpose before starting any business not covered by it.

Requirements examined at registration

After the Companies Act took effect, the Ministry of Justice decided not to examine the specificity of purposes in incorporation and other registrations. One reason given is the abolition of the restriction on similar trade names in the same area.

For a kabushiki kaisha (KK, 株式会社), the notary office (公証役場) may comment on the wording of the purposes when certifying the articles of incorporation. Any doubtful wording can be checked in advance, for example through the registration consultation service at the Legal Affairs Bureau (法務局).

As a guide to clarity, whether a word appears in a standard Japanese dictionary is sometimes used as a reference. When using new industry jargon or foreign words, check that the meaning is generally understood.

How to draft business purposes, with examples

Drafting basics

• List each planned business as a separate item.
• Include businesses you may start within the first few years after incorporation.
• Put the main business first. The order has no legal significance, but readers of the certificate of registered matters tend to judge the business from the first few lines.
• It is customary to end with “all business incidental or related to each of the preceding items” (前各号に附帯又は関連する一切の事業).
• There is no legal limit on the number of purposes. However, listing a large number of unrelated businesses makes it harder to see what the company actually does.

Examples

The wording in the table is a general example. For businesses that require a licence, confirm the wording with the competent authority before drafting the articles of incorporation.

Wording to avoid

• Vague wording such as “business in general” or “various businesses” that does not convey what the company does
• Listing, as is, services that only licensed professionals may provide, such as tax representation or legal services
• Original expressions that differ from the name of the licence, or wording only in a foreign language
• Listing many businesses you have no actual plans to pursue

Checklist before drafting the articles of incorporation

1. Identify the businesses you may start in roughly the next three years.
2. Check whether each business requires a licence or registration.
3. Confirm the required wording with the competent authority or a professional.
4. Align the purposes with the businesses described in your business plan and company profile.
5. Finally, add the item covering incidental business.

What licensing authorities check

A licence application is accompanied by the certificate of registered matters and the articles of incorporation. The review checks whether the business applied for is included in the purposes.

For a worker dispatch business licence, for example, Labour Bureau guidance states that the purposes must include a statement that the company conducts a “worker dispatch business” (労働者派遣事業). With different wording, such as “staffing business” (人材派遣業), you may be asked to amend the purposes. This is explained in detail in Worker dispatch business licence.

Secondhand goods dealing, construction, real estate brokerage, travel agency and fee-charging employment placement are other typical industries where the wording of the purposes is checked. The detailed treatment of wording may vary from office to office.

Conversely, listing a licensed business in the purposes does not by itself allow you to start that business. Operations begin only after the licence or registration has been obtained. Operating without a licence may be subject to penalties.

If the purposes are inadequate, the articles of incorporation must be amended and the change registered before applying, delaying the start of the business. It is important to identify the licensed businesses you plan to start at the time of incorporation.

Impact on the Business Manager visa and bank accounts

Business Manager visa

A Business Manager visa application includes the certificate of registered matters and a business plan. The business described in the plan is expected to match the registered purposes. If the plan centers on a business that is not among the purposes, you may be asked to explain. For businesses that require a licence, the status or prospects of obtaining it may also be checked. At renewal of the period of stay, the actual business is examined together with the financial statements and other documents. For an overview of the application, see Business Manager visa application: documents and processing times.

Opening a bank account

In customer due diligence under the Act on Prevention of Transfer of Criminal Proceeds, banks check a company’s business through its articles of incorporation and certificate of registered matters. If there are so many purposes that the actual business is unclear, you may be asked for further explanation. The account application form also asks for a description of the business, so prepare an explanation that is consistent with the purposes.

Businesses such as funds transfer services and crypto-asset exchange services cannot be conducted without registration. If you include such terms in the purposes, be ready to explain your plans and timing for registration. Preparation is covered in detail in Opening a corporate bank account as a foreign executive.

Notifications to the tax office

The notification of incorporation (法人設立届出書) submitted to the tax office after incorporation also has fields for the purposes stated in the articles of incorporation and the business actually conducted. Keeping the purposes consistent with the actual business here too makes later procedures easier to explain.

Changing business purposes after incorporation

1. For a KK, the articles of incorporation are amended by a special resolution of the shareholders’ meeting. For a godo kaisha (GK, 合同会社), the consent of all members is required unless the articles provide otherwise.
2. Within two weeks of the change, apply to register it at the Legal Affairs Bureau with jurisdiction over the head office.
3. The registration and license tax is ¥30,000 per filing.
4. Check whether licence applications or notifications to banks and business partners are required.

The same procedure is required to delete purposes that are no longer used. Adding and deleting purposes on the same occasion saves effort.

Failing to register a change may result in a non-penal fine (過料). Once the start date of a new business has been set, proceed with the procedure promptly.

If you list all purposes together at incorporation, there is no additional cost. Adding them later requires, besides the registration and license tax, preparation for a shareholders’ meeting, professional fees and time until registration is complete. Licence applications can only follow after that, which may delay the start of the business. If the shareholder is an overseas parent company, arranging signatures on the shareholders’ meeting minutes and other documents also takes time.

Summary

Registration does not examine business purposes for specificity. Licensing, visa and bank account reviews, however, do check how the purposes are worded. Listing every planned business in clearly understood language makes later procedures smoother. For businesses that require a licence in particular, we recommend confirming the wording before incorporation.

In cooperation with partner judicial scriveners and administrative scriveners, TIMOA supports you from designing purposes that fit your business plan and licensing schedule to drafting the articles of incorporation and registering changes. For details, see our Japan Entry & Company Setup page.