Closing a Company in Japan: How to Shut Down and Retain Key Talent

1. Introduction: Why Companies Close Entities (But Keep Talent)

As a mid‑sized Singaporean firm, you might close a company in Japan to optimise costs, exit underperforming markets, or refocus strategy. But what if your local team holds invaluable client relationships, operational expertise, and regional knowledge? Letting them go risks operational disruption, IP loss, and costly re-entry delays.

With an Employer of Record (EOR) Japan solution, you can retain employees without entity, hire in Japan without entity, and fast-track employee transfer after entity closure—ensuring your key talent stays with you through the transition.

2. What Happens When You Close a Company in Japan

A. Liquidation & Deregistration Process

Japan’s Companies Act outlines the process for dissolving entities (K.K./G.K.):

1. Shareholder resolution to dissolve and appoint liquidators
2. File dissolution/appointment at Legal Affairs Bureau within 15 days
3. Public creditor notification: 2 months for subsidiaries, 45 days for branches
4. Liquidate assets, repay debts (including employees, taxes, creditors)
5. Submit final accounts and tax filings, then deregister—typically 4–6 months for solvent K.K.

Unexpected audits or creditor claims can extend the process to 9–12 months .

B. Obligations to Employees

Japan’s Labour Standards Act (LSA) and Labour Contract Law place strict limitations on termination:

• Notice: 30 days’ notice or equivalent pay required
• Severance: no statutory requirement, but custom and contracts often include it
• Termination must be objectively reasonable (e.g., redundancy, performance, misconduct)
• Protected categories: employees on medical leave, maternity leave, or those on childcare leave cannot be dismissed
• Dispute resolution: employees can challenge dismissals via Labour Tribunal or courts; reinstatement is rare, but payouts and back pay may be ordered

3. Risks of Talent Loss During Entity Closure

Without a solid plan, closures can lead to:

• Operational disruption due to loss of local expertise 
• IP or relationship erosion as employees leave 
• Client disengagement when familiar contacts vanish 
• High re-entry costs when rebuilding presence in Japan 

4. Retaining Employees Without a Legal Entity: What Are Your Options?

AYP’s EOR Japan enables you to hire in Japan without entity, retain employees without entity, and smoothly transfer employees after entity closure—without losing your team.

Explore our Employer of Record Japan solution.

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5. How EOR Helps You Retain Employees in Japan

What EOR Does (Simply Explained)

AYP legally employs your staff in Japan, handling:

• Labour-compliant contracts
• Payroll, social insurance, withholding taxes
• Notices, termination pay, severance if applicable
• HR administration and local filings

You retain full control over day‑to‑day tasks and management.

Transition Process

1. Plan – Identify roles to retain 
2. Terminate current contracts with 30-day notice or pay-in-lieu 
3. Onboard with AYP under new compliant contracts 
4. Transfer benefits: seniority, social credits, controllable protections 
5. Operate – Your team works as usual; AYP manages legal compliance 

This ensures full employee transfer after entity closure, avoiding talent loss.

Why AYP is Your Best Choice

• 1 business day onboarding 
• Deep expertise in Japanese employment and compliance
• ISO‑certified and regionally integrated
• Case-proven transitions without legal disruption

Discover more via our EOR Japan page.

6. Case Study: Retention with Zero Disruption

Company: Singapore-based SaaS firm

Japan Team: 12 developers and sales staff

Scenario: Strategic withdrawal from Japan but ongoing regional support required

Solution: Partnered with AYP EOR before issuing termination

Outcome:

• 100% staff retention 
• Compliant termination and rehiring process
• No service or project disruptions
• Liquidation finalized within 6 months

“Working with AYP meant we could close our Japanese entity and keep our team and commitments—completely friction-free.” — APAC Head of Operations

7. Key Considerations Before You Close an Entity

1. Timing: Begin EOR onboarding before termination to avoid compliance gaps 
2. Compliance Risks:
   • Provide 30-day notice or pay equivalency
   • Ensure terminations are objectively sound and procedurally correct
   • Avoid dismissing protected employees (e.g., maternity, illness)
3. Employee Communication:
   • Be transparent, emphasizing continuity
   • Coordinate process with AYP for smooth transition
4. HR & Payroll Readiness:
   • Finalise payroll and social insurance obligations
   • Transfer records accurately to AYP
   • Track living dates to ensure no gaps

8. Conclusion: Close Entity Confidently & Keep Your Talent

Shutting down your Japanese entity doesn’t mean losing your team. With an EOR:

• You reduce cost and complexity
• Preserve institutional knowledge and client trust
• Maintain compliance in Japan’s employee-protective environment
• Keep projects and regional readiness intact

AYP’s EOR Japan gives you the flexibility to close a company in Japan, retain employees without entity, and stay agile for future opportunities.

9. Call to Action: Speak to AYP’s Local Experts

Planning an exit from Japan but want to keep your team?

✅ Schedule a FREE EOR + entity closure consultation

✅ Get a complimentary cost simulation

✅ Learn how AYP can onboard your team in days, not months

Retain Your Team Without a Local Entity →