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Japan is the third-largest economy in the world, offering a stable environment for business. The robust economy, excellent infrastructure, and reliable tax system make it a valued place for global investors. According to recent statistics, 49% of businesses consider  Japan an attractive destination as a test market, and 40.5% believe it suits business expansion. To expand a business in Japan, it is crucial to conduct thorough due diligence. Building partnerships in the Asian market requires compliance with the country’s jurisdiction and regional laws. Verifying a company in Japan without in-depth knowledge is exposed to financial risks, as verification involves navigating government databases, analyzing company registry filings, and screening corporate documentation. 

In this read, let’s explore the method of verifying the business and business persons in KYB Japan.

How to Verify if a Company is Registered in Japan?

In Japan, business verification involves collecting and screening business information against the official registries. The business verification process comprised multiple government agencies instead of a single parent registry, which solely maintains the business register. The primary government agencies playing a crucial to verify a company in Japan include: 

• Legal Affairs Bureau

The Legal Affairs Bureau (Hōmukyoku) plays a significant role when it comes to verify a company in Japan operating under the Ministry of Justice. The businesses, including corporations, limited liability companies, and foreign entities, are registered with the Legal Affairs Bureau. 

• National Tax Agency 

The National Tax Agency maintains a public database of corporate numbers, which can be accessed to verify a company’s tax identification. This database allows individuals and other businesses to confirm the validity of a company’s corporate number, helping to verify its existence and tax registration.

• Ministry of Economy, Trade and Industry  

In Know Your Business KYB for corporate clients, the crucial role of METI is to deal with industry-specific regulations and compliance. METI oversees the issuance of licenses and permits required for particular industries and business activities.

Although each agency has a specific role in the overall business KYC process in Japan, the National Tax Agency is the most reliable. The NTA’s comprehensive records on Corporate Numbers make it a crucial source for verifying the legitimacy and compliance of businesses operating in Japan.

Step-by-Step Guide to Verify a Company in Japan

At the National Tax Agency site, follow these steps to verify a company in Japan:

• Open NTA’s site: When you open NTA’s site, which is available in Japanese and English, the home tab offers a search for the company. 

• Search Options: To verify a company in Japan, you have two options: to start by searching by its name, address, etc., or by searching by its corporate number.

• Option 1: When you select to search with name, address, etc, you can search the company with name through partial match search or prefix search. Additionally, you can search by address or other conditions, including corporation type and change history.

• Option 2: When you click on search with a corporate number, you are directly led to the search bar, which requires a 13-digit corporate number.

• Results: By searching with a company name, the following results are shown

• Physical Address
• Registration Number
• Date of Registration
• Capital
• Tax ID

Challenges of Business Verification in Japan

Verify a company in Japan is subject to many hindrances during company verification due to multiple reasons, a few of which are stated below;

• No Single Parent Registry

One of the primary hindrances to verifying businesses is that this country has no single-parent registry that solely manages business registration. If a foreign business person comes to verify a company in Japan, it gets challenging to identify the official registry for business verification. The National Tax Agency site provides business information, but for documentation, licenses, and permits, you have to navigate through multiple agencies. Relying on multiple platforms for the verification process causes hassle and disruptions in business continuity.

• Corporate Number Misunderstanding 

At the NTAs site, when you enter the business name, the corporate number is given among business information results. The second option is just to enter the corporate number, and the business information will show. However, the corporate number itself is a major misunderstanding for the foreigner who comes to verify business. In Japan, the corporate number is actually the company registration number and its tax ID. The corporate number serves as a unique identifier for legal entities to avoid confusion between businesses with similar names. Additionally, the corporate number is used to deal with tax authorities and regulatory bodies to streamline the tax filing process.

• Understanding of Company Type 

To verify a company in Japan, you must first understand its legal type as it is used in the Japanese language. Some common types are:

• Kabushiki Kaisha (KK): The most common corporation type is Kabushiki Kaisha, which is similar to a joint-stock company. It features shareholders with limited liability, a board of directors, and, optionally, a board of auditors. 
• Gōdō Kaisha (GK): Gōdō Kaisha is similar to a limited liability company LLC, offers flexible management and limited liability for members. Members (not shareholders) manage the company directly or appoint managers. 
• Yūgen Kaisha (YK): Previously popular but primarily replaced by GK. It was similar to KK, which had limited liability for shareholders and a board of directors.
• Gomei Kaisha: It is a traditional business structure in Japan that is similar to a general partnership. Unlike Kabushiki Kaisha (KK) or Gōdō Kaisha (GK), which offer limited liability, Gomei Kaisha requires all partners to be jointly responsible. 

For a foreigner, it is challenging to understand the company types in Japanese, which causes hindrances in making informed decisions. 

• Language Barrier

Corporate number identification is necessary to verify a company in Japan. The notification of the corporate number to be sent to a corporation designates the corporation’s corporate number. The notification of the corporate number is issued only in Japanese, not English. There are many business documents that exist in the Japanese language, which is the biggest impediment to company verification. Translating these documents without altering their meaning and purpose is another challenge, which creates a significant issue in company verification.

How to verify an Ultimate Beneficial Owner UBO in Japan?

In Japan, the Ultimate Beneficial Owner (UBO) is the individual who ultimately owns or controls who owns more than 50% of a legal entity, such as a corporation. A person or group may also be considered a UBO if they hold at least 25% of voting rights. The official business registry of Japan does not provide any beneficial ownership information. At the 2023 Summit for Democracy, Japan pledged to establish a beneficial ownership registry or an equivalent system to support this commitment, but the UBO register is still not live.

Conducting AML Checks on Businesses in Japan

Conducting anti-money laundering (AML) checks on businesses in Japan involves AML checks on the company and the people behind that company. The AML checks are necessary to perform on beneficial owners, directors, and shareholders to ensure compliance with regulatory requirements. It is necessary to check that UBO complies with AML laws, such as the Act on Prevention of Transfer of Criminal Proceeds. The background checks are applied to check whether businesses adhere to guidelines from the Financial Services Agency (FSA) and the Japan Financial Intelligence Center (JAFIC).

Japan Business License and Certificate Verification 

Many regulatory bodies in Japan regulate corporate compliance to ensure transparency in business regulatory compliance. A few prominent bodies responsible for business licenses and certification are discussed below;

• Financial Service Agency

The FSA is responsible for licensing and registering financial institutions and ensures that these institutions adhere to the regulations. The Financial service agency penalizes financial institutions for regulatory violations to make the marketplace a secure place for businesses. 

• Fair Trade Commission

The FTC takes action against Violations by companies engaged in anti-competitive practices and imposes penalties. The FTC also ensures that Japanese businesses fully comply with export control regulations. 

• Japan External Trade Organization

The KYB retrieves the trade data and market research guide and assists in navigating the regulations and Japanese business practices. 

• Tokyo Stock Exchange

Tokyo Stock Exchange is crucial for corporate compliance by providing data about the Japanese financial market and other data about regulatory insight.

The KYB – Your Partner In Business Success

Avoid the hassle of navigating multiple resources, language barriers, and misunderstanding about business type and corporate number by relying on the unified platform of The KYB. At the KYB, we have an extensive database of 60+ sources solely in Japan to verify the company in one go. The KYB consolidates business data from 250+ countries and states with extensive databases of 300M+ companies. Our fast API quickly retrieves business information from multiple official registries in Japan.  The KYB applies AML checks over the business and each shareholder in the participatory chain to detect high-risk profiles and comply with regulations. Relying on The KYB, we guarantee that our record-keeping facilitates data retrieval to verify a company in Japan smoothly.