JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
by the company, such as the issuance of new shares, merger, company split and resolution of a shareholder meeting, if there exist grounds for such nullification. 5.5 Disclosure by Shareholders in Publicly Traded Companies For publicly traded companies, a bulk sharehold - ing report system exists. A shareholder holding more than 5% of the outstanding shares, as cal - culated pursuant to the relevant regulations, is required to file a bulk shareholding report within five business days of it satisfying such require - ments. Thereafter, as long as the shareholder satisfies the requirements, the shareholder is required to file updated reports when material changes occur with respect to the information contained in the report, including the case of an increase or decrease of 1% or more in the share - holding ratio. In this regard, some beneficial owners satisfying the criteria stipulated in the FIEA are deemed to hold the relevant shares, but such regulation is not necessarily able to capture the ultimate beneficial owners. In the case of institutional investors, some exceptions exist to relax the reporting timing and reduce the reporting contents. The Council of Experts on the Stewardship Code, established by the Japanese Financial Services Agency, published “Japan’s Stewardship Code” . This Code is not a law or a legally binding reg - ulation, but many institutional investors have accepted it and make disclosure in accordance with it. Under the Code, institutional investors should have a clear policy on voting and publicly disclose the same. Additionally, under the Code, institutional investors are expected to disclose voting records, including reasons for their vot - ing decisions, for each investee company on an individual agenda item basis. In relation to dis -
closure/identification of beneficial owners of the shares held by institutional investors, amend- ment to the Stewardship Code and amendment to the Companies Act are now being discussed. 6. Corporate Reporting and Other Disclosures 6.1 Financial Reporting The Companies Act provides for annual financial reporting requirements for all joint stock compa - nies. Following the end of each fiscal year, a joint stock company is required to prepare: • financial statements (consisting of a balance sheet, profit and loss statement, statement of changes in shareholders’ equity, and notes to financial statements); • a business report; and • supplementary statements to each of the foregoing. When finalised, the financial statements and business report will ultimately be submitted to the company’s annual shareholder meeting for either approval or report to the shareholders. Depending on the governance structure of the relevant joint stock company, the procedural requirements for finalising such documents will vary. In the case of a company with a board of directors, which is the most typical structure, its financial statements, business report and sup - plementary statements must be reviewed by the company’s statutory auditor or a board of statu - tory auditors (as applicable), and the financial statements and their supplementary statements must be reviewed and audited by the company’s accounting auditor (if applicable). The board of directors will then approve such documents, which will be approved by the shareholders, or
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