JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki, Kosuke Hamaguchi and Akira Komatsu, Nagashima Ohno & Tsunematsu
3.3 Board Composition A company with an audit and supervisory committee or nominating and other committees must have two or more outside directors. There are several require - ments or recommendations for listed companies. • First, a listed company with a board of statutory auditors is obligated to have one or more outside directors under the Companies Act. • Second, the Corporate Governance Code recom - mends that: (a) listed companies on the Prime Market ensure that one third or more of their directors are independent outside directors; and (b) other listed companies appoint at least two independent outside directors. • Third, the TSE Regulations require listed compa - nies to make efforts to secure at least one inde - pendent outside director as a board member. 3.4 Appointment and Removal of Directors/ Officers Appointing Directors Directors are appointed by a resolution of a sharehold - er meeting. Unless otherwise provided in the articles of incorporation, this resolution must be made by a majority of the votes of the shareholders present at the meeting if a quorum is satisfied (ie, by the pres - ence of shareholders representing a majority of those who are entitled to exercise their voting rights). The company may lower the quorum for the appointment of directors down to a third pursuant to the articles of incorporation. A cumulative voting system is also available although this is not common in Japan. In the case of a com - pany with an audit and supervisory committee, direc - tors who are audit and supervisory members must be appointed separately from the other directors of the company. Other management members, includ - ing an executive officer in a company with nominating and other committees, are appointed by the board of directors. In addition, the Corporate Governance Code recom - mends that a listed company, unless it has nominat - ing and other committees or its independent outside directors constitute a majority of its board of directors,
seek the involvement of, and advice from, an inde - pendent nominating committee regarding the appoint - ment of its directors or other management members. In particular, a listed company on the Prime Market is encouraged to ensure that a majority of such nomi - nating committee’s members are independent outside directors and disclose, among other things, the view on the independence regarding the composition of the nominating committee and its authority and roles. Qualifications of Directors Although the Companies Act provides the restrictions on qualification of directors that a corporation cannot be a director or an individual who was sentenced for breaching laws and regulations may not become a director during a certain period, there are no national - ity or residence restrictions. Dismissing Directors and Other Members of Management Directors may be dismissed at any time by a majority of the vote at a shareholder meeting, except audit and supervisory members, whose dismissal requires two thirds of the votes at a shareholder meeting. However, a dismissed director is entitled to seek damages aris - ing out of the dismissal except in cases where justifi - able grounds exist. Typically, a dismissed director may claim the compensation they would have received during their remaining term. In addition, if a director engages in any misconduct or commits a material violation of law or the articles of incorporation in connection with the execution of their duties as a director, and a proposal to dismiss the director is rejected at the shareholder meeting, then a shareholder holding, for the preceding six months or longer, not less than 3% of the voting rights of all shareholders may file a lawsuit to dismiss the director. Other management members, including an executive officer in a company with nominating and other com - mittees, may be dismissed by a board of directors. A dismissed executive officer may seek damages, as in the case of a dismissed director. Statutory Auditors Statutory auditors are appointed by a majority of the votes at a shareholder meeting. However, dismissal of
386 CHAMBERS.COM
Powered by FlippingBook