Drafting Compliant Articles of Incorporation for a Japanese Social Welfare Corporation: What are the Mandatory (Zettai-teki Kisai Jiko) Items?

Japanese Attorney at Law - Bengoshi L.L.

21 May 2025 • 8 min read

The Articles of Incorporation, or "Teikan" (定款), serve as the foundational charter for any Social Welfare Corporation (Shakai Fukushi Hojin, or SWF) in Japan. This document is not merely a formality; it is the constitution of the SWF, outlining its core identity, governance structure, and operational framework. The Social Welfare Act (Shakai Fukushi Hō) mandates that specific items, known as "Absolute-Essential Matters" (絶対的記載事項 - Zettai-teki Kisai Jikō), must be included in the Teikan. The omission of even one of these mandatory items renders the entire Teikan void, thereby preventing the establishment of the SWF. Therefore, understanding and correctly incorporating these elements is the first critical step in creating a legally compliant SWF. This article details these mandatory provisions as stipulated in Article 31, Paragraph 1 of the Social Welfare Act.

It's also noteworthy that the Articles of Incorporation can be created as an electronic document, adhering to specific requirements outlined in the Social Welfare Act Enforcement Rules (Articles 2-2 and 2-3).

I. The Nature and Importance of Absolute-Essential Matters (Zettai-teki Kisai Jikō)

The "Absolute-Essential Matters" are non-negotiable components of the Teikan. Their inclusion is mandated by law to ensure that every SWF possesses a clearly defined legal identity, a fundamental governance structure, and a transparent operational framework from its inception. These provisions provide a minimum standard of clarity and predictability for stakeholders, including beneficiaries, supervisory authorities (Shokatsu-cho), and the public. Any attempt to establish an SWF with Articles of Incorporation that fail to include all these items will be rejected during the Shokatsu-cho approval process, effectively halting the establishment.

II. Detailed Breakdown of Mandatory Items for the Teikan

The following items, derived from Article 31, Paragraph 1 of the Social Welfare Act, must be explicitly stated in the Teikan of any SWF.

1. Purpose (目的 - Mokuteki) (SWA Art. 31(1)(i))

The Teikan must clearly articulate the SWF's core purpose. This purpose must be the undertaking of either First-Class Social Welfare Services, Second-Class Social Welfare Services, or both, as defined under the Social Welfare Act. The specific services should align with these legal definitions and reflect the SWF's intended contribution to social welfare. While the primary focus is on these core welfare activities, the Teikan may also lay the groundwork for any ancillary public interest (公益事業 - Kōeki Jigyō) or profit-making activities (収益事業 - Shūeki Jigyō) the SWF might intend to conduct, although the specifics of these are often detailed as "relative matters" if pursued.

2. Name (名称 - Meishō) (SWA Art. 31(1)(ii))

The official name of the SWF must be stated. A critical legal requirement, as per Article 23 of the Social Welfare Act, is that entities other than SWFs may not use the characters "社会福祉法人" (Shakai Fukushi Hojin) or any confusingly similar characters in their name. Conversely, an SWF must include "社会福祉法人" in its official name. Beyond this, other general naming conventions apply: the name should not be misleading, identical to an existing SWF at the same registered address, or violate public order. Specific rules also govern the use of characters, symbols (e.g., Arabic numerals, ampersand, period, hyphen), and Roman letters in corporate names.

This section requires a concrete enumeration of the specific First-Class and/or Second-Class Social Welfare Services that the SWF will conduct. Simply stating a general intent is insufficient; the types of services (e.g., "operation of a special nursing home for the elderly," "provision of daycare services for children") must be clearly identified, aligning with the classifications and definitions provided in Article 2 of the Social Welfare Act.

