Minutes of Board of Director Meetings

Preparation of Minutes of Board of Directors Meetings

Minutes of board of directors meetings are written or electromagnetic records that contain matters resolved at board of directors meetings and the results of those resolutions.
Minutes of the proceedings of the Board of Directors meetings must be prepared and the directors and corporate auditors present at the meeting must sign or affix their names and seals thereto (Article 369, Paragraph 3 of the Companies Act).

Refusal to sign or affix name and seal

If a director refuses to sign or affix his/her name and seal, it is a difficult case, but the minutes must be prepared with the name of the director who refused and signed by at least a majority of the directors present (since a resolution is passed at a board meeting by a majority of the directors present (or more if the resolution requirements are increased in accordance with the Articles of Incorporation),), or the minutes may include a statement of the circumstances under which the director’s name and seal cannot be affixed to the minutes.

How to Prepare Minutes of Board of Director Meetings

Minutes of the Board of Directors meetings must be prepared in writing or as an electromagnetic record (Article 369, Paragraphs 3 and 4 of the Companies Act, and Article 101, Paragraph 2 of the Ordinance for Enforcement of the Companies Act). An “electromagnetic record” is “a record made by electronic, magnetic, or other means unrecognizable to human perception and specified by a Ministry of Justice Ordinance as being used for information processing by computers” (Article 26, Paragraph 2, parentheses in the same law).

The Ministry of Justice Ordinance (in this case, the Ordinance for Enforcement of the Companies Act) states that “information is recorded in a file prepared with a magnetic disk or other object capable of securely recording certain information by a method equivalent to this” (Article 224 of the same Ordinance for Enforcement). When minutes are prepared by electromagnetic records, an electronic signature is required (Article 369, Paragraph 4 of the Law, and Article 225, Paragraph 1, Item 6 of the Enforcement Regulations of the Law).

How to Prepare Minutes for Online Board of Directors Meetings

Board of Directors meetings can be held online, but in such cases, since the directors do not actually gather, it is common to prepare the minutes in electromagnetic records and sign them electronically. The items to be included in the minutes when an online board meeting is held are discussed below.

Matters to be included in the minutes of the board of directors meetings

Required Information

The following items are required to be included in the minutes of a board of directors meeting.

(i) Date, time and place of the meeting (Article 101, Paragraph 3, Item 1 of the Ordinance for Enforcement of the Companies Act)
The date, time, and place of the Board of Directors’ meeting must be stated. Even if the Board of Directors’ meeting is held online, the location of the meeting must be stated. In this case, the location where the representative director participates in the meeting is often stated as the place where the meeting is held.
In addition, Article 101, Paragraph 3, Item 1 of the Enforcement Regulations of the Companies Act stipulates in parentheses that “in the event that a director who is not present at the meeting attends the meeting, the method of attendance shall be included” because if any directors participated in the meeting online, such as via teleconference, the method of their attendance is to be noted.

(ii) If the meeting of the Board of Directors is held by a special director, a statement to that effect (Article 373, Paragraph 2 of the Companies Act)
When a company with a board of directors other than a company with a nominating committee, etc., has six or more directors, at least one of whom is an outside director, a majority of three or more special directors selected in advance by the board of directors who are eligible to participate in the voting shall be present at the board meeting to pass resolutions regarding the transfer of important assets and substantial debts. The Board of Directors may stipulate that the resolution may be adopted by a majority of the votes of the three or more special directors present at the meeting (Article 373, Paragraph 1 of the Companies Act). In this case, the requirements for resolution and the quorum are different from those of ordinary meetings of the Board of Directors, so it must be stated in the minutes of the meeting. However, the system of special directors is rarely used, so it is not common in practice.

(iii) If the meeting of the Board of Directors is held by a person other than the person authorized to convene the meeting, a statement to that effect (Article 101, Paragraph 3, Item 3 of the Regulations)
If a meeting of the Board of Directors is convened by a director, shareholder, or statutory auditor other than the director who has the right to convene the meeting, upon request of such director, shareholder, or statutory auditor, a statement to that effect is required, or if the person who requested the meeting convenes the meeting of the Board of Directors himself or herself, a statement to that effect is required.

