In the 21st century, terrorist financing has become a new method of money laundering, and the connection between organized crime groups and terrorists has imposed great dangers to the national security of various countries, the most shocking events of which being the 9/11 incident in the United States. The combination of money laundering and terrorist financing will seriously affect the national security of countries around the world.

In response to the international demand for anti-money laundering and counter-terrorist financing, the Japanese government has implemented the Company Beneficial Owner List System from January 31, 2022, which, from the perspective of crime prevention, will increase the transparency of the company by informing the authority of the beneficial owner. This has laid a good political foundation for the Japanese government to reduce money laundering and counter-terrorist financing in the future.

Financial institutions, such as banks, is under the impact of beneficial owner registration and is liable for legal consequences regarding beneficial owner regulation. Before working with a new client company, the financial institutions need to identify the stakeholders in the company, in order to prevent money laundering and anti-social risks. It may lead to stricken rules and increasing difficulty for new company to open corporate bank accounts in Japan.

In this guideline, Kaizen will briefly introduce the registration system of beneficial owner in Japan based on publications of the Ministry of Justice. It also describes the target of this registration system and application procedures, to serve as a reference for Kaizen’s existing clients and potential clients. In addition, Kaizen can assist in providing registration services for Japanese companies, please contact our professional consultant for further enquiries.

1. Summary of the system
   
   The Company Beneficial Owner List System (Japanese "実質的支配者リスト制度") is a system in which the Commercial Registry Office keep records of the Register of Beneficial Owner(s) upon the company’s prior registration (including a limited company with a special status) and provide a copy of the Register of Beneficial Owner(s) (with a government certification letter and the seal of the Legal Affairs Bureau) for the company’s use. After the company submitting the Register of Beneficial Owner(s) to the Commercial Registry Office, and the authority will produce a certificated copy of the Register of Beneficial Owner(s) after confirming that the contents of the Register of Beneficial Owner(s) and additional information are correct.
   
   A corporation (Kabushiki Kaisha, Japanese “株式会社”) may utilize the system free of charge by submitting the Register of Beneficial Owner(s) to the Legal Affairs Bureau. The submission of the register of Beneficial Owner(s) and additional information may be made by mail.
   
   The current system of Register of Beneficial Owner(s) is not mandatory, but it is subjected to change in the future.
   
   
2. Target Group
   
   A corporation operated by “majority rule principle” (including a limited company with a special status, the same hereinafter) may utilize the system of the Register of Beneficial Owner(s).
   
   Remarks:
   

   (1)

   The term " majority rule principle " refers to the condition in which the person who contributes the higher amount of capital to a company, such as a corporation or limited liability company, has the right to vote on the resolution of the company.

   (2)

   The above mentioned "a limited company with a special status" refers to a limited company (Japanese “特例有限会社”) that had the nature of a corporation (Kabushiki Kaisha, Japanese “株式会社”) before the implementation of the Companies Act of May 1, 2006 (Japanese "会社法"). These limited companies are not allowed to change the name from "limited company" to "Kabushiki Kaisha," but there is no statutory limitation on the term of the officers, and there is no obligation to make a settlement announcement.

   
   
3. Definition of Beneficial Owner
   
   The beneficial owner in the Register of Beneficial Owner(s) are the natural persons stipulated in Article 11, Item 2, No. 1 of the Act on Prevention of Transfer of Criminal Proceeds (Japanese “犯罪による収益の移転防止に関する法律”). It refers to the persons in the following two categories:
   

   (1)	A natural person who directly or indirectly holds more than 50% of the total voting rights of the Company;
   (2)	(If there is no such person) a natural person who directly or indirectly holds more than 25% of the total voting rights of the Company;

   
   It is worth noting that the State, local public bodies, impersonal societies, consortiums, listed companies and their subsidiaries may also be regarded as natural persons under certain circumstances.
   
   
4. Procedures
   
   According to the Legal Affairs Bureau, the following process should be followed when the Company intends to obtain a copy of the Register of Beneficial Owner(s):
   

   (1)	Compile a Register of Beneficial Owner(s);
   (2)	Prepare the Application for Retention and Delivery of Copies of the List of Information on Beneficial Owner(s) by filling in the prescribed form;
   (3)	Prepare additional information, if any;
   (4)	Submit the Register of Beneficial Owner, the Application for Retention and Delivery of Copies of the List of Information on Beneficial Owner(s), and additional information to the Legal Affairs Bureau in the company’s jurisdiction;
   (5)	If a third party is appointed to submit the application, a letter of appointment in the prescribed form should be submitted together with documents specified in point 4;
   (6)	Await for confirmation notice while the Legal Affairs Bureau examine the submitted documents;
   (7)	Receive a copy of the Register of Beneficial Owner(s) (with a government certification letter and the seal of the Legal Affairs Bureau) issued by the Legal Affairs Bureau;
   (8)	For re-issue of the Register of Beneficial Owner(s), prepare and submit Request Form for Redelivery in the prescribed form.

   
   
5. Supplementary Submission - Additional Information
   
   Additional information includes, but is not limited to:
   

   (1)	A copy of the Register of Shareholders in effect on the date of application by the Corporation (Kabushiki Kaisha, Japanese “株式会社”);
   (2)	In the event of inconsistencies between the Register of Beneficial Owner(s)s and the register of shareholders, explanatory information on the reasons for such inconsistencies shall be submitted;
   (3)	Identity confirmation document of the beneficial owner(s) (copy of driver's license, copy of resident's card, copy of passport, etc.);
   (4)	If the submission is entrusted to a third party, the authorised third party should submit document (i.e., a letter of appointment) evidencing the authority to act.