In our previous discussion on drafting the Articles of Incorporation (Teikan) for a Japanese Social Welfare Corporation (Shakai Fukushi Hojin, or SWF), we focused on the "Absolute-Essential Matters" – those provisions mandated by the Social Welfare Act that are indispensable for the Teikan's validity. However, the Teikan can, and often should, contain more than just this bare minimum. This article explores two further categories of clauses: "Relative-Essential Matters" (相対的記載事項 - Sōtai-teki Kisai Jikō) and "Optional Matters" (任意的記載事項 - Nin'i-teki Kisai Jikō). Understanding these allows an SWF to tailor its foundational document more precisely to its specific mission, operational plans, and governance preferences.

I. Understanding "Relative-Essential Matters" (Sōtai-teki Kisai Jikō)

"Relative-Essential Matters" are provisions that are not, in themselves, mandatory for every SWF's Teikan to be legally valid. However, if an SWF intends to engage in certain activities or establish particular rules that the law permits but does not universally require, these specific intentions or rules must be stipulated in the Teikan to have legal effect. Their absence does not nullify the Teikan itself (unlike the omission of an absolute-essential matter), but it does mean that the SWF cannot legally undertake those specific activities or enforce those particular self-imposed rules. These matters are typically found within the scope of Article 31, Paragraph 1 of the Social Welfare Act, following the absolute-essential items.

A. Key Examples of Relative-Essential Matters

The following are prominent examples of activities or provisions that fall under the category of relative-essential matters for an SWF's Teikan:

1. Conducting Public Interest Businesses (公益事業 - Kōeki Jigyō) (Social Welfare Act, Article 31, Paragraph 1, Item xi)
   • Legal Basis: Article 26 of the Social Welfare Act permits SWFs to conduct "public interest businesses" provided these activities do not impede their primary social welfare services. These are often activities that, while beneficial to the community, may not fall strictly within the definition of core social welfare services or might be smaller in scale.
   • Teikan Requirement: If an SWF plans to engage in any public interest businesses, its Teikan must specify the type(s) of such businesses it intends to undertake[cite: 31]. For example, this could include operating a small community café, running educational workshops related to welfare, or managing low-cost facilities for community use if these are distinct from its core registered social welfare services.
   • Financial Considerations: The Teikan should also stipulate how any surplus (if generated) from these public interest businesses will be disposed of [cite: 31] (e.g., by reinvesting it into the SWF's core social welfare services or other designated public interest activities). This reinforces the non-profit nature of the SWF.
2. Conducting Profit-Making Businesses (収益事業 - Shūeki Jigyō) (Social Welfare Act, Article 31, Paragraph 1, Item xii)
   • Legal Basis: Article 26 of the Social Welfare Act also allows SWFs to conduct "profit-making businesses." The crucial condition is that any profits generated from such businesses must be used to support the SWF's primary social welfare services or its legitimate public interest activities. They cannot be distributed as dividends or for private gain.
   • Teikan Requirement: If an SWF intends to conduct any profit-making businesses, its Teikan must specify the type(s) of these businesses[cite: 31]. This could range from renting out unused parts of its property to operating a small shop selling goods made by service users, provided it aligns with the overall mission and doesn't overshadow the core non-profit activities.
   • Use of Profits: A clear statement in the Teikan regarding the allocation of profits from these businesses is essential[cite: 31]. It must affirm that all such profits will be channeled back into the SWF's social welfare or public interest endeavors.
   • Separate Accounting: It's also vital to remember that Article 26, Paragraph 2, mandates that separate accounting records must be maintained for any profit-making (and public interest) businesses, distinct from the accounts for the core social welfare services.
3. Specific, Non-Statutory Grounds for Dissolution (解散に関する事項 - Kaisan ni Kansuru Jikō) (Social Welfare Act, Article 31, Paragraph 1, Item xiii)
   • Statutory Grounds: The Social Welfare Act (Article 46, Paragraph 1) already provides several mandatory grounds for the dissolution of an SWF. These include events such as a resolution by the Councillor Council to dissolve (Item 1), a merger, bankruptcy, the impossibility of achieving its stated purpose, or a dissolution order from the Shokatsu-cho[cite: 31]. These grounds apply to all SWFs regardless of their Teikan content.
   • Teikan-Stipulated Grounds: However, Article 46, Paragraph 1, Item 2, allows an SWF to define additional, specific grounds for its own dissolution directly within its Teikan[cite: 31]. These are triggers for dissolution that are unique to that particular SWF, beyond the standard statutory ones.
   • Requirement for Effectiveness: If the founders or members of an SWF wish to establish such custom dissolution triggers – for example, the cessation of a key funding source, the non-achievement of a specific critical milestone within a timeframe, or the occurrence of a particular external event that makes its specific mission untenable – these grounds must be explicitly written into the Teikan to be legally recognized and enforceable[cite: 31]. If such custom grounds are not in the Teikan, then only the statutory grounds for dissolution will apply.

