JAPAN Law and Practice Contributed by: Junichi Ueda, Etsuko Hara, Nobuto Shirane, Takahiro Hayase, Yutaka Shimoo and Miki Goto, Anderson Mori & Tomotsune
the remainder of the shares being subscribed to by external investors. Share subscription that involves external investors typically involves more stringent procedures, in order to provide some degree of pro - tection for the external investors. 3.3 Ongoing Reporting and Disclosure Obligations A stock company must provide, for the inspection of shareholders, the annual financial statements of the stock company at its head office and branch offices at least two weeks before its annual shareholders’ meet - ing. In addition, changes of management and amend - ments to certain items in articles of incorporation must be registered with the relevant authorities. A listed stock company has more stringent disclosure obligations, namely: • financial statements must be disclosed on a semi- annual basis; and • material corporate information such as a change of the representative director and the declaration of dividends must also be disclosed from time to time. 3.4 Management Structures Although it is possible for a stock company without a board of directors to make decisions concerning the organisation, operations and management via director(s) or the shareholders’ meetings, many stock companies have a board of directors that is in charge of making the day-to-day decisions of the company. Depending on the stock company, it may also have other responsibilities, such as appointing: • company auditor(s); • a board of company auditors; • accounting auditor(s); • accounting adviser(s); and • other committees. The company’s management structures will be set out in the articles of incorporation. A shareholders’ meeting can make decisions on the operation, etc, of the company. A company must hold at least one shareholders’ meeting in a year.
For companies with a board of directors, the types of decisions that can be made by a shareholders’ meeting are limited to those that are stipulated in the Companies Act and the articles of incorporation. In general, decisions relating to the management of the company should be decided by the board of directors. The board must consist of at least three directors, who are to be elected at the shareholders’ meeting. Reso - lutions of the board must be passed via a majority vote of the directors present at the meeting. There must be at least one representative director. Representative directors have the power to represent the company – for example, they may execute docu - ments as a representative of the company with third parties. The company should be audited by the company auditor(s), the board of the company auditors, or external auditors (as the case may be), who will also audit the directors’ execution of duties. 3.5 Directors’, Officers’ and Shareholders’ Liability The directors of the stock company have a legal duty of care to execute their duties according to the stand - ard of a reasonably prudent manager. The directors also owe a duty of loyalty to the stock company and must comply with the relevant laws and regulations when executing their duties. If the directors neglect their duties, they may be liable to the company for the damages caused as a result of the neglect. A director can be exempt from liability via a unanimous vote of all shareholders. There are no articles in the Companies Act that state directors may be liable to the company for damages arising from the performance of the directors’ functions, where the performance does not amount to a neglect of duties. While there is some recognition of piercing the cor - porate veil in Japan, this is not founded on statutory law and only exists as a matter of judicial precedent.
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