(iv) Summary of proceedings and results of resolutions (Article 101, Paragraph 3, Item 4 of the Regulations)
This is the main content of the minutes. The outline of the proceedings is the general flow of the meeting, from the opening of the meeting to the proposal, report, explanation, contents and summary of the discussion, method of resolution, and closing of the meeting. Since materials describing the contents of resolutions and reports are usually distributed in advance, detailed explanations can be filed or recorded in the minutes, thereby omitting detailed descriptions of explanations, etc. This has the added benefit of conveying the content of the explanation more clearly.
However, many companies have a system in which substantial discussions are held at management meetings prior to Board of Director Meetings. For this reason, the content of the discussion itself is often not described.

(v) Names of special interested parties, if any
Directors who have a “special interest” in a particular resolution may not participate in the voting (Article 369, Paragraph 2 of the Companies Act). The inability to participate in the voting means that one cannot exercise voting rights, is not included in the quorum in the first place, and cannot chair the meeting on the agenda in question (since the chairperson has a strong influence on the resolution’s progress).
The presence or absence of a special interested party has a significant impact on the outcome of a resolution. Therefore, if there is a director who is a special interested party, the name of such a director must be clearly stated in the minutes to clarify his/her existence and his/her absence from the resolution.
However, since whether or not a director is a special interested party varies from agenda item to agenda item, his or her name is also listed in the minutes for each agenda item (in contrast to the customary practice of listing the attendees collectively).

(vi) Statements made by corporate auditors, accounting counsel, audit committee members, and shareholders, if any (Article 101, Paragraph 3, Item 6 of the Regulations)
In accordance with the Companies Act, corporate auditors, accounting counsel, audit committee members, and others may state their opinions in cases where there is a violation of laws, regulations, or the Articles of Incorporation, or regarding financial statements (Article 356, Paragraph 2; Article 376, Paragraph 1; Article 382; Article 383, Paragraph 1; Article 399-4; Article 406 of the Companies Act).
In addition, if a meeting of the Board of Directors is convened by a person authorized to convene such a meeting at the request of a shareholder, or if a shareholder convenes a meeting of the Board of Directors himself, he may give his opinion (Article 367, Paragraph 4 of the Companies Act).
If these opinions or statements are made, they must be noted in the minutes of the board of directors’ meeting.

(vii) Nomination of directors, corporate auditors, accounting counsel, accounting auditors, shareholders, etc. in attendance (Article 101, Paragraph 3, Item 7 of the Regulations)
The Enforcement Regulations of the Companies Act stipulate that the names of executive officers, accounting counselors, accounting auditors, shareholders, etc. who attended the board of directors’ meeting must be stated.
The reason why the names of the attending directors and corporate auditors are not required to be stated may be because they are required to sign and seal the documents separately at the board of directors meetings (Article 369, Paragraph 4 of the Companies Act).
In practice, however, it is common to include the names of directors and corporate auditors who attended the meeting in addition to their signatures, and it would be effective to stipulate the names of corporate auditors and directors who attended the meeting in the minutes of the board of directors in the board meeting rules.
As mentioned above, Article 101, Paragraph 3, Item 1 of the Enforcement Regulations of the Companies Act stipulates in parentheses that “in cases where a director who is not present at the meeting attended the meeting, the method of his/her attendance shall be included”, so if there were directors who participated online, such as via video conference, the method of their attendance shall be stated, However, it may be easier to understand if the names of directors/auditors who attended the meeting are listed here as an exception to the “attendance” column.

(viii) If there is a chairman, his/her name (Article 101, Paragraph 3 of the Enforcement Regulations of the Companies Act).
Under the Companies Act, there are no regulations governing the chairperson, and it is up to the company to decide whether or not to have a chairperson.
However, since the format of a board meeting requires a person to preside over the proceedings, companies generally stipulate in their articles of incorporation or board of directors’ regulations whether or not a chairman exists and how to appoint one. And if the board of directors has a chairperson, the name of the chairperson must be stated in the minutes of the Board of Director Meetings.

