Japanese Medical Corporations, or "Iryo Hojin" (医療法人), are established with the objective of providing stable and continuous healthcare services, contributing to the public interest. However, like any corporate entity, they are not immune to circumstances that may lead to their cessation. The dissolution (解散 - kaisan) of an Iryo Hojin is a formal legal process governed by Japan's Medical Care Act (医療法 - Iryou Hou), which outlines specific grounds upon which these specialized corporations can be wound up. Crucially, the path to dissolution often involves navigating requirements for approval from supervisory authorities, particularly the prefectural governor. This article details the various circumstances that can trigger the dissolution of both "Shadan" (association-type) and "Zaidan" (foundation-type) Iryo Hojin and clarifies when governmental approval is a prerequisite versus when a simpler notification procedure applies.

The Nature of Dissolution for an Iryo Hojin

When an Iryo Hojin undergoes dissolution, it signifies the termination of its regular medical and any approved ancillary business activities. However, the legal personality of the corporation does not vanish immediately upon the occurrence of a dissolution event. Instead, the Iryo Hojin enters a liquidation period (清算 - seisan). During this phase, it is deemed to continue in existence solely for the purpose of winding up its affairs. This involves settling debts, collecting receivables, disposing of assets, and ultimately distributing any residual property according to legal and an internal rules (Medical Care Act, Art. 56-2). Only upon the formal completion of this liquidation process does the Iryo Hojin legally cease to exist.

Grounds for Dissolution of a Shadan Iryo Hojin (Association-Type)

The Medical Care Act (Article 55, Paragraph 1) specifies the following grounds for the dissolution of a Shadan Iryo Hojin:

1. Occurrence of a Dissolution Event Stipulated in its Articles of Incorporation (定款をもって定めた解散事由の発生 - Teikan o motte sadameta kaisan jiyuu no hassei): The Articles of Incorporation (Teikan), which serve as the Shadan's constitutional document, may themselves specify certain conditions, events, or a specific date upon which the corporation will dissolve.
2. Impossibility of Achieving its Business Purpose (目的たる業務の成功の不能 - Mokuteki taru gyoumu no seikou no funou): If circumstances arise that render it genuinely and objectively impossible for the Shadan to continue fulfilling its stated medical objectives and purposes as defined in its Teikan. This is not merely financial difficulty but a fundamental inability to pursue its core mission.
3. Resolution of the Members' General Meeting (社員総会の決議 - Shain soukai no ketsugi): The members of a Shadan Iryo Hojin can affirmatively vote to dissolve the corporation. The Medical Care Act (Art. 55(2)) typically requires a special majority for such a resolution, such as the consent of at least three-fourths of all incumbent members, unless the Teikan itself stipulates a different (though still typically substantial) voting threshold.
4. Merger (合併 - Gappei) with Another Iryo Hojin: If the Shadan Iryo Hojin merges with another medical corporation and, as a result of the merger, it is the entity that legally ceases to exist (i.e., it is absorbed by another Iryo Hojin or consolidated into a newly formed one).
5. Absence or Complete Loss of All Members (社員の欠亡 - Shain no ketsubou): Since a Shadan is fundamentally an association of its members (shain), if it loses all its members (e.g., through resignation, death, or disqualification) and no new members are admitted in accordance with the procedures laid out in its Teikan, this lack of a constituent membership base can lead to its dissolution.
6. Commencement of Bankruptcy Proceedings (破産手続開始の決定 - Hasan tetsuzuki kaishi no kettei): If the Iryo Hojin becomes insolvent to the point where it cannot meet its financial obligations, and a court formally initiates bankruptcy proceedings against it.
7. Revocation of its Establishment Approval (設立認可の取消し - Setsuritsu ninka no torikeshi): In cases of serious legal violations, prolonged operational deficiencies, or other severe misconduct, the prefectural governor or other competent supervisory authority that granted the initial approval for the Iryo Hojin’s establishment may revoke that approval, leading to its mandatory dissolution.

