This content is from: Local Insights

Japan: Companies Act amendments

On February 28 2018, the Ministry of Justice released the interim proposal concerning the revision of the Companies Act (in relation to corporate governance, and so on) (Interim Proposal) for public comment. Certain revisions proposed in this Interim Proposal will affect existing practices relating to shareholder meetings.

Provision of shareholders' meeting materials

Under the prevailing Companies Act, a stock company is required to provide printed paper copies of shareholder meeting materials (for example, reference documents for shareholders' meetings, the company's financial statements and business reports, and so on) to shareholders of the company unless it obtains the consent of each shareholder to provide such materials online. However, the revisions proposed in the Interim Proposal would permit an alternative method of providing shareholder meeting materials (the electronic provision system). As long as the stock company's articles of incorporation allow for this electronic provision system, the alternative procedure would mean that the company would not need to obtain shareholders' consent, and the director of the stock company would be able to post electronic copies of the materials on a website (such as the company's official website) and indicate the address where those materials could be accessed in the notice of shareholders' meeting.

It should be noted that: (i) the Interim Proposal provides that the book-entry transfer institution may only handle shares of stock companies that have adopted the electronic provision system in their articles of incorporation, meaning all listed companies would be required to adopt the electronic provision system; (ii) in order to protect the interests of shareholders, shareholders would be entitled to request printed paper copies of the shareholders' meeting materials; and (iii) notices of shareholders' meetings would still be required, although matters to be stated therein would be limited.

Restrictions on proposals by shareholders

In light of recent cases where shareholders were found to have abused their rights to submit proposals at meetings of shareholders, the Interim Proposal includes a revision to address this. Under the revision, the Interim Proposal limits the number of proposals a shareholder of a company with a board of directors may make at a single meeting, under the right to demand a notice of a summary of proposals (article 305, paragraph 1 of the Companies Act), to a certain number. In addition, the Interim Proposal provides that, if the content of any proposal by a shareholder is inappropriate (such as when a shareholder submits a proposal solely for the purpose of defaming or insulting a person), the shareholder will be prohibited from exercising both its right to propose (the right to submit proposals at the shareholders' meeting [article 304 of the Companies Act] and its right to demand a notice of a summary of proposals [article 305, paragraph 1 of the Companies Act]).

Hiroki Kawaguchi

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