(a) Statutory Declaration - This document should contain all the particulars required for the JBO Registration including, inter alia, corporate name, location of the head office, corporate objectives, amount of capital, and members of the Board of Directors. The statutory declaration, which should be executed by the JBO Representative or any authorized officer, must be notarized by either a consular official in Japan or a competent government officer (including notary public) of the country where the Foreign Corporation was incorporated. (See Attachment A to this memorandum.)

(b) Power of Attorney - This document must be executed by the JBO Representative authorizing an attorney-in-fact to effect the JBO Registration.

(c) Signature Certificate of the JBO Representative - In the case where the JBO Representative, who executed the power of attorney discussed in (b), supra, is not a Japanese national, he is required under the practice of the LAB to submit his signature certificate attested by a consular official or a competent government officer of his nationality.

(d) Submission of Seal Impression - The JBO Representative, who is a Japanese national and who has executed the power of attorney discussed in (b), supra, must register a seal in his name as the JBO Representative, for which he is required to submit a certificate of impression of his registered personal seal (Jitsuin) issued by the head of his ward.

(a) Shareholders - A shareholder of a KK may be a corporation or an individual. No citizenship or residency requirements are imposed, and there is no limitation on the number of shareholders. Thus, a KK with a single shareholder is allowed.

(b) Capital Infusion - Capital infusion at the time of incorporation of a KK must be made either in cash or in kind if authorized by the initial articles of incorporation.

At least half of capital infusion must be credited in the capital account (“Capital”) and the balance thereof in the capital reserve account. The minimum amount of the Capital was abolished.

(c) Shares of Stock - A KK may issue a variety of shares, such as voting or non-voting preferred shares. All shares must be issued in non-bearer form. The KK may issue only non par value shares.

(d) Share Transfer - A KK is not allowed to proscribe share transfers. Share transfer can be made only by way of delivery of share certificates. No further action is needed between a transferor and a transferee under the Company Law. However, the articles of incorporation may provide a provision to read that “any transfer of shares shall be subject to the approval of the Board of Directors (or the General Meeting of Shareholders)”. In this connection, it should be noted that a transferee who acquired shares without obtaining a prior approval of the Board of Directors, etc. is also entitled statutorily to request that the Board of Directors, etc. should approve his ex post facto acquisition of shares. In other words, notwithstanding said provision in the articles of incorporation, share transfer can be made validly between the parties concerned. This may allow for the undesirable situation to arise in which a KK would become connected with an unfamiliar third party. In order to obviate such a problem with a third party, we are of the view that unless otherwise provided for in the articles of incorporation, a KK, with the consent of shareholders, should not issue share certificates to the shareholders until such time as they will absolutely need the share certificates.

In case of a joint venture KK, control over share transfers could be made by agreement among the shareholders. However, such control sourced in the agreement only works to bind the parties involved but cannot be asserted against third parties.

(e) Directors - There must be at least one director in a KK. Initial director(s) shall be elected at the constituent general meeting in the case of the “Boshu-setsuritsu” or by the promoter(s) in the case of the “Hokki-setsuritsu”. (Definitions of “Boshu-setsuritsu” and “Hokki-setsuritsu” will be discussed hereinafter.) Directors must be individuals, but there are no citizenship or residency requirements therefor, unless otherwise stipulated in the articles of incorporation.

Under the old Commercial Code, a KK was required to have a board of directors consisting of at least three directors. Under the Company Law, a KK is not required to have a board of directors, and only one director is sufficient. The Company Law allows flexible organization plans, and in the case of a small and medium size KK, as many as 17 organization plans are available. Since the space is limited to discuss all of such plans, we will hereafter focus our discussion on a KK with a board of directors and statutory auditor(s), which used to be the typical organization plan under the Commercial Code.

From among the directors composing a board of directors, one or more representative directors must be elected, and at least one of the representative directors must be a resident in Japan. Under the Company Law, a representative director has the overall power to represent a KK. He has the full power to bind the company in both judicial and extra-judicial procedures. No limitation on his powers can be asserted against a bona fide third party. Therefore, considerable caution should be exercised when appointing a representative director.

(f) Statutory auditor - In a KK having a board of directors, there must be at least one statutory auditor. Statutory auditors are not necessarily certified public accountants, but may not serve concurrently as a director or an employee of the same KK or of its subsidiary. Thus, a statutory auditor recruited from among directors or employees must simultaneously resign from such position.

Statutory auditors generally have a power to audit business activity of a company including accounting matters. If the articles of incorporation of the company, however, should state that the statutory auditor will audit matters relating to accounting only, the statutory auditors will not be entitled to audit business activity of the company. The statutory auditors having the power to audit business activity may check the performance of duties by the directors, and have the obligation to report to the board of directors any indication of illegality involved in such performance. Such statutory auditors are also obligated to attend meetings of the board of directors, and check the proposals submitted to the shareholders meeting.