Other Matters to be Stated

In addition to the above-mentioned items required to be included in the minutes of the board of directors, other items that are relevant to the board of directors and deemed reasonable to be included may be included in the minutes.

For example, if a director wishes to record his/her opposition to a resolution, he/she may state that he/she opposed the resolution, since it is presumed that those who do not object to the resolution in the minutes are in favor of the resolution (Article 369, Paragraph 5 of the Companies Act).

Items to be included in the minutes in the case of a deemed resolution (resolution in writing)

If all directors who are eligible to participate in the voting on matters to be resolved proposed by the directors express their consent to the resolution in writing or by electromagnetic record, the resolution of the board of directors meeting can be omitted if the articles of incorporation stipulate to that effect in advance (Article 370 of the Companies Act). This is called a deemed resolution or a resolution in writing.

In such cases, the minutes shall include (i) the details of the matters deemed to have been resolved by the Board of Directors, (ii) the names of the directors who proposed the matters in (i) above, (iii) the date on which the resolution was deemed to have been adopted by the Board of Directors, and (iv) the names of the directors who performed their duties related to the preparation of the minutes (Article 101, Paragraph 4, Item 1 of the Enforcement Regulations of the Companies Act).

In the case of a deemed resolution, there is no need for the signatures and names and seals of the directors and auditors who attended the meeting to be recorded in the minutes, since no one attended the board meeting.

Matters to be entered in the minutes when reports are omitted

In cases where a report on matters to be reported to the Board of Directors (Article 365, Paragraph 2, Article 382, etc. of the Companies Act) is made without a meeting of the Board of Directors by substituting a notice to all directors (Article 372, Paragraph 1 of the same Act), the minutes shall include (i) details of matters that are not required to be reported to the Board of Directors, (ii) the date when the report was not required to be made to the Board of Directors (Article 372, Paragraph 1 of the Companies Act), and (iii) the names of the directors who performed the duties related to the preparation of the minutes.

Since this is only a report and not a request for a resolution of the Board of Directors, the reply of the directors is not required.

In addition, a report on the status of business execution must be made at least once every three months, and cannot be omitted by reporting to all directors.

Keeping Minutes of Board of Directors Meetings

Companies with a board of directors are required to keep the minutes of the board of directors meetings at the head office for 10 years from the date of the meeting (Article 371, Paragraph 1 of the Companies Act). Unlike the minutes of a general meeting of shareholders, there is no need to keep the minutes at the branch office.

It is the duty of the directors to keep these minutes, and any director who violates this duty is subject to a non-penal fine of up to one million yen (Article 976, Item 8 of the Law).

Keeping of minutes in the case of a deemed resolution (resolution in writing)

As mentioned above, the minutes of the board of directors’ meeting must be prepared even in the case of a deemed resolution.
In this case, the minutes must be kept for 10 years from the date on which the board of directors meeting described in the minutes is deemed to have taken place.

In the case of a deemed resolution, the written consent of all directors or an electromagnetic record must also be kept for 10 years from the date on which the resolution is deemed to have been passed (Article 371 of the Law).

Request for inspection and copying by shareholders

The content of the resolution of the board of directors is of great interest to the shareholders, who are the owners of the company. Therefore, in principle, shareholders may request to inspect or copy the minutes at any time during the business hours of the stock company if it is necessary for them to exercise their rights (Article 371, Paragraph 2 of the Companies Act).

There is no shareholding requirement for requesting inspection and copying of the minutes of the board of directors, and even one shareholder can make a request for inspection and copying.
There are no restrictions on the method of requesting inspection and copying, and the reason for the request does not need to be stated.

However, for companies with corporate auditors, companies with audit committees, and companies with nomination committees, it is necessary to obtain permission from the court in advance to inspect and copy the minutes of the board of directors (Article 371, Paragraph 3 of the Companies Act). This is because it is considered that in a company with auditors, etc., illegal acts of directors should be monitored by auditors, etc. in the first place.

Request for inspection and copying by creditors of the company

Creditors of a company with a board of directors may, with permission of the court, request to inspect and copy the minutes of the board of directors when necessary to pursue the liability of the directors or executive officers (Article 371, Paragraph 4 of the Companies Act). In addition, employees of the parent company of the company may also request inspection and copying of the minutes when necessary to exercise their rights, as may creditors of the company (Article 371, Paragraph 5 of the Companies Act).

