Convening a Shareholders' Meeting in Japan: Key Procedural Differences for Public vs. Private Companies

Japanese Attorney at Law - Bengoshi L.L.

• 7 min read

The general shareholders' meeting (株主総会 - kabunushi sokai) is the ultimate decision-making body in a Japanese stock company (株式会社 - Kabushiki Kaisha or K.K.). Its resolutions authorize fundamental corporate actions, from appointing directors to approving financial statements and amending the Articles of Incorporation. Consequently, strict adherence to the legally prescribed procedures for convening these meetings is paramount; failure to do so can render resolutions invalid and expose the company to legal challenges. The Japanese Companies Act (会社法 - Kaishaho) sets out these procedures, but they vary significantly depending on the company's classification—particularly whether it is a "public company" versus a "non-public company," and whether it operates with or without a board of directors.

1. Understanding the Core Classifications

Before delving into procedural specifics, it's crucial to understand these classifications:

  • Public Company (公開会社 - kokai kaisha) vs. Non-Public Company (非公開会社 - hi-kokai kaisha):
    • A "public company" in Japan is one whose Articles of Incorporation (Teikan) do not require the company's approval for the transfer of any of its shares, or a company that has, in fact, issued shares that are not subject to transfer restrictions. It does not necessarily mean the company is listed on a stock exchange.
    • A "non-public company" (often referred to as a closely-held company) is one where all shares issued by the company are subject to transfer restrictions, meaning their transfer requires the company's approval (typically by the board of directors or shareholders' meeting, as stipulated in the Articles). The vast majority of K.K.s in Japan are non-public companies.
  • Company with a Board of Directors (取締役会設置会社 - torishimariyakukai setchi gaisha) vs. Company without a Board:
    • A company with a board of directors must have at least three directors.
    • A company without a board of directors can operate with one or more directors. This structure is common among smaller, non-public companies.

These classifications are not mutually exclusive (e.g., a non-public company can have a board of directors) and significantly influence the rules for convening shareholders' meetings.

2. Initiating the Process: The Decision to Convene a Shareholders' Meeting

The authority to decide on holding a shareholders' meeting and to determine its fundamental parameters (date, time, place, and agenda/purpose) rests with different bodies depending on the company's structure:

  • For a Company with a Board of Directors: The board of directors must pass a resolution to make these determinations (Companies Act, Article 298, Paragraph 4). The actual convocation is then carried out by a director (often the Representative Director) based on this board resolution.
  • For a Company without a Board of Directors: The director(s) of the company make these decisions (Article 298, Paragraph 1). If there are multiple directors, this decision is typically made by a majority vote among them, unless the Articles of Incorporation provide for a different mechanism (Article 348, Paragraphs 1 and 2). A director then convenes the meeting (Article 296, Paragraph 3).

While directors typically initiate meetings, it's also worth noting that shareholders meeting certain thresholds can demand that directors convene a meeting (Article 297).

3. The Convocation Notice (招集通知 - Shoshu Tsuchi): Timing, Method, and Content

Once the decision to hold a meeting is made, a formal convocation notice must generally be sent to shareholders. The requirements vary considerably:

A. Timing of Notice Dispatch (Article 299, Paragraph 1):

  • Public Companies: Notice must be dispatched at least two weeks prior to the scheduled meeting date.
  • Non-Public Companies (that do not provide for voting by mail or electronic means): Notice must be dispatched at least one week prior to the meeting date.
  • Non-Public Companies without a Board of Directors: These companies have the greatest flexibility. Their Articles of Incorporation can stipulate a notice period shorter than one week (e.g., three days). This allows for more agile decision-making when needed.

B. Method and Content of the Notice:

  • Companies with a Board of Directors:
    • Method: The convocation notice must be in writing (Article 299, Paragraph 2). This can include electronic means if the shareholder has consented.
    • Content: The notice must specify the date, time, place, and, crucially, the agenda (i.e., the matters to be resolved) of the meeting (Article 299, Paragraph 4). In such companies, shareholders can generally only vote on matters listed in the agenda (Article 295, Paragraph 2).
    • Attachments: For ordinary (annual) general shareholders' meetings, the notice must be accompanied by the financial statements and business report that have been approved by the board of directors (Article 437).
  • Companies without a Board of Directors (and not utilizing voting by mail or electronic means):
    • Method: A written notice is not mandatory. Oral notice (e.g., by telephone) is permissible. This flexibility acknowledges that such companies often have a small number of shareholders who are in close contact.
    • Content (if written notice is used): Even if a written notice is sent, it is not required to state the agenda. This is because, in companies without a board, the shareholders' meeting has broader powers and can, in principle, resolve any matter concerning the company, whether pre-notified or not (Article 295, Paragraph 1; Article 309, Paragraph 5). Thus, notifying the agenda is less critical.
    • Attachments: There is no statutory requirement to attach financial statements or business reports to the convocation notice itself for such companies. This means the company could, theoretically, present entirely unexpected agenda items for resolution at the meeting.

