Monday, February 5, 2018

How the change and filing of directors are done in Japan

There are some procedural aspects that should be considered before filing an application for registration regarding the change of representative directors in Japanese companies.

Here I explain the details using a sample case.

Sample Case

- The company is a Kabushiki Kaisha (the most common type of companies in Japan).
- The company has a board of directors.
- There are three directors and one auditor at the company.
    Director A (=Representative director)
    Director B
    Director C
    New Director D (=New representative director)
    Auditor E
- At an annual shareholders' meeting, the term of office of current (representative) directors expire.
- The new representative director takes over the office of current representative director.
- The current representative director leaves the company.

The procedures are as follows:

Option A

1) Annual shareholders' meeting - all the (representative) directors' term of office expires and directors (B, C, and D) are appointed

2) Board meeting - A new representative director D is appointed among from the directors BCD.

Note: Director A's term of office expired at the close of shareholders' meeting, and therefore, he was not present at the subsequent board meeting.

Option B

1) Annual shareholders' meeting - all the (representative) directors' term of office expires and directors (A, B, C, and D) are appointed.

2) Board meeting - A new representative director D is appointed among from the directors ABCD.

3) Director A resigns after the board meeting.

Note: Director A was reappointed at the shareholders' meeting.

In Option B, the term of office of Director A expires once, but he is reappointed at the shareholders' meeting as the director. And he resigns on the same day after the board meeting. Why does he do such a messy affair?

The reason is that you can save troubles of directors. There is a rule that you can omit directors' certificates (except a new director) at the filing of the change of directors, if the current representative director (A) is present at the board meeting to appoint a new representative director (D).

If you choose Option A, you need to submit all the directors' notarized certificates of signature (if a director is a Japan resident, he submits a certificate of seal). The director should go to a notary office and get the certificate notarized. It is difficult for a busy director to do it.

If you choose Option B, the only person who submits the certificate is Director D, and the other directors do not need to submit it. They just need to sign (or put their seals on) the documents. If this is attractive to your company, this option is worth adopting.