New Provisions For Incentive Stock Options Under The Japanese Commercial Code

Surprisingly, it was not until this year that incentive stock options to be issued by a Japanese corporation to its directors and employees ("Stock Options") were provided for under the Japanese Commercial Code (the "Commercial Code"). Before the amendment to the Commercial Code of this year, Japanese companies were forced to use warrants detached from its stock in combination with warrants or the shares of stock held by a founding shareholder, etc. to provide a Stock Option for its directors and employees (treasury stock is in principle impermissible under the Commercial Code). Further, it has been recently announced that in order to promote the dissemination of Stock Options, a special tax provision similar to qualifying stock option plan provisions under the Internal Revenue Code, will be introduced beginning in 1998 (See our article on this topic).