Permission by the Court for a Request Inspection and Copying of Minutes of the Board of Directors Meetings

Even if a shareholder or creditor makes a request to inspect and copy the minutes of the board of directors, the court may not grant such a request if it is deemed that granting such inspection and copying would cause significant damage to the company or its parent company or subsidiaries (Article 371, Paragraph 6 of the Companies Act).

Therefore, in a request for inspection and copying of the minutes of a company, it is likely to be disputed whether or not there is a possibility of causing “significant damage.
Although the burden of proving “significant damage” in the event of a trial is on the company, “significant damage” in this case is relative to each company, and the emphasis is on the comparative and quantitative viewpoint of how much damage the company will suffer compared to the benefits that shareholders and creditors will gain from the inspection.

Examples of Significant Damages

A typical example of significant damage is, for example, when the minutes of a meeting contain trade secrets, etc., and the company may suffer significant damage if they are disclosed to the public. Since the board of directors makes important business decisions and often contains many trade secrets, it is unlikely that a court would grant permission for inspection and copying of the minutes on the grounds that there is a risk of “significant damage”.

However, in a past court case, a shareholder’s request for inspection and copying was approved on the grounds that the request was for a part of the minutes, a written pledge not to disclose the minutes to outside parties without justifiable reason was submitted, and there was a need to exercise the right (Osaka High Court Decision on November 8, 2013).
This court case suggests that a written pledge not to disclose the minutes to outside parties without justifiable reason may be effective in some cases.

Refusal by a Company to Allow Inspection, etc. of Minutes of Board of Directors Meetings

If a company receives a request for inspection and copying of the minutes of a board of directors meeting that meets the statutory requirements, the company must allow the requestor to inspect and copy the minutes.

If the company unreasonably refuses to allow the inspection and copying of the minutes of the board of directors, a petition for a preliminary injunction to demand the inspection and copying or a lawsuit may be filed as a method of requesting the inspection and copying.

If the aforementioned inspection and copying requires the court’s permission, the petition for provisional disposition must be filed after obtaining the court’s permission in advance, or the petition will be dismissed as unlawful.

In addition, if a company refuses a request for inspection, etc. of the minutes of the board of directors without justifiable reason, the directors, etc. will be subject to a fine of up to one million yen (Article 976, Item 4 of the Companies Act).

Functions of the Minutes of the Board of Directors

The minutes of board of directors meetings serve as strong evidence when determining whether or not proper procedures were followed by the board of directors and when pursuing claims of negligence against directors and corporate auditors. Since the minutes of the board of directors meetings must be signed and sealed by the directors and corporate auditors who attended the meeting and those who do not object to the minutes are presumed to have agreed to the resolution (Article 369, Paragraph 5 of the Companies Act), it is possible to confirm which directors agreed to the resolution by inspecting the minutes, and if the resolution is unjustified, a claim for damages against the directors who agreed to the resolution may be filed. If the resolution is unjustified, a claim for damages against the directors who voted in favor of the resolution may be filed.
Furthermore, in the case of conflict-of-interest transactions, a presumption of negligence of duty may also be made (Article 423, Paragraph 3, Item 3 of the same law).

On the other hand, the company and the directors can also avoid unjustified pursuit of responsibility by keeping detailed records of the agenda. In particular, if a director wishes to record his or her opposition to a resolution, he or she should request that such opposition be noted in the minutes of the meeting.

Services we can provide

Assistance in preparation of minutes of Board of Directors Meetings

We provide advice on the drafting of minutes, taking into account the individual circumstances of each company, as to what is legally required or desirable to be included in the minutes, and we also provide advice on how the minutes should be specifically drafted.

What to do when a request for inspection and copying is made

In the event that a hostile shareholder, creditor, or employee of the parent company makes a request to inspect and copy the minutes of the board of directors, we can assist in protecting trade secrets by anticipating how the court will decide on the “significant damage” in the case and conducting the trial.