How are Key Decisions Made in a Japanese Social Welfare Corporation? Understanding Councillor Council and Board of Directors Meetings.

Previous articles have explored the nature of Social Welfare Corporations (Shakai Fukushi Hojin, or SWFs) in Japan and their mandatory governance organs. Now, we turn to the crucial question of how these organs, specifically the Councillor Council (Hyōgiinkai) and the Board of Directors (Rijikai), make pivotal decisions. The Social Welfare Act (Shakai Fukushi Hō), along with its Enforcement Rules, lays down detailed procedures for convening meetings, passing resolutions, and documenting outcomes, all designed to ensure accountability and effective governance.

I. The Councillor Council (Hyōgiinkai): Supreme Decision-Making and Oversight

The Councillor Council, composed of all appointed Councillors, stands as a key supervisory and decision-making body within a Social Welfare Corporation. Its resolutions are fundamental to the SWF's operation and strategic direction.

A. Scope of Authority of the Councillor Council

The Councillor Council has the authority to pass resolutions on matters prescribed by the Social Welfare Act and those stipulated in the SWF's Articles of Incorporation (Teikan). It's important to note that if the Social Welfare Act requires a matter to be resolved by the Councillor Council, the Articles of Incorporation cannot empower any other organ (like the Board of Directors) to decide on that matter.

Key matters typically decided by the Councillor Council include:

• Selection and dismissal of Directors (Riji) and Auditors (Kanji).
• Determining the remuneration for Directors and Auditors.
• Approval of criteria for the payment of remuneration to Directors, Auditors, and Councillors.
• Approval of financial statements (such as the balance sheet and statement of income and expenditure) and the inventory of assets.
• Changes to the Articles of Incorporation.
• Disposal of residual property upon dissolution.
• Disposal of fundamental assets (Kihon Zaisan).
• Approval of social welfare fulfillment plans (Shakai Fukushi Jūjitsu Keikaku).
• Other matters stipulated by law or the Articles of Incorporation to be resolved by the Councillor Council.

B. Convening Councillor Council Meetings

Councillor Council meetings are categorized into regular and extraordinary sessions.

• Regular (Teiji) Meetings: These must be convened at a fixed time each fiscal year, typically after the fiscal year-end, to handle routine annual matters like the approval of financial statements. The PDF's sample Teikan (Article 11) suggests holding this meeting once annually, for instance, in a specific month between April and June.
• Extraordinary (Rinji) Meetings: These can be convened whenever necessary to address specific issues that arise outside the regular meeting schedule.

The responsibility for convening meetings usually falls to a Director (typically the President, based on a Board of Directors' resolution), as outlined in the Articles of Incorporation. However, Councillors also have the right to request a Director to convene a meeting by indicating the purpose and reasons for the meeting. If, after such a request, the Director does not take steps to convene the meeting, or if a notice of a meeting to be held within six weeks from the date of the request is not dispatched, the requesting Councillor(s) may convene the meeting themselves, with the permission of the supervisory authority (Shokatsu-cho).

C. Resolution Requirements for the Councillor Council

For a resolution to be valid, specific quorum and voting majorities must be met.

• Ordinary Resolutions: Generally, a resolution is passed if a majority of Councillors eligible to vote are present (constituting a quorum), and a majority of those present vote in favor. The Articles of Incorporation may stipulate higher thresholds for either the quorum or the voting majority. Councillors who have a special interest in a particular resolution are excluded from voting on that matter.
• Special Resolutions: Certain critical matters require a special resolution, demanding a supermajority. Typically, this means approval by at least two-thirds of the Councillors eligible to vote (or a higher proportion if stipulated in the Articles of Incorporation). Matters requiring such special resolutions include:
  • Dismissal of an Auditor (Kanji).
  • Partial waiver of liability for Officers (Directors, Auditors) or Councillors towards the SWF.
  • Changes to the Articles of Incorporation.
  • Dissolution of the SWF by a resolution of the Councillor Council.
  • Approval of a merger agreement (both for an SWF being absorbed and for an SWF surviving or newly established in a merger).
  • When electing Directors or Auditors, if there are more candidates than positions, each candidate must be voted on separately. Those who receive a majority vote are then ranked by the number of votes received, and candidates are selected in descending order until the stipulated number of positions is filled.

