JAPAN Trends and Developments Contributed by: Yoshitaka Sakamoto, Tsunemichi Nakano, Hiroyuki Saga and Hiroshi Ogura, Anderson Mori & Tomotsune
of discussion concerning the ideal form of sharehold - ers’ meetings. Establishment of a legal framework for virtual-only shareholders’ meetings Taking the opportunity which arose as a result of the COVID-19 pandemic, virtual-only shareholders’ meet - ings (ie, shareholders’ meetings without a physical venue) have been operating in practice for some time against the backdrop of the provisions of a special law – the Act on Strengthening Industrial Competitiveness – and the revision aims to legislate it as an official sys - tem under the Companies Act. It is expected that the revised Companies Act will set out requirements and procedures for conducting a virtual-only shareholders’ meeting and also organise the steps to be taken in the event a procedural defect exists (in particular, how to remedy the impact on the effectiveness of resolutions in the event of communication interferences), in addi - tion to providing other matters. System allowing for the identification of beneficial shareholders A system allowing for the identification of beneficial shareholders is drawing attention in relation to the response to activist investors. Discussions on the establishment of a framework that enables listed com - panies to request information from so-called nominal shareholders (in cases where a trust bank or a securi - ties company is registered as the shareholder) about the closest intermediary or the holder of the author - ity for giving instructions (beneficial shareholder) are underway. As for specific details under considera - tion, proposals have been made on whether or not to impose obligations on intermediaries to provide information, as well as on matters concerning proxy attendance by beneficial shareholders at a sharehold - ers’ meeting and their exercise of voting rights (ie, suspension of their voting rights as a sanction in the event of failure to provide information). Whether such provisions will actually be codified will be determined through future deliberations, taking into account the results of the public comment and other relevant fac - tors. This issue is also linked to the revisions to the Stew - ardship Code outlined below. Going forward, the key focus will likely be on the co-ordination with the
large shareholding reporting system (which, broadly speaking, requires shareholders holding a certain per - centage or more of the shares of a listed company to report their holdings) under the Financial Instru - ments and Exchange Act, as well as determining how far-reaching the sanctions, such as the suspension of voting rights, can be designed. Other matters to be considered in relation to the digitalisation of shareholders’ meetings The revision plans to develop legislation regarding the ideal form of electronic provision of materials for shareholders’ meetings, the exercise of voting rights in writing, and the notice of convocation of shareholders’ meetings by electronic or magnetic means. The aim is to develop a legal framework to promote the digitali - sation of various procedures relating to shareholders’ meetings, while remaining mindful of the digital divide. Review of rules regarding shareholders’ meetings as a “meeting body” With a view to rationalising the resolution of sharehold - ers’ meetings in cases where voting rights have been exercised in advance, the revision studies the feasibil - ity of a system whereby a resolution of a shareholders’ meeting is deemed to have been passed if a certain threshold of voting rights (required for the adoption of a proposal) have been exercised in advance. (Under the current system for resolutions in writing, this is only possible with 100% approval of the voting rights.) A review of the current requirements for resolutions in writing is also under consideration. Review of rules regarding shareholder proposals As for shareholder proposals, there are discussions on abolishing or revising the voting rights threshold (currently, 300 or more voting rights) and whether or not to revise the deadline for exercising the proposal right (currently, eight weeks prior to the day of the shareholders’ meeting). These are matters that could have an impact on the way shareholder proposals are put forward by activists, who have been on the rise
in recent years. Other matters
In addition to the above, the system for investigators and inspectors of procedures at shareholders’ meet -
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