(g) Meeting of shareholders - A general meeting of shareholders of a KK must be convened regularly at least once a year to approve the annual financial statements in advance of filing the final tax return with respect to the fiscal year then ended. General meeting of shareholders may act only upon such matters as stipulated in the Company Law or the articles of incorporation.

(h) Meetings of the Board of Directors - A meeting of the Board of Directors of a KK must be convened at least once every three months.

(a) Promoter(s) - A corporation as well as an individual, whether Japanese or non-Japanese, is permitted to act as a promoter. However, when we take into consideration the number of formalities required to be fulfilled by the promoters as well as the necessity to proceed with the projected incorporation efficiently, promoters should be residents of Japan and be limited to as few as possible, i.e., one or two.

A person designated as a promoter must subscribe to at least one Initial Share. (In case of the Hokki-setsuritsu, promoter(s) must subscribe to the entire number of the Initial Shares.)

(b) Authentication of the Articles of Incorporation - The promoter(s) must prepare and execute the articles of incorporation, which must be authenticated by a notary attached to the LAB having jurisdiction over the location of the head office of a KK as set forth in the articles of incorporation. Attached hereto as Attachment B is a form of the articles of incorporation for your reference.　　

Of the provisions to be incorporated in the articles of incorporation, lack of the following items make the articles of incorporation invalid in their entirety:

(c) Designation of Recipient Bank of Share Subscription Money - When the articles of incorporation are authenticated by a notary, the promoter(s) must designate bank(s) to receive payment of share subscription money (“Recipient Bank”).

(d) Share Subscription - The Initial Shares must be subscribed to by the promoter(s) and non-promoter share subscriber(s) in case of the Boshu-setsuritsu (or only by the promoter(s) in case of the Hokki-setsuritsu). Non-promoter share subscriber(s) are required to make their application for subscription thereto in the form prescribed by the promoter(s). As for the promoters, share subscription should be made in accordance with those particulars as agreed to by the promoter(s).

(e) Share Subscription Payment - After a lapse of the waiting period for clearance of the prior notification under the Forex Law as will be discussed in III.B., infra, non-promoter share subscriber(s) and/or promoter(s) should proceed to effect the share subscription payment to the Recipient Bank. Payment should be made in the full amount of the share subscription price.

Upon completion of the share subscription payment, the Recipient Bank issues a certificate concerning custody of the share subscription money, which must be filed at a later date with the LAB for the registration of incorporation of a KK.

The share subscription money so paid in is held in suspense by the Recipient Bank until a certified copy of the company registration etc. is submitted after incorporation of a KK.

(f) Election of Directors and Statutory Auditor(s) in Case of Hokki-setsuritsu - Promoter(s) must elect directors and statutory auditor(s), immediately after the share subscription payment.

(g) Investigation Report in Case of Hokki-setsuritsu - Directors and statutory auditor(s) so elected by the promoter(s) must investigate whether or not the entire number of the Initial Shares has been subscribed, the share subscription payment has been fully made, etc., and report to the promoter(s) the results of their investigation.

(h) Constituent General Meeting for the Boshu - setsurittsu - Immediately after the date (or period) of the share subscription payment, the constituent general meeting of share-subscribers, namely, promoter(s) and non-promoter share subscriber(s), must be convened for the following matters on the agenda:

In addition to these statutorily required matters, the constituent general meeting may, in compliance with the Company Law or the articles of incorporation of a KK, pass resolutions on matters including, inter alia, the amount of ceiling of director’s and/or statutory auditors’ remuneration.

(i) First Meeting of the Board of Directors for Boshu-setsuritsu and Hokki-setsuritsu - Immediately after assumption of office by the directors, the first meeting of the Board of Directors must be physically convened for the following matters and others:

(j) Registration of Incorporation - Within two weeks after the date of the investigation report in the case of the Hokki-setsuritsu or the date of conclusion of the constituent general meeting in case of the Boshu-setsuritsu, a representative director must file an application for registration of incorporation of a KK and pay the registration tax of 0.7% of the Capital (but not less than \150,000).

In the ordinary course of business of the LAB, it will take about two weeks to consummate the relevant registration at the said authorities. Regardless of the time required for the registration, a KK comes into existence effective as of the date of filing of said application for registration.

Upon completion of the registration, a certified copy of said registration becomes available.

(k) Transfer of Share Subscription Money to a KK’s Account - The Recipient Bank, once it has confirmed the incorporation of a KK by a certified copy of the company registration, will release to a KK the Share Subscription Money held by it in suspense.

(l) Issuance of Share Certificates - The issuance of share certificates is not mandatory under the Company Law, unless otherwise provided for in the articles of incorporation. If the share certificates are not issued, shareholders may request at any later date the issuance of share certificates. Under the Company Law, the shareholders listed in the shareholders’ register are entitled to assert their status against a KK and to exercise their shareholders’ rights based on the shareholders’ register. No share certificates are required for exercise of the shareholders’ rights.