In Japanese stock companies (株式会社 - kabushiki kaisha, or KK) that have established a board of directors (取締役会 - torishimariyakukai), the board meeting is the central forum for making significant business decisions and overseeing the company's management. For the resolutions passed at these meetings to be legally valid and to withstand scrutiny, the process of convening the meeting itself must adhere to the procedures prescribed by Japan's Companies Act and the company's own Articles of Incorporation (teikan). Improper convocation can lead to challenges against the validity of board decisions, with potentially serious consequences.

This article will outline the legally mandated and commonly practiced procedures for convening a board of directors meeting in Japan, addressing who has the authority to call a meeting, the required notice periods and permissible methods of notification, and common practices regarding the content of the convocation notice.

Who Has the Authority to Convene a Board of Directors' Meeting? (招集権者 - Shōshūkensha)

The authority to initiate and call a board of directors' meeting is governed by Article 366 of the Companies Act, which provides a hierarchy and specific rights:

1. Default Rule: Any Director Can Convene:
   • In principle, each director (各取締役 - kaku torishimariyaku) of the company has the individual authority to convene a board of directors' meeting (Companies Act, Article 366, Paragraph 1). This ensures that any director who believes a board discussion is necessary can initiate the process.
2. Designation of a Specific Convener by Articles of Incorporation or Board Resolution:
   • To ensure an orderly process and avoid multiple directors potentially calling meetings simultaneously or without coordination, the Articles of Incorporation or a prior resolution of the board of directors can designate a specific director as the person primarily responsible for convening board meetings (Article 366, Paragraph 1, proviso).
   • Commonly designated conveners include the Representative Director (代表取締役 - daihyō torishimariyaku), the President (社長 - shachō), or the Chairman of the Board (取締役会議長 - torishimariyakukai gichō).
3. Rights of Other Directors to Demand Convocation from a Designated Convener:
   • Even if a specific director is designated as the convener, other directors do not lose their ability to ensure important matters are discussed.
   • Any director (other than the designated convener) can demand that the designated convener call a board meeting. This demand must specify the proposed agenda items (目的である事項 - mokuteki de aru jikō) for the meeting (Article 366, Paragraph 2).
   • Fallback Mechanism: If, after such a demand is made, the designated convener fails to dispatch a convocation notice within five days for a meeting to be held within two weeks from the date of the demand, then the director who made the demand gains the right to convene the board meeting themselves (Article 366, Paragraph 3). This provision prevents a designated convener from unilaterally blocking board discussions.
4. Special Convocation Rights of Statutory Auditors (監査役 - Kansayaku) (Companies Act, Article 383):
   • If the company has statutory auditors, they also have powers related to board meeting convocation, particularly if they deem it necessary for the performance of their audit and oversight duties.
   • A statutory auditor can request the directors (or the designated convener) to convene a board meeting if they believe it is necessary, for example, upon discovering potential misconduct by a director or other urgent governance matters (Article 383, Paragraph 2).
   • Similar to the rights of other directors, if, after such a request from a statutory auditor, a convocation notice is not dispatched within five days for a meeting to be held within two weeks from the date of the request, the statutory auditor who made the request can convene the board meeting themselves (Article 383, Paragraph 3). This empowers auditors to ensure critical issues are brought before the board.
5. Limited Convocation Rights of Shareholders (Companies Act, Article 367):
   • In specific, less common circumstances related to lawsuits pursuing director liability (e.g., derivative actions), shareholders may demand the convocation of a board meeting to report on matters concerning such litigation. If the directors fail to convene the meeting, the shareholders may do so with permission from a court. This is a specialized right not typically used for general operational board meetings.

The Convocation Notice (招集通知 - Shōshū Tsūchi): Procedures and Content

Once the decision to hold a board meeting is made by the appropriate authority, a formal convocation notice must be dispatched to all individuals entitled to attend. This is governed by Article 368 of the Companies Act.

A. To Whom Must Notice Be Sent?
The convocation notice must be sent to:

1. Each Director (各取締役 - kaku torishimariyaku): This includes all internal directors, representative directors, and any outside directors.
2. Each Statutory Auditor (各監査役 - kaku kansayaku): If the company has statutory auditors. Statutory auditors have the right, and often the duty, to attend board meetings to oversee director conduct, even if they do not have voting rights on board resolutions.

Failure to notify any single director or statutory auditor (unless properly waived) can render the meeting and its resolutions invalid.

B. Statutory Notice Period (通知時期 - Tsūchi Jiki):

• The Companies Act (Article 368, Paragraph 1) stipulates a default notice period: the convocation notice must be dispatched at least one week prior to the scheduled date of the board meeting.
• This one-week period is calculated by excluding the day the notice is dispatched and the day of the meeting itself.

C. Shortening the Notice Period by Articles of Incorporation:

• Unlike the stricter rules for notice periods of shareholders' meetings for public companies, the one-week notice period for board meetings can be shortened by a provision in the company's Articles of Incorporation.
• It is common practice for companies to include such a provision in their AoI, shortening the notice period to, for example, three days, or even stating that notice can be given "without delay" if circumstances require urgency. This provides significant operational flexibility.