D. Meeting Minutes (Gijiroku) of the Councillor Council

It is mandatory to prepare minutes for all Councillor Council meetings. These minutes can be created as written documents or in an electronic format. The Social Welfare Act Enforcement Rule (Article 2-15, Paragraph 3) specifies the required content:

• Date, time, and location of the meeting (including details if alternative methods like video conferencing were used for attendance).
• A summary of the proceedings and the results of any resolutions.
• The names of any Councillors who had a special personal interest in specific resolutions.
• The names of attending Councillors, Directors, Auditors, or Accounting Auditors.
• The name of the chairperson, if one was appointed.
• The name of the individual responsible for preparing the minutes.
• The content of certain opinions or statements made during the meeting, such as:
  • Opinions stated by an Auditor regarding the selection, dismissal, or resignation of an Auditor.
  • The reasons stated by a resigning Auditor at the first Councillor Council meeting after their resignation.
  • Reports by an Auditor if they investigated proposals or documents submitted by Directors to the Councillor Council and found them to be in violation of laws, the Teikan, or significantly improper.
  • Opinions stated by an Auditor concerning their own remuneration.
  • Statements by an Accounting Auditor at a regular Councillor Council meeting if their opinion on financial statements differs from that of the Auditors.
  • Opinions stated by an Accounting Auditor when their attendance is requested at a regular Councillor Council meeting.

While the Social Welfare Act itself does not explicitly mandate that attending Councillors sign or seal the Councillor Council minutes, it is common practice for the Articles of Incorporation to include such provisions to confirm the accuracy of the minutes (e.g., the sample Teikan in Q18, Article 14, suggests that attending Councillors and Directors sign and seal the minutes).

E. Deemed Resolutions and Reports of the Councillor Council

The Social Welfare Act allows for flexibility in decision-making and reporting under certain conditions, drawing on provisions from the Act on General Incorporated Associations and General Incorporated Foundations (GIA/F Act).

• Deemed Resolution (Article 45-9, Para 10; GIA/F Act Article 194, Para 1): If a Director makes a proposal on a matter that would normally require a Councillor Council resolution, and all Councillors eligible to vote on that matter indicate their consent in writing or via electronic record, the proposal is deemed to have been approved by a Councillor Council resolution. In such cases, minutes must still be prepared, detailing the matter deemed resolved, the name of the proposer, the date the resolution was deemed to have been made, and the name of the person who prepared the minutes.
• Deemed Report (Article 45-9, Para 10; GIA/F Act Article 195): If a Director notifies all Councillors of a matter that is to be reported to the Councillor Council, and all Councillors consent in writing or via electronic record that a formal report at a meeting is unnecessary, the report is deemed to have been made to the Councillor Council. Minutes must also be created for this event, outlining the matter deemed reported, the date it was deemed reported, and the name of the minute-taker.

II. The Board of Directors (Rijikai): Executive Decision-Making and Management

The Board of Directors is the executive heart of the Social Welfare Corporation, responsible for the day-to-day management and strategic implementation of the SWF's objectives.

A. Scope of Authority of the Board of Directors

The Board of Directors is composed of all Directors of the SWF. Its primary functions are (Social Welfare Act, Article 45-13, Paragraph 2):

1. Making decisions on the execution of the Social Welfare Corporation's business operations.
2. Supervising the Directors in their execution of duties.
3. Selecting and dismissing the President (Rijichō). The Board must select one President from among the Directors.

There are certain important matters related to business execution that the Board of Directors cannot delegate to individual Directors (Article 45-13, Paragraph 4). These include:

• The disposal or acquisition of important property.
• The borrowing of substantial sums of money.
• The appointment or dismissal of important employees (e.g., facility managers).
• The establishment, significant alteration, or abolition of important organizational units, such as branch offices or key facilities.
• The establishment of internal systems necessary to ensure that the Directors' execution of duties complies with laws and the Articles of Incorporation, including systems for risk management and compliance (as further detailed in Article 2-16 of the Social Welfare Act Enforcement Rule). For "Specified Social Welfare Corporations," the Board must decide on these compliance and internal control systems (Article 45-13, Paragraph 5).
• The partial waiver of liability of an Officer or Councillor towards the SWF (this also requires Councillor Council approval).

B. Convening Board of Directors Meetings

The procedures for convening Board meetings are designed to ensure all Directors (and Auditors, who also attend) are informed and can participate.

• Convener: Generally, any Director has the right to convene a Board meeting (Article 45-14, Paragraph 1, main text). However, the Articles of Incorporation or a resolution of the Board itself may designate a specific Director (typically the President) as the official convener.
• Director-Initiated Request: If a specific convener is designated, other Directors can request that convener to call a Board meeting by specifying the agenda items.
• Director-Initiated Convocation: If the designated convener, without just cause, fails to dispatch a notice for a meeting within five days of such a request (for a meeting to be held within two weeks of the request date), the Director who made the request can convene the meeting themselves. Similar provisions apply if an Auditor requests a meeting.
• Notice Period: The person convening the meeting must send a notice to each Director and each Auditor at least one week prior to the meeting date. This notice period can be shortened if so stipulated in the Articles of Incorporation (Article 45-14, Paragraph 9, applying GIA/F Act Article 94, Paragraph 1).
• Waiver of Convocation Procedure: A Board meeting can be held without following the formal convocation procedures if all Directors and Auditors unanimously consent (Article 45-14, Paragraph 9, applying GIA/F Act Article 94, Paragraph 2).

