CHAPTER I GENERAL PROVISIONS (ARTICLES 1-11)

(Purpose)

Article 1:

The purpose of this Law is to promote in a comprehensive manner measures for small and medium enterprises (hereinafter referred to as “SMEs”) by establishing the basic principles, basic policies and other basic matters relating to measures for SMEs and clarifying the responsibilities, etc. of the State and of local public entities, so as to contribute to the sound development of the national economy and improvement in the quality of life of the people.

(Scope of SMEs and Definitions)

Article 2:

The SMEs covered by the measures adopted by the State under this Law shall in general be those that fall under any of the following items, and the scope thereof shall be determined for each measure so that such measures may be effectively implemented to realize the basic principles described in the following Article:

  1. Any entity which is a company whose capital or total amount of investment does not exceed three hundred million yen (300,000,000 yen), or a company or an individual whose regular workforce does not exceed three hundred persons, and which is principally engaged in manufacturing, construction, transportation or any other category of business (except those categories of business mentioned in any of items (2) to (4) below);
  2. Any entity which is a company whose capital or total amount of investment does not exceed one hundred million yen (100,000,000 yen), or a company or an individual whose regular workforce does not exceed one hundred persons, and which is principally engaged in the wholesale trade;
  3. Any entity which is a company whose capital or total amount of investment does not exceed fifty million yen (50,000,000 yen), or a company or an individual whose regular workforce does not exceed one hundred persons, and which is principally engaged in the service industry;
  4. Any entity which is a company whose capital or total amount of investment does not exceed fifty million yen (50,000,000 yen), or a company or an individual whose regular workforce does not exceed fifty persons, and which is principally engaged in the retail trade.
  1. The term “business innovation” as used in this Law shall mean the substantial improvement of business through the development or production of new products, development or provision of new services, introduction of new methods of producing or marketing products, introduction of new methods of providing services, introduction of new methods of business management, or other new business activities.
  2. The term “creative business activity” as used in this Law shall mean those business activities which are the object of business innovation or start-ups and which involve the use of remarkably original techniques or remarkably creative methods of business management.
  3. The term “business resources” as used in this Law shall mean the plants, equipment, technologies, skills and knowledge of individuals, and other resources utilized in business activities.
  4. The term “small enterprise” as used in this Law shall generally mean an enterprise with a regular workforce not in excess of twenty persons (or five persons in the case of enterprises which are principally engaged in commerce or the service industry).

(Basic Principles)

Article 3:

In the light of the fact that SMEs, by engaging in distinctive business activities in a variety of fields of business and providing diverse employment opportunities where individuals can demonstrate their abilities, form the foundations of the Japanese economy, and that many SMEs, which display originality and resourcefulness and engage in business activities with the aim of improving business, have a particularly important role to play in maintaining and strengthening the vitality of the Japanese economy by, among other things, creating new industries, increasing employment opportunities, encouraging competition in the market, and vitalizing regional economies, the diverse and dynamic growth and development of SMEs must be encouraged by promoting business innovation and start-ups among them, strengthening their business fundamentals, and smoothing their adaptation to changes in social or economic conditions so as to foster the autonomous efforts of independent SMEs.

(Responsibility of the State)

Article 4:

The State is responsible for formulating and implementing overall measures for SMEs in accordance with the basic principles described in the preceding Article (hereinafter referred to as the “basic principles”).

(Basic Policy)

Article 5:

The Government shall adopt measures for SMEs in accordance with the following basic policy of:

  1. Promoting business innovation and start-ups and promoting creative business activity among SMEs;
  2. Strengthening the business fundamentals of SMEs by facilitating the acquisition of business resources by SMEs and improving the fairness of transactions involving SMEs, etc.;
  3. Smoothing adaptation to changes in the economic or social environments by promoting the business stability and facilitating the business conversion of SMEs in response to such changes, etc.;
  4. Facilitating the financing of SMEs and enhancing the equity capital of SMEs.

(Responsibility of Local Public Entities)

Article 6:

Local public entities are responsible for formulating and implementing measures for SMEs which are suited to the natural, economic or social conditions in a local public entity’s locality, and which are in accordance with the basic principles and based on an appropriate division of roles with the State.

(Efforts of SMEs, etc.)

Article 7:

SMEs must endeavor to independently improve their management and terms and conditions of business in order to respond to changes in the economic or social environment and to grow and develop their businesses.

  1. Associations related to SMEs, such as organizations for furthering business cooperatives among SMEs, must endeavor to work with SMEs to realize the basic principles in the performance of their business activities.
  2. Any party other than SMEs whose activities bear on SMEs must cooperate in the implementation by the State and local public entities of measures for SMEs.

(Consideration for Small Enterprises)

Article 8:

Given the many particular difficulties faced by small enterprises in acquiring business resources, the State shall, in devising measures for SMEs, endeavor to develop and improve the management of small enterprises and shall, with regard to finance, the taxation system and other matters, show due consideration for the business conditions of small enterprises.

(Legislative Steps, etc.)

Article 9:

The Government shall take the necessary legislative, fiscal and financial steps to implement measures for SMEs.

(Surveys)

Article 10:

The Government shall, after hearing the opinion of the Small and Medium Enterprise Policy-Making Council, periodically conduct the necessary surveys to determine the actual conditions of SMEs and shall publish the results thereof.

(Annual Reports, etc.)

Article 11:

The Government shall, every year submit to the Diet a report on trends among SMEs and measures implemented by the Government for SMEs.

  1. The Government shall, every year after hearing the opinion of the Small and Medium Enterprise Policy-Making Council, prepare a statement explaining the measures to be adopted in the light of the trends among SMEs described in the report stipulated in the preceding Subsection, and shall submit it to the Diet.

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