1. Key Insights from the Gulf Business Article: The Importance of Immigration Due Diligence in the GCC
In mergers and acquisitions (M&A), immigration due diligence—the systematic review of visa, residency, and work authorization issues—is becoming as critical as financial scrutiny.
- In the Gulf Cooperation Council (GCC) countries, visas are directly tied to sponsorship relationships and specific roles. When corporate structures change, the legal residency of employees may need to be reassessed (gulfbusiness.com).
- If ignored, companies risk losing talent, facing operational disruptions, and incurring financial penalties or deal delays (fragomen.com, gulfbusiness.com).
- Therefore, businesses are urged to identify immigration risks at the earliest stages of the M&A process and implement comprehensive compliance audits, policy adjustments, and organizational support (gulfbusiness.com).
In essence, immigration due diligence in the GCC highlights how people-related legal and regulatory risks must be managed with the same rigor as financial risks.
2. Current Landscape and Trends in Japan
While Japan does not yet have a well-established practice of immigration due diligence in M&A, several factors suggest that it could become increasingly necessary.
(1) Expansion of Foreign Employment and Legal Reforms
- Due to demographic challenges, Japan has been increasing reliance on foreign workers under categories such as Technical Intern Training, Specified Skilled Worker, and Business Manager visas.
- At the same time, the Immigration Control and Refugee Recognition Act has been amended, with digitalization of visa procedures and stricter compliance mechanisms gradually being introduced.
(2) The Growing Importance of Foreign Talent in M&A and Global Expansion
- In acquisitions and global partnerships, foreign shareholders, directors, and employees are often involved.
- This creates risks when their immigration status depends on specific sponsoring entities. A merger or acquisition may trigger the need for re-application or changes in their residency status.
(3) Legal and Reputational Risks
- There have been past cases where illegal employment or improper residency status damaged corporate reputations and led to penalties.
- With rising social debate about immigration and foreign worker policies, immigration compliance is increasingly tied to corporate governance and social trust.
3. Why Immigration Due Diligence Could Become Necessary in Japan
Several conditions indicate that immigration due diligence may soon hold significant value in the Japanese business context.
(A) When M&A Involves Foreign Executives or Employees
- During acquisitions, if foreign executives hold Business Manager or Highly Skilled Professional visas, changes in corporate structure may require new applications or amendments.
- Without careful review, such transitions may unintentionally render employment unlawful.
(B) When Industry-Specific Regulations Apply
- Certain industries in Japan—such as finance, construction, or healthcare—have stricter controls on ownership, management, and licensing.
- In such sectors, the immigration or nationality status of executives can directly impact regulatory approvals and business continuity.
(C) Compliance and Governance Considerations
- As Japanese companies face stronger expectations for transparency and governance, weaknesses in managing foreign employees’ residency could be seen as a compliance failure.
- Immigration due diligence can therefore become an extension of illegal employment prevention audits, strengthening both corporate governance and social credibility.
4. Building an Immigration Due Diligence Framework in Japan
For Japan to adopt this practice effectively, several steps should be considered.
i. Institutionalizing Immigration Reviews in M&A Processes
- Just as financial and tax audits are standard, companies should integrate checklists and reports on visa and residency status into due diligence.
- Key items include: validity of residency permits, risks of reapplication due to sponsor changes, and potential disruptions in work authorization.
ii. Expanding Expertise and Guidance
- Immigration lawyers and administrative scriveners could play a stronger role by offering specialized advisory services for M&A and restructuring.
- Public institutions, such as the Chamber of Commerce or the Ministry of Justice, could issue guidelines and consultation services for SMEs.
iii. Leveraging Digitalization and Information Sharing
- A secure platform for tracking and sharing employees’ visa and residency information could greatly reduce risks in acquisitions.
- Digital management systems would allow acquiring companies to visualize immigration compliance risks in advance.
iv. Ensuring Long-Term Policy Alignment
- Immigration due diligence should not remain a reactive measure but should be framed as part of Japan’s long-term labor mobility and global competitiveness strategy.
- This requires closer alignment between immigration reform and corporate governance policy.
5. Conclusion and Future Outlook
Immigration due diligence—the systematic review of residency and work authorization issues during corporate transactions—is increasingly critical worldwide. The Gulf Business article demonstrates that in the GCC, where visas are tightly tied to employers and roles, ignoring these issues can jeopardize entire deals.
In Japan, while this practice has not yet become standard, the expansion of foreign employment, the complexity of immigration laws, and the rise of cross-border M&A point to its growing necessity. By institutionalizing immigration due diligence, Japanese companies can:
- Reduce legal and compliance risks,
- Safeguard human capital, and
- Strengthen governance and reputation in the global market.
In the near future, it is highly plausible that, just as in the GCC, Japanese companies will adopt immigration due diligence as a new standard practice alongside financial and legal due diligence. Doing so would position Japan to better integrate foreign talent, manage global transactions, and ensure sustainable corporate growth.