{"id":128956,"date":"2026-02-08T16:52:19","date_gmt":"2026-02-08T16:52:19","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=128956"},"modified":"2026-03-06T12:30:11","modified_gmt":"2026-03-06T12:30:11","slug":"japan-corporate-governance","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/japan-corporate-governance\/","title":{"rendered":"Japan: Corporate Governance"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-128956","comparative_guide","type-comparative_guide","status-publish","hentry","guides-corporate-governance","jurisdictions-japan"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Nishimura &amp; Asahi<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/logo11273416.1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Nishimura &amp; Asahi<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/logo11273416.1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Corporate Governance laws and regulations applicable in Japan<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common types of corporate business entity and what are the main structural differences between them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The most common type of corporate business entity in Japan is a stock company (kabushiki kaisha or KK), and its organisational structure typically consists of (i) shareholders, (ii) a board of directors, (iii) representative directors, and (iv) statutory auditors, with some notable exceptions (see question 3).<\/p>\n<p>Stock companies may generally be divided into two groups according to restrictions on the transfer of shares by their articles of incorporation as follows:<\/p>\n<p>Closed KKs. Closed KKs require the company\u2019s approval for any acquisition or transfer of the company\u2019s shares. Most existing KKs are closed KKs. Closed KKs may simplify the organisational structure, and some organs, like a board of directors, representative directors, or statutory auditors may not be mandatory.<\/p>\n<p>Open KKs. Open KKs are companies without any provisions requiring the approval of the company for acquisition or transfer of all or some of their shares in the articles of incorporation. Generally, only securities issued by open KKs can be listed on a securities exchange in Japan. The Tokyo Stock Exchange (TSE) is the most well-known securities exchange in Japan, and it is one of the largest equity markets in the world, listing approximately 3,933 companies (as of 30 January 2026), including major Japanese companies.<\/p>\n<p>The applicable requirements and practice thereunder regarding corporate governance may significantly differ depending on whether a company is a closed KK or an open KK, and whether the company is listed. In order to simplify the discussion, however, we assume that the corporate entities mainly discussed herein are listed companies on the TSE, unless otherwise noted.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the current key topical legal issues, developments, trends and challenges in corporate governance in this jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>First, shareholder activism is gradually becoming more popular in Japan. Increasingly, activist shareholders ask Japanese companies to engage in dialogue regarding management issues and future policies, exercise shareholder proposal rights, and make acquisition proposals. In some cases, activists also gain support from institutional investors and general shareholders, who say they appropriately request management improvements and make proposals to improve corporate value.<\/p>\n<p>Second, \u201cacquisitions without consent,\u201d which propose mergers and acquisitions without the consent of the target company\u2019s management, are gradually becoming more common. Acquisitions without consent include \u201chostile takeovers\u201d and have been considered taboo in Japan. It has been said that hostile takeovers entail a negative impact, such as a negative image of the acquirer and difficulty gaining support from other shareholders. However, the \u201cGuidelines for Corporate Takeovers,\u201d compiled by the Ministry of Economy, Trade and Industry in the summer of 2023, positively evaluates acquisitions leading to increased corporate value, including acquisitions without consent, and calls on companies receiving a \u201cbona fide offer\u201d to give sincere consideration to such offer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who are the key persons involved in the management of each type of entity?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While a shareholders\u2019 meeting is the ultimate governing body, other key persons may differ depending on the structure of the management body, which can be classified into three types: (i) a company with statutory auditors; (ii) a company with an audit and supervisory committee; and (iii) a company with three committees.<\/p>\n<p><strong>(i) Company with statutory auditors<\/strong><\/p>\n<p>Shareholders elect both directors and statutory auditors, and the directors constitute a board of directors. The board of directors appoints representative directors, who can bind the company and take general responsibility for the management and operation of the company on a daily basis, from among the directors.<\/p>\n<p>Directors must monitor the performance of duties of other directors, and statutory auditors must audit the management of the company by the directors. Important decisions of the company provided by law or the articles of incorporation must be resolved at a board meeting. Most listed companies fall into the category of a large company (companies with capital of JPY 500 million or more or with total debts of JPY 20 billion or more), and the statutory auditors of a large company must form a board of statutory auditors with three or more members.