System for Electronic Provision of Materials for General Meetings of Shareholders

Amendments to the System for Electronic Provision of Materials for General Meetings of Shareholders

The system for electronic provision of materials for shareholders’ meetings (hereinafter referred to as the “electronic provision system”), which was established by the amendment of the Companies Act in 2018, came into effect on September 1, 2022. This article describes the details of the Electronic Filing System and preparations for its implementation.

Outline of the electronic provision system

The electronic provision system refers to a system under which materials for shareholders’ meetings (reference documents for shareholders’ meetings, voting documents, business reports, and (consolidated) financial statements) can be provided by posting them on the company’s website or other website and notifying shareholders in writing of the website address and other information (Article 325-2 of the Companies Act and following).

Purpose of the electronic provision system

In the past, the materials for the general meeting of shareholders were to be sent out with the notice of convocation at least two weeks prior to the meeting, but under the new system, the materials will be available on the website at least three weeks prior to the date of the meeting. Under this system, stock companies will be able to reduce the time and costs required for printing and mailing, and shareholders will be able to review the materials for the general meeting of shareholders earlier than before.

Companies obliged to use the electronic provisioning system

Companies issuing book-entry shares (listed companies) are obliged to use the electronic share offering system in accordance with Article 159-2, Paragraph 1 of the Law Concerning Book-Entry Transfer of Corporate Bonds, Shares, etc. On the other hand, stock companies other than book-entry share issuers are free to decide whether or not to use the electronic book-entry transfer system, regardless of their institutional design, so even private companies and companies without a board of directors can use the system.

Procedures for using the electronic provisioning system

In order to use the electronic provisioning system, the following procedures must be followed: (1) amendment of the Articles of Incorporation, (2) electronic provisioning measures, and (3) sending of a notice of convocation of a general meeting of shareholders.

(i) Procedures for amending the articles of incorporation (Article 325-2 of the Companies Act)

In order to introduce the electronic provisioning system, it is necessary to amend the articles of incorporation to establish a provision in the articles of incorporation to take electronic provisioning measures (Article 325-2 of the Companies Act). In addition, since it is a registered matter, the registration procedure must also be conducted along with the amendment of the articles of incorporation (Article 911, Paragraph 3, Item 12-2 of the Companies Act).

However, for companies that have issued book-entry shares as of September 1, 2022, the effective date of the amendment, a transitional measure has been established whereby the company is deemed to have passed a resolution to amend its articles of incorporation to take the electronic provisioning measure, effective as of the effective date of the amendment. A company that is deemed to have adopted a resolution to amend its articles of incorporation must register its articles of incorporation to the effect that it will adopt electronic provisioning measures within six months of the effective date. In the case where a director of a company deemed to have adopted a resolution to amend its articles of incorporation convenes a general meeting of shareholders within six months of the effective date, the same procedure may be used as before.

 

 (ii) Measures for electronic provisioning

 Outline of Electronic Provisioning

In order to use the electronic provision system, it is necessary to take electronic provision measures (Article 325-3 of the Companies Act). Electronic provision means that the company posts the contents of the Reference Documents for General Meetings of Shareholders, etc. on a website on the Internet and makes them available for shareholders to view (Article 95-2 of the Ordinance for Enforcement of the Companies Act). Electronic provision of information shall begin three weeks prior to the date of the general meeting of shareholders or the date of dispatch of the convocation notice, whichever is earlier, and shall continue until the day on which three months have elapsed after the date of the general meeting of shareholders (Article 325-3, Paragraph 1 of the Companies Act).

 How to implement electronic provisioning measures

Since electronic measures must be printable (Article 95-2, Article 222, Paragraph 1, Item 1(b), and Article 222, Paragraph 2 of the Enforcement Regulations of the Companies Act), merely posting a video or audio file explaining matters for which electronic measures are to be taken does not constitute taking electronic measures. When posting video or audio files for implementation of electronic provisioning measures, it is necessary to post printable materials as well.

Matters for which electronic provisioning measures should be taken

The matters for which electronic provision measures should be taken are as follows (each item of Article 325-3, Paragraph 1 of the Companies Act).

・Matters to be included in the notice of convocation (matters set forth in each item of Article 298-1 of the Companies Act)

・Matters to be stated in the voting form (in cases where the exercise of voting rights by written form is permitted)

・Matters to be stated in the reference documents for the general meeting of shareholders (in cases where the exercise of voting rights by electromagnetic means is permitted)

・Matters to be included in the reference documents for the general meeting of shareholders (in cases where exercise of voting rights by written ballot is permitted)

・Matters to be stated or recorded in the financial statements and business report (including the audit report or the accounting audit report) (in the case of a company with a board of directors convening an ordinary general meeting of shareholders)

・Matters stated or recorded in the consolidated financial statements (in the case of a company with a board of directors and a certified public accountant when convening an ordinary general meeting of shareholders)

・If the prescription for electronic provision of information has been amended, a statement to that effect and the matters before the amendment.

