Korea-Japan Joint Production Faces Challenges Over Production Committees [K-Content Japan]

Consensus Required Due to Unlimited Liability...
"A Major Hurdle for Overseas Partners"
Establishing Legal Entities Such as LLPs and SPCs Is Virtually Essential

While joint production of visual content between Korea and Japan continues to gain momentum, narrowing the gap in production systems and business practices remains a challenge. In particular, the decision-making structure rooted in Japan’s unique production committee system is cited as a key issue.

Junko Kusunoki, CEO of Film Solutions / Korea Creative Content Agency Tokyo Business Center.

Junko Kusunoki, CEO of Film Solutions, pointed out the legal limitations of Japanese production committees and differences in perception with overseas partners at the 'Korea-Japan Content Co-production Week' held by the Korea Creative Content Agency in Tokyo on October 2.

The production committee is an unincorporated association under Japanese civil law, and there is no legal personhood or separate registration system. Since it pools funds from multiple investors, investment shares are treated as "deemed securities" under the Financial Instruments and Exchange Act. However, if all investors participate directly in the business, an exemption from regulatory application is recognized. Passive investors who only provide funds are not allowed to participate under this structure.

The nature of investors also differs from Korea. In Japan, media-related companies typically invest with the aim of creating business synergies, making the joint venture primarily between insiders. In Korea, financial investors such as venture capital (VC) firms and content funds are more common, which increases the need for clarifying rights and obligations and ensuring transparent distribution of profits.

'Korea-Japan Content Co-production Week' On-site / Korea Creative Content Agency Tokyo Business Center.

All members of a Japanese production committee bear unlimited liability. Copyrights are also divided among the investors as communal property. Although major decisions can be made by a majority per civil law, the unlimited liability structure makes full consensus virtually mandatory in order to avoid disputes.

Kusunoki stated, "Even if the managing company takes the lead in actual operations, unilateral decisions aren’t allowed; everyone must reach a consensus, which often becomes an obstacle in working with overseas partners." She noted that, for example, when monetizing Korean IP through animation and sharing profits, "disputes easily arise because investment ratios and profit distribution are often unclear."

The differences between the two countries are also clear in rights management and accounting practices. In Korea, the revenue-sharing 'waterfall' model is determined in advance for each revenue source, and copyrights are centralized under the production company or the main investor. In Japan, rights certification and responsibilities are dispersed. Profits are divided after fees are deducted, which often breeds mistrust. Collaborations with foreign companies can also bring unexpected tax risks, such as permanent establishment taxation and withholding tax.

Junko Kusunoki, CEO of Film Solutions / Korea Creative Content Agency Tokyo Business Center.

Kusunoki presented two alternatives suited to current circumstances. "One approach is to maintain the existing production committee system while stipulating detailed conditions in individual contracts with overseas partners," she explained. "Another is to establish a Limited Liability Partnership (LLP) or Special Purpose Company (SPC) within Japan to make it easier for overseas partners to participate." She emphasized that, "especially when collaborating with Western or global funds where the investment committee model with unlimited liability is less acceptable, forming a legal entity like an LLP or SPC is virtually essential."

This content was produced with the assistance of AI translation services.