<\/p>\n<p><strong>(ii) Company with an audit and supervisory committee<\/strong><\/p>\n<p>Shareholders elect directors who are members of the audit and supervisory committee and other directors separately, and all of those directors constitute the board of directors. No statutory auditor is appointed.<\/p>\n<p>The board of directors appoints one or more representative directors from among the directors who are not members of the audit and supervisory committee, and such representative directors are given the same authority as in a company with statutory auditors.<\/p>\n<p>The audit and supervisory committee is empowered with broader audit authority than the statutory auditors in a company with statutory auditors, and it is authorised to state its opinions on the election, dismissal, and remuneration of directors who are not members of the audit and supervisory committee at the shareholders\u2019 meeting.<\/p>\n<p><strong>(iii) Company with three committees<\/strong><\/p>\n<p>Shareholders only elect directors, and the directors form a board of directors and elect the members of three committees from among these directors. No statutory auditor is appointed. The three committees are (a) the audit committee, which mainly audits the directors and executive officers, (b) the nominating committee, which determines proposals to be submitted at the shareholders\u2019 meeting regarding the appointment and dismissal of directors, and (c) the compensation committee, which determines compensation for each director and executive officer.<\/p>\n<p>The board of directors appoints executive officers (shikko-yaku) who manage and operate the company on a daily basis, and directors and the board of directors supervise the executive officers. The board generally cannot manage and operate the company by itself; thus, it needs to delegate the authority to make important decisions to executive officers to enable the company to make various decisions timely. If two or more executive officers are elected, the board of directors must select representative executive officers.<\/p>\n<p>Historically, (i) is the most common corporate structure for listed companies in Japan. However, the number of (ii), which were introduced in 2014, is gradually growing, and approximately 1,710 companies listed on the TSE have adopted this new structure as of 30 January 2026. While (iii) was introduced in 2002, it is less popular than the other two structures in number, as only approximately 98 companies have adopted this structure as of 30 January 2026.<\/p>\n<p>No matter which structure is adopted, each of the directors and executive officers take responsibility for the management of the company. As shareholders\u2019 responsibility is limited to the amount of their invested capital, shareholders generally do not have any responsibilities.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are responsibility and management power divided between the entity\u2019s management and its economic owners? How are decisions or approvals of the owners made or given (e.g. at a meeting or in writing)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In listed companies, their operations and management of the company is the responsibility of directors (in the case of companies with three committees and executive officers, please see question 3) and only material issues must be approved by a shareholders\u2019 meeting under the Companies Act, unless otherwise provided for in the articles of incorporation.<\/p>\n<p>Under the Companies Act, any decision and approval by the shareholders can be made in writing if the shareholders agree unanimously. However, since it is not possible in practice within listed companies, they are resolving decisions and giving their approval at a meeting.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal sources of corporate governance requirements and practices? Are entities required to comply with a specific code of corporate governance?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The primary sources of corporate governance requirements and practices in Japan may be generally categorised as regulatory and non-regulatory sources:<\/p>\n<p><strong>(i) Regulatory sources<\/strong><\/p>\n<p>(a) Companies Act (Act No. 86 of 2005) (CA)<\/p>\n<p>The CA sets forth the basic principles that a company needs to abide by regarding the rights and obligations of management members, organs, the disclosure of information, etc. The CA applies to all types of companies, irrespective of whether they are listed.<\/p>\n<p>(b) Financial Instruments and Exchange Act (Act No. 25 of 1948) (FIEA)<\/p>\n<p>The FIEA generally requires that listed companies (x) disclose issues relating to corporate governance in their annual securities reports or quarterly reports,(y) timely disclose material information in their extraordinary reports, and (z) submit internal control reports to the authorities, etc.<\/p>\n<p>(c) The securities listing regulations published by the TSE (TSE Regulations)<\/p>\n<p>The main corporate governance requirements for listed companies under these regulations are (x) to submit corporate governance reports, and (y) to elect and disclose the name of at least one independent officer (see question 8).<\/p>\n<p><strong>(ii) Non-regulatory sources<\/strong><\/p>\n<p>(a) Articles of incorporation<\/p>\n<p>All companies are required to establish articles of incorporation that regulate their corporate governance, including organs and the number of directors.