Suspension of Electronic Provisioning

Even in the event of interruption of electronic provisioning measures (e.g., when shareholders are unable to access the electronic provisioning measures) due to server downtime, hacking, etc., the effectiveness of the electronic provisioning measures shall not be affected if all of the following requirements are met (Article 325-6 of the Companies Act).

・The company has good faith and no gross negligence or justifiable cause for the interruption.

・The time of interruption is less than one-tenth of the duration of the E-Offering Measures.

If the interruption occurs during the period from the date of commencement of the 

・Electronic provisioning to the date of the general meeting of shareholders, the total time of the interruption does not exceed one-tenth of the said period.

・Promptly after becoming aware of the interruption, an electronic provision of the interruption, the duration of the interruption and the content of the interruption shall be made.

On the other hand, if there is an interruption during the period from the date of commencement of the electronic provision of information to the date of the general meeting of shareholders and the above requirements are not met, the convocation procedure is defective, and this defect is considered to be grounds for revocation of the resolution of the general meeting of shareholders.

Exceptions to Electronic Provisioning

In cases where a voting document is delivered to shareholders at the time of notice of convocation, the electronic provision of the voting document is not required, as an exception (Article 325-3, Paragraph 2 of the Companies Act). In addition, when a shareholder convenes a general meeting of shareholders with permission of the court (Article 297, Paragraph 4 of the Companies Act), electronic provision of the voting form is also not required (Article 325-2, Pillar 1 of the Companies Act).

(iii) Sending of notice of convocation of general meeting of shareholders (Article 325-4 of the Companies Act)

A convocation notice must be sent even if electronic provision is used. However, special provisions limit the content of the convocation notice in cases where electronic provision is used, and the following information is sufficient (Article 325-4, Paragraph 2 of the Companies Act; Article 95-3, Paragraph 1 of the Ordinance for Enforcement of the Companies Act).

・Date, time and place of the general meeting of shareholders

・Purpose of the general meeting of shareholders

・If the exercise of voting rights in writing is permitted, a statement to that effect

・If the exercise of voting rights by electromagnetic means is permitted, a statement to that effect

・A statement to the effect that electronic provisioning measures are being used

・URL, etc. of the website where the electronic method is used

Shareholders’ Right to Request Delivery of Documents (Article 325-5 of the Companies Act)

Method of Request by Shareholders for Delivery of Documents

In consideration of shareholders who have difficulty using the Internet, shareholders are granted the right to request the delivery of written materials. A shareholder may request the company to deliver written materials for a general meeting of shareholders (matters to be provided electronically) by two weeks prior to the date of the meeting by submitting a request by the record date for exercising voting rights. However, a company may stipulate in its Articles of Incorporation that all or part of the matters to be provided electronically that are stipulated by the applicable Ordinance of the Ministry of Justice shall not be required to be stated in the document delivered (Article 325-5, Paragraph 3 of the Companies Act; Article 95-4 of the Ordinance for Enforcement of the Companies Act).

Measures to be taken by a company in response to a request for delivery of written documents

Once a shareholder makes a written request, he/she is deemed to have requested delivery of the document at any subsequent shareholders’ meeting unless he/she withdraws the request. Therefore, as a countermeasure against the accumulation of requests for delivery of documents, a company is allowed to notify shareholders of the termination of delivery of documents when one year has passed since the shareholder made a request for delivery of documents and to give a notice to the shareholders to state their objections, setting a notice period of one month or more if they have any objections (Article 325-5, Paragraph 4 of the Companies Act). If a shareholder who has received a demand notice fails to state his/her objection to the demanding authority, the shareholder’s request for delivery of documents will lose its effect. However, it is possible for a shareholder whose request for delivery of documents has lost its effect to make a new request for delivery of documents.

Amendments to Electronic Delivery Measures

After the date on which electronic filing must be commenced under the Companies Act (September 1, 2022), only corrections of errors or unavoidable corrections based on circumstances that arose after the commencement of electronic filing may be made. When an amendment is made to an item for which electronic provision measures have been taken, the item before the amendment must also be electronically provided (Article 325-3, Paragraph 1, Item 7 of the Companies Act).

Preparations for introduction of electronic delivery system

Amendments to Articles of Incorporation

The following changes to the Articles of Incorporation may be made to the Articles of Incorporation

1.Establishment of a new provision to the effect that electronic provision measures will be taken

2.Establishment of a new provision to the effect that the content of documents to be delivered  to shareholders who have made a request for delivery of documents may be limited

3.Deletion of the provision regarding deemed provision of reference documents for the general meeting of shareholders, etc. through Internet disclosure

4.Supplementary provisions regarding effective date of amendments to the Articles of Incorporation, etc.

Other preparations

On the date of commencement of electronic provision (three weeks prior to the date of the general meeting of shareholders), it is necessary to confirm in advance the method of implementation, etc. in order to commence the electronic provision measures. It is also necessary to consider in advance the adoption or rejection of the exercise of voting rights by electromagnetic means, how to inform shareholders of the electronic provision system, and how to respond to requests for the delivery of written documents from shareholders.