C. Resolution Requirements for the Board of Directors

A resolution of the Board of Directors is passed if a majority of Directors who are eligible to participate in the vote are present (constituting a quorum), and a majority of those present vote in favor (Article 45-14, Paragraph 4). The Articles of Incorporation may set higher requirements for the quorum or the voting majority. Any Director who has a special personal interest in a particular resolution is excluded from participating in the vote on that specific matter.

D. Meeting Minutes (Gijiroku) of the Board of Directors

It is mandatory to prepare minutes for all Board of Directors meetings. These minutes must be created in either written or electronic format (Social Welfare Act Enforcement Rule Article 2-17, Paragraph 2).

• Signatures or Seals (Article 45-14, Paragraph 6): If the minutes are prepared as a written document, all Directors and Auditors who attended the meeting must sign them or affix their names and seals. However, the Articles of Incorporation may provide that only the President who attended the meeting needs to sign or affix their name and seal. In such a case, the names of other attending Directors must still be listed in the minutes (Social Welfare Act Enforcement Rule Article 2-17, Paragraph 3, Item 6). If the minutes are prepared in an electronic format, an electronic signature equivalent to a physical signature or seal is required from the relevant attending Directors and Auditors (Article 45-14, Paragraph 7; Social Welfare Act Enforcement Rule Article 2-18, Paragraph 1, Item 1).
• Content (as per Social Welfare Act Enforcement Rule Article 2-17, Paragraph 3): The minutes must include:
  • The date, time, and location of the Board meeting (including details if remote participation methods were used).
  • If the meeting was convened upon the request of a Director or Auditor, or by a Director or Auditor other than a designated convener, that fact must be noted.
  • A summary of the proceedings and the results of any resolutions.
  • The names of any Directors who had a special personal interest concerning a specific resolution.
  • The substance of certain opinions or statements made, such as:
    • Reports by a Director concerning transactions involving a conflict of interest or competition with the SWF's business.
    • Reports by an Auditor concerning any dishonest act by a Director or any fact indicating a violation of laws or the Articles of Incorporation.
    • Any opinions expressed by an Auditor.
  • The names of any Accounting Auditors who attended the meeting.
  • The name of the chairperson, if one was appointed.

E. Deemed Resolutions and Waiver of Reporting for the Board of Directors

Similar to the Councillor Council, the Board of Directors also has provisions for streamlined decision-making and reporting.

• Deemed Resolution (Article 45-14, Paragraph 9, applying GIA/F Act Article 96): The Articles of Incorporation may allow a proposal made by a Director to be deemed approved by a Board resolution without holding a meeting, if all Directors eligible to vote on the matter indicate their consent in writing or via electronic record. This is only valid if no Auditor raises an objection to the proposal. Specific minutes must be prepared detailing the matter deemed resolved, the proposing Director, the date of deemed resolution, and the Director responsible for preparing the minutes.
• Waiver of Reporting to the Board (Article 45-14, Paragraph 9, applying GIA/F Act Article 98): If a Director, Auditor, or Accounting Auditor notifies all Directors and all Auditors (if any) of a matter that is required to be reported to the Board, then a formal report at a Board meeting is not necessary. Minutes must also be prepared for this, indicating the matter for which reporting was waived, the date of waiver, and the Director responsible for the minutes.

III. Interplay and Hierarchy in Decision-Making

The governance structure of an SWF involves a clear, albeit interactive, hierarchy. The Councillor Council acts as the ultimate authority for fundamental strategic decisions, changes to the corporation's foundational rules (Articles of Incorporation), and the appointment and oversight of those who manage the SWF (Directors and Auditors). The Board of Directors, under the leadership of the President whom it selects, is then responsible for the executive decision-making and ongoing management of the SWF's operations, acting within the framework established by law, the Articles of Incorporation, and the resolutions of the Councillor Council. The President, in turn, executes these decisions and represents the SWF externally.

Conclusion

The decision-making processes within Japanese Social Welfare Corporations are meticulously defined to uphold principles of good governance. The distinct roles and procedural requirements for the Councillor Council and the Board of Directors ensure that there are checks and balances, and that critical decisions receive appropriate levels of scrutiny. For those interacting with SWFs, understanding these internal mechanics—how proposals are debated, resolutions are passed, and records are kept—provides insight into their operational integrity and commitment to accountability. These structured processes are fundamental to the SWFs' ability to fulfill their public interest mission effectively.