JAPAN Law and Practice Contributed by: Tomoyuki Tanaka and Henry Tan, Anderson Mori & Tomotsune
A “principal shareholder” may be required by the FSA to submit reports or materials, be inspected by the FSA at its offices, be required to respond to questions put by the relevant FSA officer and be required to present its accounting books and other documents to the FSA for inspection. A “principal shareholder” that fails to meet any of the conditions imposed by the FSA may be sub - ject to any action that the FSA may order the bank’s “principal shareholder” to take as the FSA deems necessary. Furthermore, a “principal shareholder” with more than 50% of the voting shares of a local bank may be ordered by the FSA to submit an improvement plan or otherwise take such meas - ures as the FSA deems necessary to ensure the sound and appropriate management and opera - tion of the local bank. Other than the above, pursuant to the Foreign Exchange and Foreign Trade Act, foreign inves - tors that acquire shares in a local bank may be subject to certain requirements, such as notifica - tion requirements. 4. Governance 4.1 Corporate Governance Requirements Under the Banking Act, a local bank must have a board of directors and accounting auditors. Additionally, under the Companies Act, a local bank must have: • a board of corporate auditors; or • a subcommittee of the board of directors comprising either an audit and supervisory committee, or an audit committee, remunera - tion committee and appointment committee.
Under the Banking Act, directors and executive officers engaging in the ordinary operations of a local bank must have the knowledge and experi - ence to be able to manage and operate the bank appropriately, fairly and efficiently. Additionally, they must have sufficient social credibility. Fur - thermore, the Guidelines stipulate the appropri - ate governance system for local banks. For example, representative directors of local banks with a board of corporate auditors must: • take command of the establishment and maintenance of the bank’s internal compli - ance framework; • make risk management a primary concern; • establish an adequate internal control frame - work for proper disclosure of the bank’s corporate information to the public; and • ensure that appropriate internal audits are performed on the bank. The board of directors of a local bank must: • proactively oversee the performance of the bank’s representative directors; • establish and review the bank’s business management plans in line with the bank’s business objectives; • establish a clear risk management policy by taking certain objectives into consideration; and • ensure appropriate performance and review of internal audits of the local bank. The Guidelines also require listed banks or listed bank holding companies to comply with Japan’s Corporate Governance Code published by the Tokyo Stock Exchange. In light of this, listed banks should appoint at least two independent external directors who are able to contribute to
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