JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
Securities Listing Regulations Published by the Tokyo Stock Exchange (TSE Regulations) The TSE Regulations include certain corporate governance requirements which companies list - ed on the Tokyo stock exchange must comply with. The Tokyo stock exchange has three seg - ments (Prime, Standard and Growth). Companies listed at the Prime Market must meet enhanced corporate governance requirements. Companies listed at the Prime Market, the Standard Market and the Growth Market respectively account for approximately 43%, 41% and 16% among approximately 3,800 companies listed at the Tokyo stock exchange as of April 2025. 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 Cor - porate Governance Code and to disclose some corporate governance matters in their corporate governance reports. The latest amendment to the Corporate Governance Code took effect in June 2021. 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 important corporate governance requirements, although it is not directly applica - ble to listed companies but to institutional inves - tors. The Stewardship Code of 2020 is the most recent version. Many major institutional investors have published their own proxy voting policies in response to the Stewardship Code, will vote at shareholder meetings in accordance with their own policies, and will have engagement discus - sions 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 various guidelines or study group reports with respect to corporate governance issues, which include the Corporate Governance Sys - tem Guidelines, the Fair M&A Guidelines, the Outside Directors’ Guidelines and the Guidelines for Corporate Takeovers. 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares Listed companies are subject to various cor - porate governance requirements, including the following. Governance Structures Having a board of directors is mandatory. Listed companies must choose one of the three gov - ernance structures: • company with a board of statutory auditors; • company with an audit and supervisory com - mittee; or • company with nominating and other commit - tees. Companies with a board of statutory audi - tors, companies with an audit and supervisory committee, and companies with nominating and other committees respectively account for approximately 55%, 43% and 2% among approximately 3,800 companies listed at the Tokyo stock exchange as of April 2025. Outside/Independent Members All the listed companies are required to have out - side director(s) under the Companies Act. The Corporate Governance Code provides that one third or more of the directors should be inde -
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