4. Location of Office(s) (事務所の所在地 - Jimusho no Shozaichi) (SWA Art. 31(1)(iv))

The Teikan must specify the location of the SWF's principal administrative office (主たる事務所 - Shitaru Jimusho). If any secondary or branch offices (従たる事務所 - Jūtaru Jimusho) are to be established from the outset, their locations must also be included.
A key point of flexibility here concerns the level of detail. The Teikan may state the full, specific address down to the lot number. However, it is more common, and often strategically advantageous for operational flexibility, for the Teikan to specify only the minimum administrative district (e.g., city, special ward, town, or village) where the office will be located (e.g., "The principal office of this corporation shall be located in Chiyoda Ward, Tokyo."). If only the minimum district is stated, the SWF can relocate its office within that same administrative district without needing to amend its Teikan (although a separate registration of the change of address with the Legal Affairs Bureau is still mandatory). However, if the office moves outside the administrative district specified in the Teikan, a formal Teikan amendment (requiring Councillor Council approval and Shokatsu-cho notification) becomes necessary. For the actual corporate registration with the Legal Affairs Bureau, the full, specific address is always required.

5. Matters Concerning Councillors and the Councillor Council (評議員及び評議員会に関する事項 - Hyōgiin oyobi Hyōgiinkai ni Kansuru Jikō) (SWA Art. 31(1)(v))

Given the pivotal role of the Councillor Council in SWF governance (especially post-2017 reforms), the Teikan must include comprehensive provisions regarding this body and its members. This includes:

Provisions formally establishing the Councillor Council as an organ of the SWF.
The stipulated number of Councillors (or a specified range for the number).
The method for selecting Councillors. This method must ensure neutrality and independence; for example, Directors or the Board of Directors cannot be empowered to appoint Councillors.
Other relevant operational rules for the Councillor Council, such as specific procedures for convening meetings or passing resolutions if these are intended to vary from (or be more stringent than) the statutory minimums.

6. Number of Officers and Other Matters Concerning Officers (役員の定数その他役員に関する事項 - Yakuin no Teisū sonota Yakuin ni Kansuru Jikō) (SWA Art. 31(1)(vi))

The Teikan must specify the governance structure related to its executive officers (Directors and Auditors). This includes:

The number (or an acceptable range for the number) of Directors (理事 - Riji). The Social Welfare Act mandates a minimum of six Directors.
The number (or an acceptable range for the number) of Auditors (監事 - Kanji). The Act mandates a minimum of two Auditors.
Any other specific matters pertaining to officers that the SWF wishes to stipulate, such as particular qualifications beyond the statutory minimums, or specific roles if applicable (though the President's selection is typically a Board matter).

7. Matters Concerning the Board of Directors (理事会に関する事項 - Rijikai ni Kansuru Jikō) (SWA Art. 31(1)(vii))

Provisions for the establishment and functioning of the Board of Directors are mandatory. This would include:

A clause formally establishing the Board of Directors as an organ.
Potentially, specific rules concerning the Board's operations if the SWF wishes to define procedures beyond, or different from, the default provisions in the Social Welfare Act (e.g., setting a higher quorum, different notice periods for meetings if permissible, specific rules for the President's authority if delegated by the Board for routine matters).

8. Matters Concerning an Accounting Auditor (if one is to be appointed) (会計監査人を置く場合の事項 - Kaikei Kansanin o Oku Baai no Jikō) (SWA Art. 31(1)(viii))

If the SWF either chooses to appoint an Accounting Auditor (会計監査人 - Kaikei Kansanin) from its establishment, or is required to do so because it meets the criteria for a "Specified Social Welfare Corporation," the Teikan must include provisions for this role. This would involve:

A clear statement that an Accounting Auditor will be appointed.
Possibly details regarding their term of office or specific aspects of their selection process if these are intended to differ from the default statutory provisions.

9. Matters Concerning Assets (資産に関する事項 - Shisan ni Kansuru Jikō) (SWA Art. 31(1)(ix))

The Teikan must address the management and structure of the SWF's assets. Key aspects include:

Classification of Assets: A clear distinction must be made between "Fundamental Assets" (基本財産 - Kihon Zaisan) and "Other Assets." Fundamental Assets are those deemed essential for the SWF to carry out its core social welfare services (e.g., land and buildings for a nursing home). They are subject to much stricter rules regarding their disposal or use as collateral.
Disposal of Fundamental Assets: The procedures for disposing of, or offering as security, any Fundamental Assets must be detailed. This typically involves resolutions by both the Board of Directors and the Councillor Council, and often requires the approval of the Shokatsu-cho.