II. Exploring "Optional Matters" (任意的記載事項 - Nin'i-teki Kisai Jikō)

"Optional Matters" encompass any other provisions that an SWF chooses to include in its Teikan to further regulate its internal affairs, clarify procedures, or reflect its unique operational philosophy.

A. Definition and Scope

The key characteristics of optional matters are:

• They are not legally required for the Teikan to be valid, nor are they necessary to give effect to specific powers (unlike relative-essential matters)[cite: 31].
• They can be included as long as they do not contradict any mandatory provisions of the Social Welfare Act, other applicable laws (e.g., civil code provisions on juridical persons), or fundamental principles of public policy or the inherent nature of a Social Welfare Corporation[cite: 31].
• Once included in the Teikan, these optional provisions become legally binding on the SWF, its officers, councillors, and employees, just like any other clause in the Teikan[cite: 31].
• They offer a valuable means for an SWF to tailor its internal rules and governance framework more precisely to its specific circumstances, scale of operations, and organizational culture.

B. Common Examples of Optional Matters

While the scope for optional matters is broad, some common examples seen in practice include[cite: 31]:

1. Alternative Titles for Leadership Positions (理事長又は理事に総裁、会長又は副会長等の呼称)
   • The Social Welfare Act uses specific legal titles such as "Rijichō" (理事長) for the President/Chairperson of the Board of Directors. However, an SWF may find it practical or culturally appropriate to use alternative, perhaps more commonly understood or prestigious, titles for its leadership figures, either for internal use or in its public communications[cite: 31].
   • Examples include stipulating in the Teikan that the Rijichō may also be referred to as "Kaichō" (会長 - often translated as Chairman or President), "Sōsai" (総裁 - Governor or Director-General, typically for very large or historically significant organizations), or that certain Directors may hold titles like "Fukukaichō" (副会長 - Vice-Chairman or Vice-President)[cite: 31].
   • Important Note: While alternative titles can be used, the underlying legal roles, responsibilities, and representative authority as defined by the Social Welfare Act remain attached to the statutory positions (e.g., the individual legally designated as Rijichō holds the ultimate representative power, regardless of any other title they might use).
2. Detailed Provisions Concerning Staff/Employees (職員に関する事項 - Shokuin ni Kansuru Jikō)
   • While the Social Welfare Act extensively covers the appointment, terms, and duties of officers (Directors, Auditors) and Councillors, the Teikan can optionally include more detailed provisions regarding the general staff and employees of the SWF[cite: 31]. This might cover:
     • General principles or procedures for the hiring, promotion, discipline, and dismissal of staff members (beyond what is covered by labor law).
     • The organizational structure of the SWF's administrative office or secretariat (事務局 - Jimukyoku), including the establishment of specific departments or roles[cite: 31].
     • Rules concerning employee conduct, training, or specific internal HR policies that the SWF wishes to codify at the Teikan level.
3. Procedures for Acting Representation of the President (理事長に事故等があるときの代理代行に関する事項 - Rijichō ni Jiko nado ga aru toki no Dairi Daikō ni Kansuru Jikō)
   • The Social Welfare Act contains general provisions for the continuation of duties by officers in case of vacancies. However, an SWF's Teikan can optionally specify more detailed internal procedures or an order of precedence for who should act on behalf of the President if the President is temporarily incapacitated (e.g., due to illness or accident) or otherwise unavailable to perform their duties[cite: 31].