D. Complete Waiver of Convocation Procedures by Unanimous Consent (Companies Act, Article 368, Paragraph 2):
This is a highly practical and frequently utilized provision, especially in companies with smaller, cohesive boards:

• If all directors AND all statutory auditors (if the company has them) unanimously consent, the entire formal convocation procedure—including the dispatch of a notice and adherence to any notice period (statutory or as per AoI)—can be omitted entirely.
• This allows for board meetings to be held on an impromptu basis or arranged very quickly when all relevant parties are in agreement and available. This is particularly useful for urgent matters or in closely-held companies where communication among board members and auditors is constant.

E. Method of Dispatching the Notice (通知方法 - Tsūchi Hōhō):

• The Companies Act itself does not prescribe a specific method for dispatching the board meeting convocation notice (e.g., it doesn't mandate written mail versus electronic mail).
• Therefore, any method that reasonably ensures the notice effectively reaches all entitled individuals (all directors and all statutory auditors) in a timely manner is generally considered legally acceptable. This could include oral notification, telephone calls, fax, email, or formal written letters.
• Best Practices for Evidentiary Purposes: While oral notice might be legally permissible if it can be proven that everyone was duly notified, for clear evidentiary purposes, it is highly recommended to use a method that provides a record of dispatch and receipt. Common best practices include:
  • Email: Often used for its speed and ability to create a traceable record (especially with read receipts or delivery confirmations).
  • Fax or Written Notices: For more formal situations or if required by internal company rules.

F. Content of the Convocation Notice (通知の内容 - Tsūchi no Naiyō):
This is a point where the legal requirements for board meeting notices differ significantly from those for shareholders' meeting notices:

• Legally Mandated Content: The Companies Act does not explicitly require the convocation notice for a board of directors' meeting to state the agenda items or the purpose(s) of the meeting (目的事項 - mokuteki jikō).
• Implication: This means that, from a strict legal standpoint, the board can deliberate upon and pass valid resolutions on matters that were not specifically listed in the convocation notice (if one was even sent). This provides a degree of flexibility for boards to address emergent issues.
• Strong Recommendation and Common Practice for Good Governance: Despite this legal flexibility, it is overwhelmingly considered best corporate governance practice and highly advisable to include the proposed agenda items in the convocation notice. Doing so allows directors and statutory auditors to:
  • Prepare adequately for the discussions by reviewing relevant materials and considering their positions.
  • Identify and consider potential conflicts of interest in advance of the meeting.
  • Determine if they need to gather further information or seek clarification before the meeting.
• Many companies, recognizing these benefits, choose to make the inclusion of an agenda in the convocation notice a requirement in their internal Board of Directors' Regulations (取締役会規則 - torishimariyakukai kisoku) or even stipulate it in their Articles of Incorporation.

Location of Board Meetings (開催場所 - Kaisai Basho)

The Companies Act does not impose restrictions on the physical location where board meetings can be held. Therefore, meetings can take place:

• At the company's head office (the most common location).
• At another location within Japan.
• Even overseas, if convenient for the directors.

Furthermore, recognizing modern communication technologies, board meetings can be validly held via teleconference, video conference, or other means of simultaneous two-way audio (and preferably visual) communication that allows all participating directors and statutory auditors to hear and speak to each other effectively throughout the meeting. The minutes of such a remotely-held meeting should accurately reflect the method of participation for each attendee (as per Article 101, Paragraph 1, Item 1 of the Companies Act Enforcement Rules regarding minute content).

Importance of Adhering to Proper Convocation Procedures

While the convocation procedures for board meetings offer more flexibility in certain areas (e.g., agenda in notice, ability to shorten notice period by AoI) compared to those for shareholders' meetings, adherence to the core requirements is still essential.

• Validity of Resolutions: Failure to properly notify all directors and statutory auditors of a meeting (unless the convocation procedure has been validly waived by their unanimous consent) can be grounds for challenging the validity of any resolutions passed at that meeting.
• Director and Auditor Rights: Proper convocation ensures that all directors have the opportunity to participate in decision-making and fulfill their duties, and that statutory auditors can exercise their oversight functions by attending.

Conclusion

Convening a board of directors' meeting in a Japanese Kabushiki Kaisha involves a set of defined legal procedures designed to ensure that directors and statutory auditors are properly informed and can participate effectively in this key governance process. While the system allows for significant flexibility—such as the ability for any director to call a meeting (in principle), the option to shorten notice periods through the Articles of Incorporation, and the widely used provision for waiving formal convocation entirely by unanimous consent—the fundamental requirement of ensuring all entitled parties are properly included in the process remains.

Although the Companies Act does not legally mandate the inclusion of an agenda in the convocation notice for board meetings, doing so is a critical aspect of good corporate governance, enabling informed participation and efficient deliberation. Adherence to these convocation protocols is fundamental to the legitimacy of board decisions and the overall health of the company's governance framework.