<\/p>\n<p>(b) Japan\u2019s Corporate Governance Code (CGC)<\/p>\n<p>Japan\u2019s CGC, published by the Council of Experts Concerning the Corporate Governance Code established by the TSE and the Financial Services Agency, offers fundamental principles for effective corporate governance of listed companies in Japan.<\/p>\n<p>(c) Proxy voting criteria provided by investor groups<br \/>\nSome investor groups, including the Pension Fund Association, who may be subject to the Principles for Responsible Institutional Investors (Japan\u2019s Stewardship Code or SSC), provide criteria for proxy voting that influence the corporate governance of listed companies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is the board or other governing body constituted? Does the entity have more than one?  How is responsibility for day-to-day management or oversight allocated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The governing body is the board of directors, the members of which are appointed by the shareholders\u2019 meeting. The board supervises the execution of duties by each of the directors and executive officers and, at the same time, appoints its representative directors (in the cases of a company with statutory auditors and a company with an audit and supervisory committee) and executive officers (in the case of a company with three committees). Since these executives can concurrently serve as directors, the so-called two-tier board structure is not employed in Japan.<\/p>\n<p>It is worth mentioning, however, that if a company has statutory auditors, the statutory auditors are appointed by a shareholders\u2019 meeting separately from directors. These statutory auditors cannot concurrently serve as directors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are the members of the board appointed and removed? What influence do the entity\u2019s owners have over this?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Directors are elected by an ordinary resolution at a shareholders\u2019 meeting. Generally, the board of directors nominates director candidates; however, in the case of companies with three committees, this must be done by the nominating committee.<\/p>\n<p>Directors (other than directors who are members of the audit and supervisory committee) can be dismissed at any time by an ordinary resolution at a shareholders\u2019 meeting, unless a higher threshold is provided for in the articles of incorporation. Directors who are members of an audit and supervisory committee can be dismissed by an extraordinary resolution at a shareholders\u2019 meeting. Directors can seek damages for dismissal from the company if they are dismissed without justifiable grounds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who typically serves on the board? Are there requirements that govern board composition or impose qualifications for board members regarding independence, diversity, tenure or succession?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Executive directors are often elected from shareholders or employees, but this is not a statutory requirement to being a director. In regard to the board composition, listed companies, as well as some large non-listed companies, must appoint at least one outside director. In addition, all listed companies are required to elect and disclose the name of at least one independent officer pursuant to the TSE Regulations. To qualify as an independent officer, he\/she must be an outside director or outside statutory auditor defined under the CA, and must also not (even potentially) have a conflict of interest with shareholders. Further, if the company has a board of statutory auditors, at least half of the statutory auditors must be outside statutory auditors under the CA. Under the CGC, although not a requirement, companies listed on the Prime Market (which is conceptualised for companies focusing on constructive dialogue with global investors, according to the TSE) should appoint at least one-third of their directors as independent directors and that companies listed on other markets should appoint at least two independent directors.<\/p>\n<p>With respect to the committees, the majority of audit and supervisory committee members and three committees members must be outside directors. Other than these, there is no specific requirement concerning independence, diversity, and succession of the board.<\/p>\n<p>As for the disclosure, under the related ordinances of the FIEA, applicable companies, including listed companies on the TSE, are required to disclose their policy and effort relating to corporate sustainability and diversity indicators, such as the ratio of female managers and the gender wage gap in their securities report. Under the CGC, although not a requirement, listed companies are encouraged to present their policies and goals for ensuring diversity in the promotion to core human resources, such as the promotion of women, foreign nationals, and midcareer hires to middle managerial positions, and to disclose the status of their progress.