   • This could involve, for instance, designating a specific Director (perhaps one titled as "Vice-President" if such an optional title is adopted) to automatically assume acting responsibilities, or outlining a process by which the Board of Directors would quickly appoint an acting representative from among its members.
4. Enhanced Quorum or Voting Requirements for Meetings:
   • The Social Welfare Act sets statutory minimums for quorums and voting majorities for resolutions of the Councillor Council and the Board of Directors. An SWF may, through its Teikan, choose to establish higher thresholds for these if it desires a more stringent decision-making process (e.g., requiring a two-thirds majority for certain Board decisions that would otherwise only need a simple majority, or a higher attendance rate for a quorum).
5. Establishment of Specific Committees or Advisory Bodies:
   • An SWF might find it beneficial to establish various internal committees not mandated by law, such as an ethics committee, a service quality review committee, a fundraising committee, or specific advisory panels composed of external experts or community representatives. The Teikan can provide for the establishment, basic composition, and general mandate of such optional bodies.
6. More Granular Rules on Asset Management or Financial Procedures:
   • Beyond the mandatory Teikan clauses concerning assets and accounting, an SWF could choose to include more detailed internal rules, principles, or limitations regarding the management of its finances, investment of surplus funds (within legally permissible boundaries), or procedures for handling specific types of assets or donations, provided these are consistent with legal requirements and prudent financial management.

III. Strategic Considerations for Drafting Relative and Optional Clauses

When deciding which relative-essential or optional matters to include in the Teikan, founders and existing SWFs should consider several strategic points:

• Balancing Specificity with Flexibility: Overly detailed or rigid clauses in the Teikan can necessitate frequent amendments (which is a formal process) as circumstances change. Conversely, too little detail on important matters can lead to operational ambiguity or disputes. A balance must be struck.
• Alignment with Mission and Operational Needs: The chosen clauses should genuinely support the SWF's specific mission, its planned scale and type of operations, and its preferred governance style. Generic clauses may not be helpful.
• Future-Proofing (to the extent possible): While it's impossible to predict all future developments, some thought should be given to whether certain optional clauses might provide useful frameworks for anticipated growth, new types of activities, or evolving governance challenges.
• Clarity, Consistency, and Unambiguity: All Teikan clauses, regardless of category, must be drafted with utmost clarity to avoid misinterpretation. They must also be consistent with each other and with all applicable laws.
• Legal Review: Given the legal implications, it is always highly recommended that any proposed relative-essential or optional clauses be reviewed by legal professionals in Japan who are experienced in social welfare law and corporate governance. This helps ensure compliance, legal effectiveness, and alignment with the SWF's objectives.

Conclusion

While the Absolute-Essential Matters form the non-negotiable core of a Social Welfare Corporation's Articles of Incorporation, Relative-Essential and Optional Matters provide valuable tools for customization and enhanced governance. Relative-Essential Matters are critical for legally enabling specific activities like public interest or profit-making businesses, or for defining unique dissolution triggers. Optional Matters allow an SWF to further refine its internal rulebook, clarify procedures, and reflect its distinct organizational character. Careful consideration, strategic drafting, and professional legal review of these clauses are essential to ensure they are effective, compliant, and truly serve the long-term interests and mission of the Social Welfare Corporation.