Aktuelle Rechtsentwicklung

Forthcoming Legislation

Hiroshi Oda

I.    Interim Draft on the Amendment to the Commercial Code

The Ministry of Justice prepared an interim draft on the amendment to the Commercial Code in March which is to be submitted to the Legislative Advisory Council.

The interim draft covers three areas; shares, corporate bodies, accounting/ disclosure.

In the part dealing with corporate bodies, there is some streamlining and simplification. For examples, the quorum for a qualified majority vote at the shareholders’ meeting can be reduced to one third from one half of the current law. With the possible increase of individual shareholders, companies are expecting it to become harder to meet the quorum. A simplified procedure for convening the shareholders’ meeting will be available. In large companies, i.e. companies with either a capital of half a billion yen or more, or with a debt of 20 billion yen or more, the proposal for the disposal of profits, which currently requires the approval of the shareholders’ meeting, can be decided by the board only, provided that a chartered accountant and the auditors endorsed it. There are around 10,000 such large companies. Incidentally, chartered accountants may now be sued by a shareholder’s action.

A new body called management committee (keiei iinkai) may be optionally introduced. At present, many companies have an unofficial ‘inner cabinet’ which comprises senior managing directors and above. The interim draft made this official, and subordinated it to the board.

In order to ensure the independence of the board and to strengthen its supervisory role, the interim draft mandate above-mentioned large companies to have at least one external director. Only those who have never been an employee, manager, or director of the given company or its group companies qualify as external directors.

One of the obstacles to having an external director was the potential liability of directors. The draft limits the liability of external directors as compared with internals.

If a company meets the following conditions, it is not required to have auditors:

1.       independent committees which cover a) selection of candidates for directorship (nomination committee), b) determination of remuneration of directors (remuneration committee) and c) audit (audit committee).