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For entrepreneurs who plan to register a JV in Japan, it is advisable to familiarize yourself with the information provided by our experts in this blog post.

Partner relationships

If you are planning to register a JV with a Japanese partner, then it is worth considering some of the peculiarities of the land of the rising sun. When creating a JV, its partner must compete with each other. Hence, they should not share confidential information. There are only a few exceptions to this rule. For example, when the majority of shares are owned by one JV partner. These promotions are generally not subject to anti-competitive laws.

In terms of the partners' share in the capital, Japanese JVs can be with a smaller share of foreign capital, with a greater share of foreign capital, and joint ventures created on a parity basis.

The advantage of enterprises on a parity basis is the equality of partners, which ensures increased business efficiency and coordinated actions. The negative aspects in the functioning of these enterprises include the possibility of conflict situations, when one of the partners needs to take responsibility for resolving any issue of the joint venture's activities.

Enterprises with a greater share of foreign capital are created to ensure maximum control over the JV activities by foreign partners in Japan and, as a rule, in conditions when local partners do not have the financial resources to increase their share in the company. At the same time, the interest of the foreign participant in obtaining the due profit and in the prompt development of the invested resources increases. But local authorities, considering such an enterprise as foreign, may not provide it with certain benefits.

JVs with a smaller share of foreign capital are not a very favorable form of cooperation for foreign businessmen, since they usually seek to control the activities of the Japanese JV.

Management issues

Difficulties may arise in setting up a Japanese JV due to differences in ownership structure, goals and objectives, cultural traditions and management style. It is often very difficult for foreign companies to negotiate with state-owned enterprises, since they do not have a single decision-making center and they coordinate their actions with numerous government departments.

But a foreign company may not be the best partner for a local family company: a foreign manager must coordinate his actions with the headquarters, and the local business owner makes decisions alone. Companies of different types often have different goals. The family-owned company will be more interested in stable dividends for a small number of shareholders, rather than in increasing turnover and accelerating the pace of development and short-term growth in shareholder value, which is usually the goal of a public company.

A unique situation when establishing a joint venture in Japan may arise due to the fact that in many Japanese JVs the foreign-appointed director is a non-resident. That is why the foreign partner is generally concerned about the activities of the representative appointed by the local partner.

A good solution for a better understanding of the intricate corporate structure would be to order advice on the management of Japanese JVs from our company's experts.

Final word

This article is published for informational purposes only and is not a complete consultation. The issues discussed in the material require professional advice on international investment law.

You can order advice on the regulation of Japanese JVs from the IQ Decision UK legal advisors.