Grounds for Dissolution of a Zaidan Iryo Hojin (Foundation-Type)

For Zaidan Iryo Hojin, which are established based on an endowment of assets, the grounds for dissolution are outlined in the Medical Care Act (Article 55, Paragraph 3). They are similar in some respects to Shadan, but with key differences reflecting their non-membership structure:

1. Occurrence of a Dissolution Event Stipulated in its Act of Endowment (寄附行為をもって定めた解散事由の発生 - Kifukukoui o motte sadameta kaisan jiyuu no hassei): The Act of Endowment (Kifukukoui), the foundational document of a Zaidan, may specify particular events or conditions that would trigger its dissolution.
2. Impossibility of Achieving its Business Purpose (目的たる業務の成功の不能 - Mokuteki taru gyoumu no seikou no funou): Similar to a Shadan, if the Zaidan finds it impossible to continue pursuing its endowed medical purpose.
3. Merger (合併 - Gappei) with Another Iryo Hojin: If the Zaidan Iryo Hojin is the entity that ceases to exist following a merger.
4. Commencement of Bankruptcy Proceedings (破産手続開始の決定 - Hasan tetsuzuki kaishi no kettei): Identical to the ground for Shadan.
5. Revocation of its Establishment Approval (設立認可の取消し - Setsuritsu ninka no torikeshi): Identical to the ground for Shadan.

Notably, "absence of members" is not a ground for Zaidan dissolution, as they are not membership-based. Furthermore, while the Council (評議員会) of a Zaidan plays a key governance role, a "resolution of the Council to dissolve" is not listed as a direct statutory ground for dissolution in the same way a members' resolution is for a Shadan. However, a determination of "impossibility of achieving purpose" would likely involve significant deliberation and decision-making by the Zaidan's Council and Board of Directors.

The Crucial Role of Governor's Approval (知事の認可 - Chiji no Ninka) for Certain Dissolutions

A critical aspect of the dissolution process for many Iryo Hojin is the requirement for prior approval (認可 - ninka) from the prefectural governor. The Medical Care Act (Article 55, Paragraph 6) specifies that for certain grounds of dissolution, this gubernatorial approval is an absolute prerequisite for the dissolution to become legally effective. Without this ninka, any internal decision to dissolve on these grounds is legally void.

This mandatory prior approval applies in the following circumstances:

1. Dissolution due to the Impossibility of Achieving its Business Purpose: This applies to both Shadan and Zaidan Iryo Hojin. If either type of medical corporation concludes that it can no longer fulfill its fundamental operational objectives.
2. Dissolution by a Resolution of the Members' General Meeting: This applies specifically to Shadan Iryo Hojin. When the members vote to dissolve their corporation.

Rationale for Requiring Governor Approval:
The requirement for governor approval in these instances serves as an important public interest safeguard. It allows the supervisory authority (the prefectural government) to:

• Assess the legitimacy and necessity of the proposed dissolution.
• Ensure that the cessation of the Iryo Hojin’s services will not unduly disrupt patient care or negatively impact access to essential healthcare services in the community.
• Oversee the proposed plan for the winding-up of affairs, particularly the proper settlement of liabilities and the disposition of any residual assets (especially critical for non-equity holding Iryo Hojin, where assets typically revert to the state or another non-profit entity).

Application for Dissolution Approval:
When an Iryo Hojin seeks to dissolve on grounds requiring approval, it must submit a formal application (解散認可申請書 - kaisan ninka shinseisho) to the prefectural governor. The application package typically includes:

• A detailed statement outlining the reasons for the proposed dissolution.
• Documentary evidence that all necessary internal corporate procedures for deciding on dissolution have been duly followed (e.g., certified minutes of the Members' General Meeting resolution for a Shadan).
• A current inventory of the Iryo Hojin’s assets and a balance sheet.
• A comprehensive plan detailing the proposed method for the disposition of any residual assets that may remain after all debts and liabilities have been settled.

