JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
3. Management of the Company 3.1 Bodies or Functions Involved in Governance and Management Shareholder Meeting/Directors/Board of Directors All joint stock companies are required to have a shareholder meeting and directors. If a company has a board of directors, it must appoint three or more directors. A listed company is required to have a board of directors. A company may have one of the following bodies: • a statutory auditor and, as the case may be, a board of statutory auditors; • an audit and supervisory committee; and • nominating and other committees. If a company has any of a board of statutory auditors, an audit and supervisory committee or nominating and other committees, it must also have a board of directors. A listed company that is a large-sized company ( daigaisha ), ie, a company that has recorded on its audited and approved balance sheet for its most recent fis - cal year either JPY500 million or more in stated capital, or JPY20 billion or more in liabilities, is required to have one of these bodies. Statutory Auditors The main role of a statutory auditor is to audit the execution of the duties of the directors. A listed company with statutory auditors is required to An audit and supervisory committee consists of three or more audit and supervisory members, who are also directors of the company elected as such by its shareholder meeting. A majority of the audit and supervisory members must be outside directors. The main role of the audit and have a board of statutory auditors. Audit and Supervisory Committee
and provide information on investments in human capital and intellectual properties. In particular, a listed company on the Prime Mar - ket is encouraged to collect the necessary data to analyse the impact of the risks and earning opportunities related to climate change on its business activities and profits and to enhance the disclosure based on the Task Force on Cli - mate-related Financial Disclosures (TCFD) rec - ommendation or an equivalent framework. Under the FIEA, publicly traded companies (in this context, listed companies and other com - panies that are required to file annual securities reports under the FIEA) are required to disclose their notion and efforts on sustainability in annu - al securities reports. This disclosure requirement spans the following four categories: • governance; • strategy; • risk management; and • indexes and goals. In addition, in response to the establishment of the inaugural global sustainability disclo - sure standards (IFRS S1 and IFRS S2) by the International Sustainability Standards Board in June 2023, the Sustainability Standards Board of Japan established the sustainability dis - closure standards (the “SSBJ Standards” ) in March 2025. The SSBJ Standards, which can be applied voluntarily at this point, are expected to be adopted in the legal disclosure regime.
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