<\/p>\n<p>In addition, regarding board diversity, the Japanese government formulated and published the \u201cBasic Policy on Gender Equality and Empowerment of Women (the Intensive Policy for Gender Equality and the Empowerment of Women 2023)\u201d in June 2023. Based on this policy, in October 2023, the TSE set numerical targets for appointment of female executives, such as directors, by listed companies on the Prime Market to at least one in or around 2025 and to 30% or more of total executives by 2030. The TSE also recommends that such listed companies develop action plans to achieve these numerical targets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the role of the board with respect to setting and changing strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The leading role of the board with respect to setting and changing strategy is generally exercised by the representative director (in the cases of a company with statutory auditors and a company with an audit and supervisory committee) or (representative) executive officers (in the case of a company with three committees) based on the discussion or resolution at the board as necessary. Representative directors must be appointed from among directors. The (representative) executive officers need not be appointed from among directors, but usually at least one executive officer concurrently serves as a director.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are members of the board compensated? Is their remuneration regulated in any way?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For a company with statutory auditors, the remuneration of directors must be approved at a shareholders\u2019 meeting. In practice, most companies approve only a maximum aggregate amount of remuneration for all directors and delegate the board of directors to determine the amount for individual directors, and the board determines the distribution of remuneration among the directors, or further delegates these responsibilities to one of the directors (typically, the representative director).<\/p>\n<p>For a company with an audit and supervisory committee, the remuneration of directors must be approved at a shareholders\u2019 meeting, and that of members of the audit and supervisory committee must be approved separately from that of other directors. In practice, most companies approve only a maximum aggregate amount of remuneration for all directors who are members of the audit and supervisory committee, and the members of the audit and supervisory committee determine the distribution of remuneration among themselves.<\/p>\n<p>In the case of a company with three committees, the compensation committee determines the remuneration of each director and executive officer in accordance with the remuneration policy prescribed by the committee. The approval of a shareholders\u2019 meeting is not required.<\/p>\n<p>Historically, directors\u2019 remuneration has consisted mainly of fixed cash compensation, and performance-based remuneration has accounted for a relatively small portion of total remuneration. Equity-based incentives such as stock options are not widely utilized. The CGC encourages listed companies to include incentives in remuneration packages such that they reflect mid to long-term business results and potential risk, in order to promote healthy entrepreneurship.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do members of the board owe any fiduciary or special duties and, if so, to whom? What are the potential consequences of breaching any such duties?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Japanese law, directors and executive officers must perform their duties (i) with the care of a prudent manager, (ii) in compliance with all laws and regulations and resolutions of shareholders\u2019 meetings, and (iii) loyally. It is said that the duties of (i) and (iii) are not clearly distinguishable in Japan, and that these duties include so-called fiduciary duties owed by directors and executive officers to the company or all the shareholders. There is no legally binding concept of fiduciary duty owed by majority shareholders to minority shareholders in Japan.<\/p>\n<p>Directors who neglect their duties are liable to the company for the resulting damages. Where directors are grossly negligent or knowingly fail in performing their duties, such directors are liable to third parties, such as creditors, directly for the resulting damages.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are indemnities and\/or insurance permitted to cover board members\u2019 potential personal liability? If permitted, are such protections typical or rare?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Insurance covering board members\u2019 potential personal liability is permissible, and purchasing such insurance is typical in Japan. Also, it is still rare, but some companies have introduced indemnification agreements, allowing companies to indemnify directors and executive officers against third-party claims under certain conditions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How (and by whom) are board members typically overseen and evaluated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Each board member is overseen by other board members and evaluated by his\/her performance, and if it is not satisfactory, he\/she will not be nominated by the board of directors (in the cases of a company with statutory auditors and a company with an audit and supervisory committee), or by the nominating committee (in the case of a company with three committees).<\/p>\n<p>However, there has been criticism that there is no specific criteria for the evaluation of board members or that evaluation does not function well. As such, the CGC encourages the board to appropriately evaluate company performance and reflect the evaluation in its assessment of senior management.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the board required to engage actively with the entity\u2019s economic owners? If so, how does it do this and report on its actions?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Companies are required to disclose various information pursuant to the CA, the FIEA, and the TSE Regulations (see question 5). At the same time, they are encouraged to actively and constructively engage in dialogue with investors and shareholders in accordance with the CGC.