4. The Role of the Articles of Incorporation (Teikan) in Customizing Procedures

The Companies Act provides default rules, but companies can (and often do) tailor certain procedural aspects through their Articles of Incorporation.

  • Shortening Notice Periods: As noted, non-public companies without a board can specify a notice period shorter than one week in their Articles.
  • Modifying Resolution Quorums and Majorities (Article 309):
    • Ordinary Resolutions (普通決議 - futsu ketsugi):
      • The default quorum is the attendance of shareholders holding a majority of the total voting rights. The Articles can eliminate this quorum requirement or set a lower one (Article 309, Paragraph 1). Many companies, especially closely-held ones, do so, often stating that resolutions can be passed by a majority of the voting rights of shareholders present at the meeting.
      • However, for certain critical ordinary resolutions, such as the election or dismissal of directors, if a quorum is stipulated, it cannot be less than one-third of the voting rights (Article 341).
    • Special Resolutions (特別決議 - tokubetsu ketsugi):
      • These are required for significant matters like amending the Articles, mergers, major asset sales, etc. The default quorum is shareholders holding a majority of total voting rights, and the default approval threshold is two-thirds of the voting rights of shareholders present.
      • The Articles can lower the quorum (but not below one-third of total voting rights) and can increase the required approval majority (e.g., to three-fourths). The Articles can also add other conditions, such as requiring the approval of a certain minimum number of individual shareholders (Article 309, Paragraph 2). In practice, companies looking for flexibility often lower the quorum requirement for special resolutions while keeping the two-thirds approval majority.

5. Streamlining and Simplifying Procedures: Options for Efficiency

Particularly for non-public companies with a limited number of engaged shareholders, the Companies Act offers ways to simplify or even bypass formal convocation and meeting procedures, provided there is shareholder unanimity.

  • Waiver of Convocation Procedures (招集手続の省略 - shoshu tetsuzuki no shoryaku) (Article 300):
    • If all shareholders unanimously consent, the formal convocation procedures (including notice) can be omitted entirely.
    • This option is not available if the company intends to allow shareholders to vote by mail or by electronic means for that meeting.
  • Unanimous Attendance General Meeting (全員出席総会 - zen'in shusseki sokai):
    • Even if formal convocation procedures were flawed or omitted, if all shareholders entitled to vote attend the meeting (or participate, e.g., via video conference if permitted) and unanimously agree to hold the meeting and proceed with business, any resolutions passed are valid. This principle is well-established. The Supreme Court on June 24, 1971, affirmed that for a one-person company, the sole shareholder's presence constitutes a valid meeting without formal convocation.
  • Resolution by Unanimous Written Consent (書面決議 / みなし決議 - shomen ketsugi / minashi ketsugi) (Article 319, Paragraph 1):
    • This allows for a resolution to be passed without any physical or virtual meeting.
    • A director or a shareholder makes a proposal on a matter that could be resolved at a shareholders' meeting.
    • If all shareholders who would be entitled to vote on that matter provide their consent to the proposal in writing or by electronic record, the proposal is deemed to have been approved by a resolution of the shareholders' meeting. The meeting itself is considered to have been omitted.
  • Deemed Reporting of Matters (Article 320):
    • Similarly, if directors notify all shareholders of matters that would normally be reported at a shareholders' meeting (e.g., the content of the business report), and all shareholders consent in writing or by electronic record to dispense with the formal report at a meeting, the report is deemed to have been duly made to the shareholders' meeting.
  • Minutes Still Required: It is crucial to note that even when a resolution is passed by unanimous written consent or a report is deemed made, the company must still prepare formal minutes recording this event, detailing the proposal, the consents, and the date the resolution or report is deemed to have occurred (Ordinance for Enforcement of the Companies Act, Article 72, Paragraph 4).

6. Key Considerations for Foreign Parent Companies

For foreign parent companies with Japanese subsidiaries, these procedural nuances are highly relevant:

  • Know Your Subsidiary's Status: Accurately identify whether the subsidiary is public or non-public, and whether it has a board, as this dictates the baseline rules.
  • Leverage Flexibility: For wholly-owned or tightly controlled non-public subsidiaries, the flexible rules regarding shorter notice periods, oral notices (for companies without a board), and unanimous consent procedures can significantly enhance administrative efficiency.
  • Review and Align Articles of Incorporation: Ensure the subsidiary's Articles of Incorporation are consistent with the desired level of governance efficiency and procedural requirements. Amendments may be necessary to take full advantage of available flexibilities or to impose stricter rules if desired.

Conclusion

Convening a shareholders' general meeting in Japan is not a one-size-fits-all process. The Companies Act provides a tiered framework that imposes more formal and stringent requirements on public companies and companies with boards of directors, particularly concerning written notices, agenda specification, and notice periods. Conversely, it offers considerable procedural flexibility to non-public companies, especially those without a board, allowing for more agile communication and decision-making, including the possibility of dispensing with formal meetings altogether through unanimous shareholder consent. A thorough understanding of these distinctions, coupled with a careful review of the specific company’s Articles of Incorporation, is essential for any corporate officer or legal professional tasked with ensuring the compliant and effective conduct of shareholder meetings in Japan.