License requirements
License requirements
To obtain a license, applicants are required to satisfy four "license requirements" defined by Article 7, Construction Business Act, and not to fall under "disqualification requirements" defined by Article 8, Construction Business Act. “License requirements” and “disqualification requirements” are described as follows:
(1) License requirements
1) Person responsible for management and operation
An applicant for a license must have an employee who has experience as a “responsible person for management and operation.” (Article 7.1, Construction Business Act).
Since management and operation of the construction industry have remarkably different characteristics from those other industries, a contractor must have at least one employee who has the aforementioned experience for a certain period in order to maintain appropriate management.
When the applicant for a license is corporation, at least one director must satisfy one of the following descriptions. When the applicant is an individual, either the applicant or his/her general manager must fall under one of the following descriptions as well. The person thus determined is called “Person Responsible for Management and Operation (PRMO)”.
Concrete prerequisite conditions necessary for PRMO follow:
(a) PRMO must have five-year or more experiences as PRMO, if the candidate has worked for the same construction business as the nature of the license under application;
(b) PRMO must have seven-year or more experiences as PRMO, if the candidate has worked for a different construction business from the nature of the license under application;
(c) PRMO must have one of the following experience working in “a similar position to PRMO” (if the user of the PRMO is a corporation, PRMO’s position must be immediately below the directors and if the users is an individual, PRMO’s position must be immediately below the user) who has engaged in management and operation for the same construction business as the nature of the license under application:
1 Five-year or more comprehensive administrative experience in business management of a construction company as an executive director, etc. on the basis of the concrete authority delegated by the board of directors or a senior director, through the decision by the boards of directors, concerning the execution of business management; or
2 Seven-year or more experience in assisting the tasks specified above.
If the above prerequisite is satisfied, the candidate is qualified as PRMO. Experience in a foreign country or countries are counted if MLIT Minister approves.
Assignment of PRMO is one of the licensing conditions. For example, if the PRMO resigns after obtaining a license but if the PRMO resigns and the successor is not assigned, the license will be revoked due to dissatisfaction of licensing conditions (Article 29.1.1, Construction Business Act). Contractors are suggested to prepare for this situation by assigning a successor who satisfies PRMO conditions so that an absent period may not arise.
2) Full-time engineer attached to each office
An applicant for a license must assign a full-time engineer attached to each office. (Article 7.2 and 15.2, Construction Business Act)
In order to conclude an appropriate contract agreement for construction work and to assure the performance, it is inevitable to have professional knowledge of the construction work relating to the construction business that the company is applying for a license. Since each business office conducts business activities, such as estimation, bidding and conclusion of a contact agreement, it is necessary to assign an engineer at each business office who has certain qualifications or experience (hereinafter referred to as a “Full-time Engineer”: FTE) concerning the construction business that the company is applying for a license.
Qualifications necessary for FTE vary according to the construction business to be licensed, namely Ordinary Construction Business or Specific Construction Business as well as to the category of the construction work.
Since FTE is mandated to be attached as a full-time engineer to each office, FTE must be working at the office on a full-time basis.
Similar to the requirements for PRMO, assignment of FTE is one of the license requirements. Contractors should be careful about the revocation of license if the FTE becomes absent after obtaining a license.
[To apply for Ordinary Construction Business License]
a. FTE is mandated to have completed the study of the “Designated Subjects” as well as having a five-year or more working experience after graduating from a high school or having a three-year working experience after graduating from a university.
b. FTE must have ten-year or more working experience. Concerning the construction work relating to the construction business to be licensed, a candidate for FTE must have ten-year or more working experience.
c. National Certificate Holders, etc. Those who obtained an official technical or skill certificate determined per the construction business license under application.
d. Those who obtained MLIT Minister’s approval to have the equivalent or higher abilities than those specified “a.” and “b.” above.
[To apply for Specific Construction Business License]
a. FTE must have a national certificate.
b. FTE must have instructor / supervisor-like working experience.
c. FTE must be certified by MLIT Minister as a person who has equivalent or higher abilities than the person specified in “a” or “b” above.
3) Reliability (Article 7.3, Construction Business Act)
If fears for unlawful or unfaithful actions can clearly be presumed in the process of concluding a contract agreement or the execution of work, no one is eligible to operate construction business. This clause is applied not only to a corporation or individual to be licensed but also to directors having important standing in transactions of construction business.
