First of all, stock company (KK) is roughly classified as follows:

●”Private company” means a stock company which issues only shares with restrition on transfar. A shareholder needs a approval of the company for transfar (Company Act Article 2(xvii) and Article 136).

From a practical point of view, most stock companies (KK) owned by foreign companies (headquarters) or business persons tend to be incorporated as “Private company”, so I am talking about “Private company” in this column unless otherwise noted.

Private company can be categolized mainly into a company with a board of directors and a company without one. In other words, a borad of directors is not a necessary organ under Company act, so it is possible for Private company not to have a board of directors.

If a private company has a board of directors, roles of its shareholders’ meeting are limited.

In the event of such a shareholders’ meeting, only the matters provided for in Company Act and the matters provided for in the articles of incorporation may be resolved at a shareholders’ meeting (Company Act Article 295(2)).

Furthermore, the matters providede for in the Act are restrictive. For example, in principle, a determination of whether or not to grant approval of transferring shares with restriction on transfer should be resolved at a board of directors (Company Act Article 139(1)).

On the other hand, if a private company does not have a board of directors, the roles of a shareholders’ meeting are broader than the former.

For example, a determination of approval of transferring shares as I mentioned just before may be resolved at a shareholders’s meeting(Company Act Article 295(1)).

To put it briefly, if a private company has a board of meeting, all significant matters regarding management of the company, except the matters stipulated in the Act and the articles of incorporation, should be decided by a board of directors.

2. The process for a shareholders’ meeting

The general process for a shareholders’ meeting at a private company is roughly as follows:

1. Summon a shareholders’ meeting

■ A person (organ) to summon a shareholders’ meeting: directors or a board of meeting if the company has.

■ Period of time: at least one week(*) prior to the day of the shareholders’ meeting(Company Act Article 299(1)).

* If a shorter period of time is provided for in the articles of incorporation in cases where the company does not have a board of directors, such shorter period of time is applicable.

■ Matters must be decided in cases where directors call a shareholders’ meeting: as follows:

(i)the date, time and place of the shareholders meeting;

(ii)if there is any matter which is the purpose of the shareholders meeting, such matter;

(iii)that shareholders who do not attend the shareholders meeting may vote in writing, if so arranged(*);

* In cases where the number of the shareholders (excluding shareholders who may not vote on all matters which may be resolved at a shareholders meetings) is one thousand or more, the directors must decide the matters listed in item (iii).

(iv)that shareholders may vote by electronic or magnetic means, if so arranged;

(v)beyond what is set forth in the preceding items, any matters prescribed by Ministry of Justice Order(*).

* Please refer to Regulations for Enforcement of the Companies Act, Article 63.

2. Hold a shareholders’ meeting and Resolutions

■ In principle, shareholders are entitled to one vote for each one share they hold at the shareholders meeting.

■ Type of resolutions: there are generally two main types of resolutions as follows:

(i) An ordinary resolution: the resolution at a shareholders’ meeting is passed by a majority of the votes of the shareholders present at the meeting where the shareholders holding a majority of the votes of the shareholders who are entitled to vote are present, unless otherwise provided for in the articles of incorporation(Company Act Article 309(1)).

Ex. election and dismissal of director(s) (Company Act Article 341), remuneration for director(s) (Company Act Article 361 (1)), and so on.

(ii) A special resolution: the resolutions at a shareholders’ meeting must be passed by a majority of two thirds (in cases where a higher proportion is provided for in the articles of incorporation, such proportion) or more of the votes of the shareholders present at the meeting where the shareholders holding a majority (in cases where a proportion of one third or more is provided for in the articles of incorporation, such proportion or more) of the votes of the shareholders entitled to vote at such shareholders meeting are present(Company Act Article 309(2)).

Ex. amendements of the articles of incorporation (Company Act Article 466).

■ NOTE:

(1) If there are some shareholders outside of Japan, voting by electronic would be efficient way.

As described in above (iv), a private company may approve the exercise of voting rights by electronic or magnetic means.

(2) There are also some information regarding hybrid virtual shareholder meetings, which might be useful for international companies.

The Ministry of Economy, Trade and Industry (METI) releases the “Guidelines on Approaches to Hybrid Virtual Shareholder Meetings” and “Collection of Successful Case Examples as Appendix to Guidelines on Approaches to Hybrid Virtual Shareholder Meetings”.

If you have inquiries about shareholder meetings and any other matter on corporate law, please do not hesitate to contact us.

Lawyer Ken Takahashi

Email: k-takahashi@kensei-law.jp

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