JAPAN Law and Practice Contributed by: Junichi Ueda, Etsuko Hara, Nobuto Shirane, Takahiro Hayase, Yutaka Shimoo and Miki Goto, Anderson Mori & Tomotsune
• 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 share - holders’ 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 direc - tors, who are to be elected at the sharehold - ers’ meeting. Resolutions of the board must be passed via a majority vote of the directors pre - sent at the meeting. There must be at least one representative direc - tor. Representative directors have the power to represent the company – for example, they may execute documents as a representative of the company with third parties. The company should be audited by the compa - ny 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 standard of a reasonably prudent man - ager. 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 Com - panies Act that state directors may be liable to the company for damages arising from the per - formance of the directors’ functions, where the performance does not amount to a neglect of duties. While there is some recognition of piercing the corporate veil in Japan, this is not founded on statutory law and only exists as a matter of judi - cial precedent. 4. Employment Law 4.1 Nature of Applicable Regulations There are many labour-related and employment- related laws and regulations in Japan, all of which were enacted to embody the fundamen - tal principles and rights contained in the Con - stitution. In particular, the Labour Standards Act (LSA) and the Labour Contracts Act (LCA) pro - vide for the fundamental principles of individual employment relationships, whereas the Labour Union Act (LUA) provides for the fundamental principles of collective labour relationships. Japan is a country with a civil law system, in which judicial precedents do not have legally binding force. However, in the field of labour and employment law, judicial precedents are considered very important, as it is often difficult to make decisions based solely on the laws and regulations. This is because most of the provi - sions under those laws and regulations only pro -
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