4) Financial foundations, etc. (Article 7.4 and 15.3)
To start construction work, a certain amount of preparatory funds is necessary for purchasing materials and, machinery and equipment as well as securing the labor force. In starting actual business activities, funds should also be assured. Therefore, it is a licensing requirement that a contractor has sufficient financial foundations, etc. for contracting for the construction work that requires a license.
Moreover, when a contractor intends to obtain a license for Specific Construction Business, it must satisfy additional financial requirements to those for Ordinary Construction Business. One of the reasons is that generally, contractors having a Specific Construction Business License carry out construction work by using many subcontractors. Particularly, they are requested to conduct sound management and are mandated to pay subcontracting fees to the subcontractor, within 50 days after receiving a notice of delivery of the planned goods / services for the construction work, even though the contractor has not yet received the payment from the original commissioning entity.
As for Ordinary Construction Business, contractors must satisfy one of the following conditions:
Net Worth: 5-million yen or more;
Fund Raising Abilities: 5-million yen or more; or
Record on the fact that the contractor has operated continuously for past five years, until the date before the date of application for a license.
As for Specific Construction Business, contractor must satisfy all of the following conditions:
Deficits: Not exceeding 20% of the Capital;
Current Ratio: 75% or more;
Capital: 20-million yen more; and
Net Worth: 40-million yen or more.
[Disqualification Clause (Article 8 and 17, Construction Business Act)]
In accordance with the Construction Business Act, MLIT Minister or Prefectural Governors must not approve a license, if the applicant for a license falls under any of the conditions shown below. A license is also not issued, if false description on the important items is included in the license application documents and the attachments; or if description on important facts is omitted.
1. Incompetent persons, quasi-incompetent persons, and those who with a bankruptcy yet to be discharged.
2. Persons in the case where his / her Ordinary Construction Business License or Specific Construction Business License was revoked for the fact that Article 29-1-5 or 29-1-6 was applied, as well as five years have not yet passed from the revocation date.
3. Persons in the positions where he / she submitted a report specified in Article 12.5 on the fulfillment of Article 12.5, within the duration between the date when a notice was sent regarding the revocation of Ordinary Construction Business or Specific Construction Business, thereby Article 29-1-5 or 29-1-6 being applied and the date when the punishment was completed or the decision not to do punishment was made; as well as five years have not yet passed since the submission date of the aforementioned report.
4. In the case where, within the period determined in 3 above, the report specified in Article 12.5 on the fulfillment of Article 12.5 was submitted, within 60 days before the aforementioned notice date as specified in 3 above; among the persons who had been directors of the corporation relating to the aforementioned report, employees determined in the cabinet order, or employees for the individual relating to the aforementioned report; the persons who have not yet spent five years since the submission date of the aforementioned report.
5. Persons who were suspended to conduct construction business according to Article 28.3 or Article 5, but the suspension period has not yet fulfilled.
6. Persons who were suspended to conduct construction business to be licensed according to Article 29.4, but the suspension period has not yet fulfilled.
7. Persons who were sentenced to imprisonment or more, but five years have not yet passed from the date of the fulfillment of the sentence or from the date when the sentence was nullified.
8. Persons who were punished fines but have not yet spent five years since the date when the punishment was completed or the date when the punishment was nullified, in the cases where the persons fall under the provisions that are based on the rules decided by an ordinance in accordance with the laws and rules, concerning the implementation of construction work and the use of laborers who are engaged in construction work; the persons violated legal rules for preventing unfair actions by an organized group of gangsters (except for the said law, Article 31.7); the persons committed a crime specified in the Crime Law, Article 204, 206, 208, 208.3, 222, or 247; or the persons commit a crime of the laws concerning punishments for violent actions, etc.
9. Concerning business operation, a nonage person who does not have the same abilities that legal majority has, as well as his / her legal agent falls under any of the aforementioned conditions.
10. In the case where a corporation that has directors or employees determined in a cabinet order, directors or employees who fall under any of the conditions 1 to 4 above or 6 to 8 above.
11. Among the individuals or employees determined by a cabinet order, those who fall under any of the conditions 1 to 4 above or 6 to 8 above.
