No legal requirement since 2015 -- but a strong practical one
Until March 2015, Japan's Companies Act required at least one representative director of a kabushiki
kaisha (KK) or godo kaisha (GK) company to be resident in Japan. Japan's Ministry of Justice eliminated
this legal requirement in March 2015, meaning an all-foreign board is now legally permissible. In
practice, though, most companies still retain a Japan-resident representative: banks routinely refuse to
open corporate accounts for a KK or GK without one, and landlords routinely refuse to lease commercial
property to such a company, making a resident representative practically necessary for an actively
operating business even without a strict legal mandate -- a pattern this platform has also seen, for
different underlying reasons, in Kenya and the Netherlands. A foreign company's branch office in Japan
(as distinct from a locally incorporated KK/GK subsidiary) is a separate case: branch offices still
legally require a Japan-resident representative manager, a requirement the 2015 change did not
touch.
Incorporating an Indian company as an NRI founder based in Japan
An NRI in Japan setting up an Indian private limited company follows the same Companies Act, 2013
framework as a founder based anywhere else -- including the requirement that at least one director be a
person who has stayed in India for a specified minimum number of days in the preceding calendar year.
This resident-director requirement is commonly satisfied by bringing in an India-based co-director or
professional nominee.
FDI reporting and repatriating business profits
Foreign investment into an Indian company by an NRI or a Japan-incorporated entity must comply with
FEMA's FDI reporting requirements, generally through the RBI's online reporting portal, within the
prescribed timelines after each equity issuance or transfer. Repatriating profits or dividends from the
Indian company back to Japan is generally permitted through normal banking channels, subject to
applicable withholding tax under Indian law and the India-Japan DTAA's uniform 10% rate.
Common mistakes NRI founders and investors in Japan make:
- Assuming the 2015 legal change means an all-foreign board is entirely frictionless in Japan,
without checking banking and leasing practicalities that can slow down account access and operations
significantly.
- Confusing a KK/GK subsidiary (no legal resident-director requirement since 2015) with a branch
office (which still legally requires a resident representative manager).
- Not appointing a resident director for an Indian company back home, causing compliance issues
under India's Companies Act, 2013.
