Q18: What is the difference between a Japanese corporation and a Japanese branch regarding bankruptcy isolation for foreign corporations?
ringo tax corporation
Japanese Certified Public Accountant ・Tax Accountant Hiroya Aihara
Ringo Tax Corporation
A: Bankruptcy isolation refers to preventing the bankruptcy of subsidiaries or branches from affecting the parent company or head office. There is a significant difference between a Japanese corporation and a Japanese branch in this respect.
Q: What specifically are the differences between a Japanese branch and a Japanese corporation?
A Japanese branch is part of a foreign corporation, and its financial failure directly affects the headquarters. This means if the branch goes bankrupt, the headquarters may also bear the liabilities. On the other hand, a Japanese corporation is a separate legal entity from its parent company and does not fundamentally bear the parent company's responsibilities. The liability of shareholders is limited to their contribution amount, so the foreign corporation does not directly bear responsibility for the bankruptcy of a Japanese corporation.
Q: From the perspective of bankruptcy isolation, which is more advantageous?
A Japanese corporation is more advantageous because the bankruptcy of a Japanese corporation does not directly affect the foreign corporation, bringing financial stability to the parent company. In contrast, the bankruptcy of a Japanese branch affects the headquarters, increasing the risk. However, from the perspective of moral responsibility or reputational risk, the parent company often ends up bearing the burden in practice.
