Die japanische Gesellschaftsrechtsreform 2005/2006
Abstract
The Company Law Reform 2005/2006, which will probably come into effect on 1 April or 1 May 2006, will once again bring about major changes in the field of company law in Japan. As a result of this reform and other reforms in recent years, Japan will soon have a very modern and well-structured company law. This will be by no means a slavish copy of U.S. company law, although as a model the U.S. company law has had a great impact on many parts of the various reforms.
First of all, the reform entails the emergence of a Japanese Company Act. The Company Act will unite all the legal provisions concerning companies that were formerly to be found scattered in various laws such as the Commercial Code, the Law for Special Commercial Law Provisions concerning the Audit of Joint Stock Companies, and the Law concerning the yûgen kaisha. One formal change will be that in contrast to the old Commercial Code, the new Company Act will be written in modern Japanese. Furthermore, the Law concerning the yûgen kaisha will be abrogated and the yûgen kaisha system will be abolished. The existing yûgen kaisha will continue to exist, but it will become impossible to establish new companies of that kind. The former yûgen kaisha will be legally treated as stock companies to the extent that there are no particular provisions in the Law Regarding the Execution of the Company Act, which will come into effect on the same day as the Company Act.
Moreover, two new types of legal entities will be introduced into Japanese law: the so-called limited liability company (gôdô kaisha, LLC) and the limited liability partnership (yûgen sekinin jigyô kumiai, LLP). Both forms are based on homonymous types of legal entities in U.S. law, but they show several differences compared to the U.S. models. While all forms of companies are now regulated by the Company Act, the rules for the LLP are set by a different and particular law governing specifically the limited liability partnership because the limited liability partnership is not regarded as a company in its narrow meaning. This law has already been in effect since 1 August 2005.
Another important aspect of the upcoming company law reform concerns many changes in the law of Japanese joint stock companies, including the rules for corporate governance structures. In general, one can say that the reform provides for a much greater flexibility for designing corporate governance structures. Henceforth, the joint stock companies can be divided into two groups: large-sized companies, which correlate to the large companies that were formerly regarded as such and particularly regulated by the Law for Special Commercial Law Provisions concerning the Audit of Joint Stock Companies; and small-sized companies, which do not meet the specific requirements set for the definition of large companies. Furthermore, both groups of companies can be established as publicly held companies or as closely held companies. Depending on the size of a company and its character as a closely held or publicly held company, the Company Act sets minimum requirements for the establishment of a corporate government structure. Henceforth, a joint stock company is at least required to have a shareholders’ meeting and one director. This is a significant change as formerly all stock companies were required to set up a board with at least three directors. Generally speaking, the Company Act requires large and publicly held companies to set up a more complex structure of corporate governance than small-sized and closely held companies. Accordingly, small-sized and closely held companies can be henceforth established with a very basic and plain governance structure. Besides, for large-sized companies it is still possible to set up a company structure with committees within the board of directors.
With the reform coming into effect, joint stock companies are permitted to have an optional accounting consultant who shall assist the director(s) in preparing the financial statements of the company. Like the accounting auditor of the company, the Company Act regards this governing body as an organ (kikan) of the company, although by definition both organs have to preserve a sufficient independent stance within the company which differs from that of other company organs.
Furthermore, the rules for the power of attorney of the representative directors and the representative executive officers of stock companies have been changed slightly. There are also new rules for the appointment and dismissal of directors, and in closely held companies it is no longer necessary to treat all shareholders equally if certain requirements are met by the company. The Company Act now provides for a somewhat altered, specific legal liability regime for all organs and other bodies of the company, toward the company itself as well as toward third parties.
A further very important alteration regarding the law of stock companies is that henceforth the requirement of setting up a minimum stated capital when establishing a company has been abolished. Theoretically, it is now possible to found a stock company with only one yen of stated company capital. Hitherto this was only possible by the application of a specific procedure and only for a limited period of five years.
In closely held stock companies, the power of corporate auditors can be limited to audit only the financial statements of the company, whereas in other companies the corporate auditor is in principle authorized to audit the business operations of the directors also.
In addition, in closely held stock companies the term of office of directors, corporate auditors, and accounting consultants can be extended and set for a period of up to ten years.
The structure of corporate governance of each company has to be described in the business report, which is part of the financial statements that stock companies have to prepare once a year. Moreover, stock companies become free to distribute their profit to the shareholders whenever they like, not only twice a year as was formerly limited.
Important changes will also be brought about in regard to the rules set for restructuring stock companies, particularly for mergers. It will become possible to conduct a merger between three companies. The absorbing company in a merger will soon be allowed to pay a compensation in cash or to distribute other assets to the shareholders of the extinguishing company rather than emitting new shares of the new company as the results of the merger. For instance, such assets can be stocks of the parent company of the absorbing company. This corresponds to a facilitation of hostile takeovers, about which there has been an increasing controversial public debate in Japan. As a result, it is not yet clear whether this part of the reform will come into force at the same time as the other parts, or instead later in a slightly altered form, probably along with new defense mechanisms for hostile takeovers, which are also currently under discussion. Another important change is the introduction of the opportunity to emit so-called golden shares as one kind of company stocks. In general, these are heavily disputed in many countries, particularly within the European Union.
The above-mentioned limited liability company (LLC), which will be introduced by this company law reform, will be regarded along with the partnership company (gômei kaisha) and the limited partnership company (gôshi kaisha) as a new category of company in contrast to the joint stock company. In this context, many changes will also take place in regard to the law for the partnership companies and the limited partnership companies. For instance, the Company Act provides for a new legal liability regime for all representative members of the company toward the company itself as well as toward third parties, which is similar to that of the joint stock companies, including a set of rules for a new type of lawsuit similar to the shareholders’ representative lawsuit. Moreover, from the date the reform comes into effect, it will be possible for companies to become a non-limited liability partner in a partnership company as well as in a limited partnership company; the former Art. 55 Commercial Code will be abolished.
Finally, it also has to be mentioned that, as the result of the upcoming reform, the hitherto existing obligatory ex ante check by Japanese authorities of the company name to be registered in the context of founding a company will be abolished.