Dissolutions Requiring Notification, Not Prior Approval (届出 - Todokede)

For certain other grounds of dissolution, the Medical Care Act does not require prior approval from the governor for the dissolution itself to be legally effective. However, in these cases, a formal notification (届出 - todokede) of the dissolution must be made to the prefectural governor by the appointed liquidator(s) without delay after the dissolution event has occurred (Medical Care Act, Article 55, Paragraph 8).

These grounds, which necessitate notification rather than prior approval, include:

1. Dissolution due to the Occurrence of a Dissolution Event Specifically Stipulated in the Iryo Hojin’s own Articles of Incorporation (for Shadan) or Act of Endowment (for Zaidan).
2. For Shadan Iryo Hojin only, dissolution due to the absence or complete loss of all members (shain no ketsubou).

Content of the Dissolution Notification:
When submitting this notification, the liquidator(s) typically must provide documents such as:

• Proof of the dissolution registration with the Legal Affairs Bureau.
• An asset inventory and balance sheet as of the date of dissolution.
• The plan for the disposition of residual assets.
• Details of the appointed liquidator(s), including their resumes and letters of acceptance of office.

Special Cases: Merger, Bankruptcy, and Revocation of Establishment Approval

• Merger: When an Iryo Hojin dissolves as part of a merger, the dissolution is intrinsically linked to the merger process itself, which has its own distinct approval and registration requirements. The dissolving entity legally ceases to exist upon the effectiveness of the merger.
• Bankruptcy: If an Iryo Hojin dissolves due to the commencement of formal bankruptcy proceedings, the process is primarily governed by Japan's bankruptcy laws. A court-appointed bankruptcy trustee typically takes over the management of the corporation’s assets and affairs to satisfy creditors.
• Revocation of Establishment Approval: In the rare and serious event that dissolution is triggered by the prefectural governor (or other supervisory authority) revoking the Iryo Hojin’s original establishment approval, the subsequent registration of dissolution with the Legal Affairs Bureau is often initiated by an official commission (shokutaku - 嘱託) from the governor's office itself, rather than by an application from the (now dissolving) Iryo Hojin.

Implications for Stakeholders

The various grounds for dissolution and the associated approval or notification requirements have several implications:

• Risk Assessment: For entities transacting with or having a significant interest in an Iryo Hojin (e.g., creditors, long-term partners, employees), understanding the potential dissolution triggers—both statutory grounds and any specific conditions laid out in its foundational documents—is a component of ongoing risk assessment.
• Governor's Role as a Public Interest Safeguard: The requirement for gubernatorial approval for certain types of voluntary or necessity-driven dissolutions acts as a crucial check. It ensures that such decisions are not taken lightly, improperly, or in a manner that could severely compromise community access to necessary healthcare services or lead to the inappropriate dispersal of assets dedicated to public benefit.
• Process for Creditors and Other Claimants: The initiation of dissolution signals the commencement of a liquidation process. During liquidation, legally mandated procedures are followed to notify creditors, collect outstanding claims, and settle the Iryo Hojin’s liabilities from its available assets before any final disposition of residual property.

Conclusion

The dissolution of a Japanese Medical Corporation is a formal legal process with clearly defined grounds stipulated in the Medical Care Act, differing slightly for Shadan and Zaidan types. A critical distinction lies in the requirement for prior approval from the prefectural governor for dissolutions arising from the impossibility of achieving business purposes or, in the case of Shadan Iryo Hojin, from a resolution of its members. Other specific grounds, such as the occurrence of a dissolution event predefined in the corporation's own foundational documents or the complete loss of members for a Shadan, require only a subsequent notification to the governor by the liquidators. These regulatory controls, particularly the approval mechanism, underscore the public-interest nature of Iryo Hojin and are designed to ensure that their cessation is managed in an orderly manner that considers the impact on patient care and the community, and ensures the proper handling of assets dedicated to healthcare.