10. Matters Concerning Accounting (会計に関する事項 - Kaikei ni Kansuru Jikō) (SWA Art. 31(1)(x))

Provisions related to the SWF's financial management and reporting are essential. These include:

Fiscal Year: The defined fiscal year for the SWF (typically April 1st to March 31st in Japan).
Financial Reporting: Stipulations regarding the preparation and approval of annual business reports, balance sheets, statements of activities (or income and expenditure), cash flow statements, and associated financial documentation.
Financial Settlement and Audits: Procedures for finalizing annual accounts and conducting internal and (if applicable) external audits.

11. Matters Concerning Amendments to the Articles of Incorporation (定款の変更に関する事項 - Teikan no Henkō ni Kansuru Jikō) (SWA Art. 31(1)(xiv))

The Teikan must itself specify the procedure by which it can be amended. This typically involves:

A special resolution of the Councillor Council (requiring a supermajority, often two-thirds).
For most types of amendments, subsequent approval from the Shokatsu-cho is also required for the amendment to take legal effect (Social Welfare Act, Article 45-36). (Exceptions where only notification to the Shokatsu-cho is needed include changes to office location, certain increases in fundamental assets, and changes in the method of public notice ).

12. Method of Public Notice (公告の方法 - Kōkoku no Hōhō) (SWA Art. 31(1)(xv))

The Teikan must define how the SWF will make official public announcements (公告 - Kōkoku). These are required for various matters, including the disclosure of financial statements, calls for creditors upon dissolution, or announcements related to mergers or bankruptcy proceedings.
While there is no overarching legal requirement for publication in a specific newspaper for all types of notices, common practice, often reflected in Teikan provisions, includes:

Posting at the SWF's principal office bulletin board.
Publication in the Official Gazette (官報 - Kanpō), which is mandatory for certain critical notices like dissolution, creditor calls, and bankruptcy.
Publication in a daily newspaper with wide circulation.
Electronic public notice, such as posting on the SWF's official website, is an increasingly utilized method.

13. Initial Officers and Councillors (設立当初の役員及び評議員 - Setsuritsu Tōsho no Yakuin oyobi Hyōgiin) (SWA Art. 31, Paragraph 3)

As a specific requirement for the establishment phase, the Teikan (often in an addendum or supplementary provisions) must explicitly name the individuals who will serve as the SWF's very first Directors, Auditors, and Councillors. This ensures that the SWF has a legally constituted governance body from the moment of its formation. It is common for such Teikan to also include a clause stating that, following the SWF's legal establishment, formal elections or appointments for officers according to the main body of the Teikan will be conducted without delay.

III. The Importance of Precision and Compliance

The term "Absolute-Essential Matters" underscores their gravity. These items collectively form the minimum legal and operational DNA of the Social Welfare Corporation. Their precise and compliant inclusion in the Articles of Incorporation is fundamental because:

Legal Validity: As stated, omission voids the Teikan, rendering it legally ineffective.
Shokatsu-cho Approval: The supervisory authority will meticulously review the Teikan for the presence and adequacy of these mandatory provisions. Any deficiencies will lead to the rejection of the establishment approval application, halting the entire process.
Foundation for Operations: These clauses provide the basic rules and framework upon which all subsequent governance, management, and activities of the SWF will be built.

Given the legal complexities and the severe consequences of errors, it is highly advisable for founders of an SWF to seek professional legal advice, often from a judicial scrivener (Shihō Shoshi) or lawyer specializing in non-profit and corporate law in Japan, during the drafting of the Teikan. This helps ensure that all mandatory items are correctly interpreted and adequately addressed, aligning with both the letter of the law and the founders' intentions.

Conclusion

The Absolute-Essential Matters dictated by the Social Welfare Act are the non-negotiable bedrock of a Social Welfare Corporation's Articles of Incorporation. Careful, informed, and compliant drafting of these provisions is the first and most critical step towards establishing an operational and legally sound SWF in Japan. While these items form the mandatory core, the Teikan can be further shaped by "relative essential matters" (which must be in the Teikan to have effect, such as specifying types of public interest or profit-making businesses) and "optional matters" (other clauses the SWF chooses to include), which will be the subject of further discussion. Mastery of these foundational requirements is essential for any entity venturing into the establishment of this unique form of Japanese non-profit corporation.