<\/p>\n<p>Companies are also encouraged by the CGC not only to disclose information, but to engage in constructive dialogue including financial information briefings, IR conferences, individual meetings, and public relations in various forms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are dual-class and multi-class capital structures permitted? If so, how common are they?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Dual or multi-class capital structures have been permitted at the TSE since 2008; subsequently, a company conducted an initial public offering with the listing of its Class A shares on the TSE in 2014, which have one-tenth of the voting rights of its Class B shares, which are held by its founder and not listed. No other companies have listed their shares on the TSE since then, and this company is the only example of a dual-class listing company in Japan.<\/p>\n<p>As for the listing of a non-voting class of shares by listed companies, there are several examples. In 2007, a listed company listed its non-voting, non-participating preferred shares on the TSE. In 2023 and 2024, respectively, two other listed companies listed non-voting \u201cbond-type\u201d class shares on the TSE, with the company\u2019s call option after five years of issuance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What financial and non-financial information must an entity disclose to the public? How does it do this?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Stock companies are required to disclose their financial statements such as balance sheets every year under the CA. Also, in the case where the stock company is required to file a securities report and other disclosure documents under the FIEA, most typical financial and non-financial information is included in the disclosure documents.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can an entity\u2019s economic owners propose matters for a vote or call a special meeting? If so, what is the procedure?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the CA, qualified shareholders are permitted to make up to ten shareholder proposals. To be a qualified shareholder, a shareholder must hold the lesser of one percent of all voting rights or 300 voting rights; moreover, it must have continuously held such shareholding for six months or longer. Shareholder proposals have to be made no less than eight weeks before the date of the shareholders\u2019 meeting.<\/p>\n<p>Any shareholder holding three percent or more of the company\u2019s voting rights for six months or longer may demand that directors call a special meeting. When the board does not call a special meeting without delay, the shareholder can obtain court permission, and once such permission is obtained, the shareholder can call the special meeting for the company.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors have to take enforcement action against an entity and\/or the members of its board?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors may seek enforcement action against the entity or the members of the board mainly in several ways: (i) investigation or enjoinment of the director\u2019s act; and (ii) bringing suits to recover damages.<\/p>\n<p>First, investors are entitled to request an investigation of a director\u2019s act that is illegal or in breach of the articles of incorporation by a court-appointed inspector. If the company has statutory auditors, investors may ask the statutory auditors to investigate or enjoin the illegal act by the director on behalf of the company. Also, investors are entitled to request an injunction of a director\u2019s act under certain requirements.<\/p>\n<p>Second, investors are entitled to initiate a lawsuit on behalf of the company (i.e., a derivative claim). In some cases, investors may bring a lawsuit against board members directly as individuals (i.e., a direct claim).<\/p>\n<p>Before filing a derivative claim, the shareholders need to request that the company sue such members of the management body, and if the company does not sue the management members within 60 days of such a request, the shareholders may sue the members on behalf of the company. These claims are usually brought on the basis of a breach of fiduciary duty by the directors, statutory auditors, or executive officers.<\/p>\n<p>If a shareholder suffers damage due to the wilful misconduct or gross negligence of the directors, statutory auditors or executive officers in the performance of their duties, the shareholder may directly claim for damages against such members.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is shareholder activism common? If so, what are the recent trends? How can shareholders exert influence on a corporate entity\u2019s management?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Shareholder activism has become more common in Japan in recent years, and there have been several movements that require attention every year.<\/p>\n<p>Recently, there have been an increasing number of cases where activist shareholders positively propose to conduct M&amp;A transactions to companies, or activist shareholders intervene to prevent a company from conducting M&amp;A transactions or propose to seek better conditions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are shareholder meetings required to be held annually, or at any other specified time? What information needs to be presented at a shareholder meeting?