Beware: Opening corporate bank accounts is becoming increasingly difficult!

Opening corporate bank accounts has become more and more difficult year by year. Since we posted our article about the procedures for opening corporate bank accounts in Japan, the procedures and policies at Japanese banks have become much stricter. These procedures and policies have become so strict that even Japanese nationals have difficulties opening corporate bank accounts when incorporating a company.

Unless you are able to open a corporate bank account, you will be virtually unable to conduct business since you will not have a bank account for your clients and customers to make their payments to you or for you to pay your business expenses.

The screening criteria for opening a corporate bank account are not disclosed and they vary from bank to bank, thereby making [opening a corporate bank account] a guessing game. Below are the explanations of grounds for which a bank may refuse to allow you to open a corporate bank account.

Common problems for people in Japan and abroad

Is there a proper office?

Financial institutions such as banks place great importance on the location where the business is conducted. In the case of a virtual office, it is difficult [for the bank] to grasp the actual situation, and the bank may refuse to allow you to open a corporate bank account for that reason. Further, some financial institutions may refuse to allow you to open a corporate bank account if the registered address of the head office and the actual place of business are different.

Please note that in certain cases people have been rejected by the banks when the business is conducted at their home.

Whether there is a landline

Some people think that they don't need a landline because they can be contacted on their mobile phone.

However, among financial institutions, such as banks, some consider the “presence or absence of a landline telephone” as one of the requirements for opening a corporate bank account.

Details of the business are unclear

If the business details and purpose of the business are unclear, you may be turned down for that reason alone.

In theory, you can register several objectives of the company. That being said, if you do list 20 or 30 business objectives, it may be unclear to the bank what the nature of the company’s objectives are and therefore may refuse to allow you to open a corporate bank account.

Insufficient Capital

If the company has insufficient capital, the bank may consider the company to lack credibility, and therefore refuse to allow you to open a corporate bank account.

Although there is no fixed amount for the company’s initial capital; as a general rule, you will need at least 1 million yen. Please keep in mind that you will need minimum capital of 5 million yen if you are applying for a business manager visa. If so, this problem may not apply to you.

Special circumstances when establishing a company in Japan from abroad

There is no one in Japan to manage the business

As a general matter, a company can be incorporated in Japan [by a foreign company] even if none of the directors of the company incorporated in Japan actually reside in Japan. However, that would mean that there would be no one in Japan who would be responsible for managing the company incorporated in Japan.

In cases like this, if there are no directors in Japan, banks will almost always refuse you to open a corporate bank account.

No controlling beneficial owner of the company in Japan

When opening a corporate bank account, the bank will check who the controlling beneficial owner of the company is. If there is no controlling beneficial owner in Japan, the bank has no way to screen and confirm the controlling beneficial owner, and as a result, the bank may refuse to open an account. This trend is particularly evident in small and medium-sized financial institutions.

Support by Kobe Legal Partners

From time to time, clients who have already established a company come to us for legal advice after a bank has refused to open a corporate bank account. Unfortunately, at that point, we are unable to help them after they have already set up their companies.

On the other hand, if you have not yet set up your company, we may be able to assist you using banks affiliated with our office and who can conduct a preliminary screening. However, there are two conditions for this preliminary screening. The first condition is that you have asked our office to set up your company and the second condition is that the company’s founder or prospective directors reside in Japan.

However, if the conditions are not met, you will not be able to receive a preliminary review.

Please note that the preliminary screening does not guarantee that you will be able to open an account, and you may be refused as a result of the screening. If the preliminary screening is approved, you will be able to open a corporate bank account as soon as the company registration is complete.

Summary

It is necessary to take steps to open a corporate bank account when you are setting up a company.

If you register your company without opening a corporate bank account, there is a risk that you will not be able to open a bank account later and consequently will not be able to do business. When establishing a company, please take this into consideration as you proceed.