Directors and Board of Directors

• For public companies (the stock company (KK) that does not have provisions in its articles of incorporation requiring board approval for the transfer of all or part of its shares), a board of directors is mandatory, and such companies must have at least three directors. For private companies that do not establish a board of directors, a minimum of one director is sufficient.
• The term of office for directors in public companies is generally up to the close of the annual shareholders’ meeting regarding the last fiscal year ending within two years after their appointment (excluding directors in companies with committees). The term can be shortened but not extended (i.e., a maximum of two years).
• In private companies, the articles of incorporation may allow for the extension of a director’s term up to ten years.
• Board meetings must be called at least one week before the meeting date, but this procedure can be waived with the consent of all directors.
• Under the Companies Act, directors must report on their management activities to the board at least once every three months; therefore, board meetings must be held at least quarterly. Board meetings can also be held via video or telephone conferencing.
• Resolutions of the board require the attendance of more than half of the eligible directors (quorum), and decisions are made by a majority of those present.
• It is possible, under the articles of incorporation, to pass resolutions without holding a meeting if a director proposes an agenda item and all directors express their consent in writing or via electronic record, thereby deeming the proposal approved without a meeting.

Shareholders’ Meetings

• In companies without a board of directors, shareholders’ meetings can resolve any matters stipulated by the Companies Act as well as issues related to the organization, operation, and management of the corporation. In contrast, companies with a board of directors can only resolve matters specified in the Companies Act and in the articles of incorporation.
• For public companies, a notice of the shareholders’ meeting must be sent to each shareholder at least two weeks before the meeting date. For private companies, the notice must be sent at least one week in advance. However, if all shareholders are eligible to vote consent, the convening procedure may be omitted.
• Shareholders’ meetings must be held within a certain period after the end of each fiscal year (annual shareholders’ meeting), typically within three months after the fiscal year end.
• Currently, under the Companies Act, holding shareholders’ meetings online without a physical venue is not allowed. However, for listed companies, the 2021 Industrial Competitiveness Enhancement Act (Act on Strengthening Industrial Competitiveness) permits online-only shareholders’ meetings under certain conditions based on the articles of incorporation.
• Regarding shareholder proposal rights at shareholders’ meetings in public companies with a board of directors, only shareholders who continuously hold at least 1/100 of the total voting rights or at least 300 voting rights for six months (which can be shortened as per the articles of incorporation) can propose agenda items. In private companies, the six-month holding requirement does not apply.
• Resolutions at shareholders’ meetings are passed with the attendance of shareholders holding more than half of the voting rights (quorum), and require (1) an ordinary resolution with a simple majority of votes from the shareholders present, (2) a special resolution with at least two-thirds of the votes from the shareholders present, and (3) an extraordinary resolution that requires attendance by more than half of all shareholders with voting rights (not more than half of the voting rights), with at least two-thirds of their votes in favor.
• Resolutions by written consent (without holding a meeting) are possible if all voting shareholders express their consent in writing or via electronic record, thereby deeming the proposal approved at a shareholders’ meeting. The reporting requirement can also be deemed approved under similar conditions.

Annual Reporting Obligations

• KKs must prepare financial statements (balance sheet, profit and loss statement, statement of changes in shareholders’ equity, and notes to the financial statements) and a business report for each fiscal year. Financial statements must be approved at the annual general shareholders’ meeting.
• As a requirement for public disclosure, KKs must promptly publish the balance sheet (and for large KKs—with a capital of over 500 million JPY or total debts over 20 billion JPY, both the balance sheet and the profit and loss statement) in the Official Gazette, a daily newspaper, or on a website after the conclusion of the annual general shareholders’ meeting.