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, companies are required to hold a shareholders\u2019 meeting annually (ordinary shareholders\u2019 meeting), and commonly hold their ordinary shareholders\u2019 meetings within three months after the end of each fiscal year under the provision in the articles of incorporation to that effect. In this meeting, shareholders vote on items such as the appointment of directors\/statutory auditors and the distribution of dividends. Companies may also hold extraordinary shareholders\u2019 meetings when necessary.<\/p>\n<p>Before an ordinary shareholders\u2019 meeting, a convocation notice, including reference materials for exercising voting rights, financial statements, and business reports, must be provided to shareholders at least two weeks before the date of the meeting. In the case of listed companies, they must make these materials available on the Internet at least three weeks before the date of the meeting.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any organisations that provide voting recommendations, or otherwise advise or influence investors on whether and how to vote (whether generally in the market or with respect to a particular entity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, proxy advisors, such as Institutional Shareholder Services (ISS) and Glass Lewis, commonly provide voting recommendations for investors of listed companies on how to vote in accordance with their respective voting policies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What role do other stakeholders, including debt-holders, employees and other workers, suppliers, customers, regulators, the government and communities typically play in the corporate governance of a corporate entity?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No laws provide a specific role for other stakeholders, such as debt-holders, employees, suppliers and customers, in the context of corporate governance of the company. However, the CGC encourages companies to fully recognise that their sustainable growth and the creation of mid to long-term corporate value can be achieved as a result of the resources and contributions from a range of stakeholders, including employees, customers, business partners, creditors, and local communities.<\/p>\n<p>As such, companies are encouraged to make efforts to appropriately cooperate with these stakeholders. Based on this principle, many listed companies consider that these stakeholders are important and indispensable for them to increase their corporate value sustainably.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are the interests of non-shareholder stakeholders factored into the decisions of the governing body of a corporate entity?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The governing body generally needs to make decisions considering how to maximise the interests of shareholders. The governing body should also consider other stakeholders as being very important and indispensable to increase corporate value sustainably pursuant to the CGC (see question 22).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What consideration is typically given to ESG issues by corporate entities? What are the key legal obligations with respect to ESG matters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the related ordinances of the FIEA, applicable companies, including listed companies on the TSE, are required to disclose their policy and effort relating to corporate sustainability in their securities report (see question 8). In addition, the CGC also provides that companies should take appropriate measures to address social and environmental issues. Recently, it is more common for corporate entities to voluntarily publish reports containing information regarding social, environmental, and ethical issues.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What stewardship, disclosure and other responsibilities do investors have with regard to the corporate governance of an entity in which they are invested or their level of investment or interest in the entity?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Principles for Responsible Institutional Investors (Japan\u2019s Stewardship Code or SSC) sets out principles that are considered helpful for institutional investors in fulfilling their stewardship responsibilities with regard for both their clients and beneficiaries and the investee companies. It offers the principles to be followed for a wide range of institutional investors to appropriately discharge their stewardship responsibilities, with the aim of promoting sustainable growth of investee companies. These principles include that institutional investors should have a clear policy on how they fulfil their stewardship responsibilities, and they should publicly disclose such a policy and the results of how they exercised their voting rights.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the current perspectives in this jurisdiction regarding short-term investment objectives in contrast with the promotion of sustainable longer-term value creation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>It is said that short-termism may bring about under-investment in tangible and intangible assets, including R&amp;D, which may cause damage to long-term value. Recently, such risks of short-termism have been widely recognized. Under the circumstances, various efforts to create corporate value over the mid- and long-term have been promoted to maximize Japanese companies\u2019 profits for sustainable economic development in Japan. CGC and SSC in Japan can be considered part of such efforts.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4659<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/128956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=128956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}