The best investment method for transitioning to a Business Manager Visa
Photo by Precondo CA on Unsplash
What leads the success of transitioning to Business Manager Visa in Japan is a mystery for not only founders but also many immigration specialists.
The acceptance of residential status applications often depends on vague factors like diplomacy and relationship with the other jurisdictions in Japan, so it’s hard to map out clear guidelines or even timelines. That being said, we still want to find what makes the application successful when it comes to the Business Manager Visa application, one of the most difficult applications to pass. As of the end of 2020, the number of Business Manager Visa holders was 27,235, which makes up only 0.9% of the entire visa holder population of 2,887,116. [reference]
The baseline criteria of applying for a Business Manager Visa
As all of you know, the criteria is quite traditional as of now.
5,000,000 JPY initial capital investment (or hire 2 full-time employees with stable residential status)
A dedicated office space
Renewal
In order to renew the Business Manager Visa, the immigration bureau looks very closely at the financial status of your company. The key focus point is that your business is operating “sustainably”, which means that you have:
Positive cash flow
Annual 10 million JPY revenue
These are two of the main evaluation criteria that many immigration specialists refer to. According to the latest update about the 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 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.
Conversely it is important to note that if the cash position goes negative for two years in a row, the business is perceived as “unsustainable”.
What if I am a startup with a 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 first, they target investment.
Types of investment
For early stage startups, J-KISS & convertible notes are the common ways to get the first round of investment. According to Ministry of Economic, Trade and Industry (METI), there are mainly two types of investment for startups.
Convertible Equity (known as J-KISS in Japan)
Convertible Note
Convertible notes have traditionally been the most common way of the first round of investment, but J-KISS has recently gained traction thanks to METI’s efforts.
J-KISS
If a startup receives investment via J-KISS, 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 is financially positive.
According to the report from METI published on December 28th, 2020, the investment focus is starting to shift towards convertible equity in the form of J-KISS.
The financial statement would be considered “good” for the Business Manager Visa application (or even renewal) since the net asset position is seen as positive.
Convertible Note
METI classifies convertible debt into three categories on their report,
convertible note
convertible bond
convertible loan
but all of these convertible debts are considered as “Long Term Liability” and is financially considered to be “debt”.
Catch the wave & catch the mainstream
Photo by Oliver Sjöström on Unsplash
METI considers the risk for founders, and the investment method of convertible equity through J-KISS is beginning to enter the mainstream of startup finance.
Japanese legal advisors and the entire systems are starting to catch up to the latest investment structures, and we have started 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 go against the current criteria.
It will still take some time to overcome the current siloed administration, but let’s hope the current wave of evolving tech startups in Japan will transform the traditional system.
