This year, many significant amendments have been made to the Commercial Code. The latest amendments were promulgated on May 29 2002 and will take effect sometime within a year after this date. One of the amendments will allow class voting for the election of directors.
Class voting for electing directors is of great importance especially to the venture financing industry and to joint ventures. Even before the amendment, shareholders could enter into voting agreements to appoint directors but recourse under these agreements was limited.
In Japan, directors are generally elected by a majority resolution at a shareholders' meeting. However, this amendment will permit shareholders owning shares of different classes to vote separately for the election of directors where a company's articles of incorporation provide that any transfer of shares is subject to the approval of the board of directors. This restriction thus limits class voting for electing directors to closed companies.
Certain prescribed provisions relating to shares of all classes must be included in the articles of incorporation, such as the number of directors to be elected by each class or group of classes. If the articles provide that the rights to elect directors of a class or group of classes are to change following certain events, the events and the number of directors to be elected thereafter by each class or group of classes must be specified.
Unless otherwise provided for in the articles and subject to certain exceptions, if shareholders of a particular class or group of classes are permitted to elect certain directors, those directors may only be removed by a special resolution of that class or group of classes and any election or removal of these directors cannot occur at a shareholders' meeting. In the event that there is a director who is to be appointed by a class or group of classes and no shareholder owns any shares of that class, the provisions relating to class voting for electing directors will be deemed ineffective. Class voting for the election of corporate auditors is also permitted and subject to similar requirements.