JAPAN Law and Practice Contributed by: Akira Matsushita and Hideki Ben, Mori Hamada
of laws and regulations (including a director’s duties of care and loyalty under the Companies Act) or the articles of incorporation, and if such act is likely to cause irreparable damage to the company (substan- tial detriment is required for types of companies other than those listed in the foregoing), a shareholder (hav- ing owned shares consecutively for the preceding six months or more) may enjoin that director’s act, usually by obtaining an order of provisional disposition from the court unless otherwise provided for in the articles of incorporation (Article 360 of the Companies Act). The holding-period requirement does not apply to shareholders of a private company. Derivative Actions Unless otherwise provided for in the articles of incor- poration, a shareholder of a public company, having owned shares in the company consecutively for the preceding six months or more, may demand that the company file an action to enforce the liability of direc- tors of the company due to negligence in the perfor- mance of their duties. If the company does not file an action against the directors within 60 days from the date of the demand, the shareholder may file a derivative action against the directors on behalf of the company (Articles 423 and 847 of the Companies Act). The holding-period requirement does not apply to shareholders of a private company. Direct Claims Under the Companies Act, if directors have acted in bad faith or with gross negligence in the performance of their duties, those directors are jointly and severally liable to a third party for damages arising as a result thereof (Article 429 of the Companies Act). Sharehold- ers may also be eligible to claim damages directly from the directors pursuant to this provision. While there are arguments that the remedy for sharehold- ers suffering indirect damages due to the directors’ bad faith or gross negligence should be addressed through derivative actions, there may be cases where a shareholder can make claims for indirect damages against the directors. If directors make false statements with respect to important matters in certain corporate documents, including financial statements and business reports, those directors are jointly and severally liable to a third
party for damages unless the directors prove that they did not fail to exercise due care with respect to the performance of their duties. Furthermore, a shareholder may bring a tort claim against directors for damages. 10.3 Derivative Actions As discussed in 10.2 Remedies Against the Direc- tors , shareholders can bring a derivative action for and on behalf of a company in respect of a wrong done to the company. 11. Shareholder Activism 11.1 Legal and Regulatory Provisions The main legal provisions that govern shareholder activism are contained in the Companies Act, since it provides shareholder rights such as: • inspection rights; • shareholder proposal rights; • rights to call for shareholders’ meetings; and • rights to enjoin directors’ acts and derivative actions. The FIEA also relates to shareholder activism, as it sets forth (among other things) disclosure rules for large shareholdings, tender offer regulations, proxy regulations, insider trading rules and fair disclosure rules. Listed companies must also comply with the disclosure rules of the stock exchange. The Tokyo Stock Exchange issued Japan’s Corpo- rate Governance Code (CGC) in 2015 (most recently amended on 11 June 2021) and the Expert Committee of the FSA issued Japan’s Stewardship Code (SC) in 2014 (most recently amended on 26 June 2025). The CGC and the SC have worked as “the two wheels of a cart” to promote and achieve effective corporate governance from the perspective of listed companies and institutional investors. The CGC and the SC do not adopt a rule-based approach; rather, they adopt a principle-based approach that is not legally binding on companies or institutional investors with a “comply or explain” approach (ie, either comply with a principle or, if not, explain the reasons for non-compliance). The
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