What leads to the success of transitioning to Business Manager Visa in Japan is a unicorn not for not only founders but also many immigration specialists.
The Business Manager Visa application is one of the most difficult applications to get approved in Japan. As of the end of 2020, the number of business visa holders was 27,235 which consists of only 0.9% of entire visa holders (total visa holders in 2020: 2,887,116). The acceptance of residential status depends on diplomacy and the relationship with the other jurisdiction in Japan, so it’s hard to peg a clear guideline and timeline. That being said, we still want to find what makes the application successful.
The criteria of applying for a Business Manager Visa:
As on now, the criteria remains quite traditional.
- A dedicated office space
- 5 million JPY initial investment (or hire 2 full-time employees with stable residential status)
In order to successfully renew a Business Manager visa, the immigration bureau closely examines the financial status of your company. The key is finances will reflect that the business has been “sustainably” operated.
- Positive cash flow
- Annual 10 million JPY revenue
These are two of the main evaluation criteria many immigration specialists refer to. According to the latest update about Business Manager Visa criteria, the immigration bureau does not turn down the applications as soon as the cash position goes negative. As long as the company has a plan to stabilize the business within a year, the immigration bureau considers the business is going to be sustainable especially if you submit the renewal application along with a capital planning sheet written by a CPA (Certified Public Accountant) or a small and medium enterprise consultant.
Important note: if the cash position is in the negative for two consecutive years, the business is perceived to be “unsustainable.”
Startup with negative cash position?
This is often the disparity between the traditional immigration guideline and the nature of “startups.” Startups sometimes go through negative operating cash flows for the first couple of months (or years) depending on the business model. To scale, they target investment.
Types of investment
For early-stage startups, JKISS & convertible note are the common ways to get the first round of investment. According to Ministry of Economic, Trade and Industry (METI onwards), there are usually two types of investment for startups.
- Convertible Equity (= JKISS in Japan)
- Convertible Note
Convertible Note has been traditionally the most common way of the first round of investment, but the focus of METI is shifting over to JKISS.
If a startup receives investment via JKISS, the company books it as “Stock Acquisition Rights” according to Article 238 of the Companies Act and the guideline specified by ASBJ (Accounting Standards Board of Japan). Stock Acquisition Rights are considered as “net asset” and financially it’s positive.
According to the report from METI published on December 28th, 2020, the focus is becoming convertible equity (=JKISS).
The financial statement would be considered “good” for Business Manager Visa application (or even renewal) since the cash position stays positive.
METI classifies convertible debt into three categories on their report,
- convertible note
- convertible bond
- convertible loan
Although, all of these convertible debts are considered “Long Term Liability” and financially considered as “debt.”
Catch the wave to the mainstream
METI considers the risk for founders, and the investment method with Convertible Equity is getting the mainstream of startup finance.
Japanese legal advisors and the entire system are catching up the latest investment structure, and I’ve begun to meet several investment lawyers who specialize in investment contracts.
On the other hand, the immigration system itself is still built for traditional business owners and investors, and the Business Manager Visa applications for scalable startup founders sometimes goes against the current criteria.
It still takes time to overcome the silo administration, but let’s hope the current wave of evolving tech startups in Japan will transform the traditional system.
Seek More Advice on How to Navigate the Complexities of Japan Visa Pathways
Startup Work Inc. based in Tokyo, leads in supporting Shibuya's Startup Visa. With bilingual support staff and extensive, practical experience working with startups, Startup Work Inc. provides a leading source for supporting individuals and startup businesses in Japan.
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