Yugen Kaisha (YK)

Yugen kaisha (YK) is a fairly well-known form of limited liability company that became widespread in Japan between 1940 and early 2006. However, in June 2005 the Companies Act was established in Japan, which led to the abolition of the yugen kaisha business form. The bill changed the yugen kaisha form into kabushiki kaisha (KK)—and then were into godo gaisha (GG), a joint-stock company that is still the most popular Japanese business form. Yugen kaisha’s corporate administration was also changed through the corporation law.

What is the Yugen Kaisha

The German GmbH was the basis for the yugen kaisha corporate structure, as it was a limited liability company and the most popular corporation type in Germany as well. The Japanese structure was used mainly by not the largest businesses with a maximum shareholders’ number of 50 people. The collective capital contribution required by the shareholders (members) was 3 million yen. Yugen kaisha form was required to have only one director, and there was no requirement of a full board of directors.

After the Companies Act 2005 came into force on May 1, 2006, the creation of a new yugen kaisha was no longer possible, the structure was replaced by gogo gaysha.

More about the Yugen Kaisha

A yugen kaisha can be considered as a subchapter S corporation, when KK can rather be called a standard corporation. A  kabushiki kaisha implies less stringent procedures in terms of accounting and operational activities than the yugen kaisha. The owners of the yugen kaisha have limited liability, however, the restrictions also affect the transfer of shares to the public.

Japan is considered to be a country of small businesses, since about 70% of all Japanese companies have less than 20 employees. The main advantages of the yugen kaisha form were a simplified structure and relatively mild registration requirements, which allowed small businesses to enter the market. However, there were examples of the use of this form of registration by large companies, such as ExxonMobil, for example. Nowadays, many Japanese companies prefer to have a gogo gaysha, because this type is considered to be big and prestigious in Japan.

Changes in capitalization requirements affected the yugen kaisha and kabushiki kaisha companies in 1991 by changing the amount of capitalization for yugen kaisha companies from $1,000 to $30,000. At the same time, the minimum size of capitalization amount for kabushiki kaisha raised from the value of $4,000 to the value of $100,000.