JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki, Kosuke Hamaguchi and Akira Komatsu, Nagashima Ohno & Tsunematsu
Financial Instruments and Exchange Act (Act No 25 of 1948, as Amended) (FIEA) The FIEA, together with its subordinate regulations, requires listed companies and certain other publicly held companies to make disclosures related to cor - porate governance in various filings. Securities Listing Regulations Published by the Tokyo Stock Exchange (TSE Regulations) The TSE Regulations include certain corporate gov - ernance requirements which companies listed on the Tokyo stock exchange must comply with. The Tokyo stock exchange has three segments (Prime, Standard and Growth). Companies listed at the Prime Market must meet enhanced corporate governance require - ments. Companies listed at the Prime Market, the Standard Market and the Growth Market respec - tively account for approximately 42%, 42% and 16% among approximately 3,750 companies listed at the Tokyo stock exchange as of April 2026. Corporate Governance Code The Corporate Governance Code is a part of the TSE Regulations. The Tokyo stock exchange requires listed companies to “comply or explain” with respect to the principles included in the Corporate Govern - ance Code and to disclose some corporate govern - ance matters in their corporate governance reports. The latest amendment to the Corporate Governance Code took effect in June 2021, and another major amendment is being discussed at the Financial Ser - vices Agency and the Tokyo stock exchange. Stewardship Code The Stewardship Code published by the Council of Experts on the Stewardship Code, established by the Financial Services Agency, is another source of impor - tant corporate governance requirements, although it is not directly applicable to listed companies but to institutional investors. The Stewardship Code of 2025 is the most recent version. Many major institutional investors have published their own proxy voting poli - cies in response to the Stewardship Code, will vote at shareholder meetings in accordance with their own policies, and will have engagement discussions with the management of listed companies to encourage mid- to long-term growth.
Guidelines and Study Reports Japanese governmental agencies or study groups organised by them from time to time publish vari - ous guidelines or study group reports with respect to corporate governance issues, which include the Cor - porate Governance System Guidelines, the Fair M&A Guidelines, the Outside Directors’ Guidelines and the Guidelines for Corporate Takeovers. 1.3 Companies With Publicly Traded Shares Listed companies are subject to various corporate governance requirements, including the following. Governance Structures Having a board of directors is mandatory. Listed com - panies must choose one of the three governance structures: • company with a board of statutory auditors; • company with an audit and supervisory committee; or • company with nominating and other committees. Companies with a board of statutory auditors, com - panies with an audit and supervisory committee, and companies with nominating and other committees respectively account for approximately 51%, 46% and 3% among approximately 3,750 companies listed at the Tokyo stock exchange as of April 2026. Outside/Independent Members All the listed companies are required to have outside director(s) under the Companies Act. The Corporate Governance Code provides that one third or more of the directors should be independent outside directors in the Prime Market (or two or more directors must be independent outside directors in the other markets). If a listed company has a controlling shareholder, enhanced requirements regarding inde - pendent outside directors will apply in order to protect
the interest of minority shareholders. 1.4 Stock Exchange Requirements Developments
The Tokyo stock exchange has recently been focusing on protecting the interest of minority shareholders in a listed company with a controlling shareholder. An
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