New Rules on Corporate Governance in Japan

Abstract

The latest amendment of the Japanese Companies Act went into force on 1 May 2015. It includes two important changes also relevant for foreign investors. The first change is the introduction of a newly created option for Japanese joint-stock corporations to choose a third corporate governance structure: the so-called company with an audit and supervisory committee (kansa to iin-kai setchi kaisha). The centerpiece of this new governance structure is the committee, which acts as the company’s main audit organ. As the committee only cursorily covers decisions on management compensation and nomination, Japanese entrepreneurs do not need to be concerned about decisions by an organ the majority of which comprises outside directors. Furthermore, as members of the committee are simultaneously members of the board of directors, the new corporate governance structure also resolves one of the main issues surrounding the board of statutory auditors: the lack of influence on the board of directors. The second amendment introduces a stricter definition for outside directors and auditors. 

(The Editors)