As a business expands, both contracts and internal rules can drift out of step with reality. Sorting out what to review before transactions and headcount grow makes it easier to prevent trouble.
- The company keeps using the contract templates it created at founding
- Internal rules are minimal and standards for judgment differ by person
- Managing contract signing and renewal depends on one particular person
- There are cases where it is hard to decide between headquarters' rules and Japanese practice
This article explains the contracts and internal rules to review when expanding in Japan.
Why Contracts and Rules Fall Behind During Expansion
While the business is small, individual experience and case-by-case judgment may suffice, but as transactions and headcount grow, judgments start to vary. The gap between what contracts say and how things actually operate also tends to widen with growth.
At foreign companies especially, headquarters' rules and Japanese practice sometimes conflict, and it is necessary to sort out which one to follow.
Items to Review
Check the current state of contracts and internal rules from the following perspectives.
| Item | What to Review |
|---|---|
| Contract templates | Whether standard clauses are in place for each type of transaction and fit the current business |
| Contract management | Who manages signing, renewal, and termination dates, and how |
| Approval procedures | Whether the scope of approval for contracts and spending, and each person's authority, is clear |
| Employment rules | Whether employment contracts and work rules fit the current headcount and working style |
| Alignment with headquarters' rules | How differences between headquarters' rules and Japanese practice are being sorted out |
How to Approach the Review
There is no need to review everything at once. Start with high-value transactions and areas where trouble would have the greatest impact. Share the revised content in a form that people in the field can use easily.
Where legal judgment is involved, it is reassuring to have a lawyer or other specialist check. Set aside regular occasions for review and update as the business changes.
Summary
- As a business expands, contracts and internal rules easily fall out of step with reality
- Check contract templates, contract management, approval procedures, employment rules, and alignment with headquarters' rules
- Start with high-value transactions and high-impact areas
- Have specialists check parts involving legal judgment, and update regularly
Contact
JBN supports foreign companies expanding in Japan, from preparing contracts through to building internal rules.
To discuss preparing your contracts and internal rules, please contact us.