Operation of the Board of Directors

Persons authorized to convene meetings of the Board of Directors

Since it is stipulated that each director shall convene a meeting of the Board of Directors (Article 366, Paragraph 1 of the Companies Act), it is a general rule that any director has the authority to convene a meeting of the Board of Directors.

Determination of who is authorized to convene a meeting

However, if the Articles of Incorporation or the Board of Directors specify who is to convene a meeting of the Board of Directors, that director is to convene the meeting.

Requests to convene a meeting by other directors

Even in such cases, other directors may request the person with the authority to convene a meeting of the Board of Directors to convene a meeting of the Board of Directors by indicating the matters that are the purpose of the meeting (Article 366, Paragraph 2 of the Companies Act). If a notice of convocation of a meeting of the Board of Directors is not issued within five days of a request by another director to convene a meeting of the Board of Directors, setting a date within two weeks of the date of such request, the director who made such request may convene a meeting of the Board of Directors himself (Article 366, Paragraph 3 of the Companies Act).

Convocation of a meeting of the Board of Directors by a shareholder

A shareholder of a company with a board of directors may demand that a meeting of the board of directors be convened if the shareholder believes that a director has committed, or is likely to commit, any act that is outside the scope of the purposes of the company with a board of directors or that otherwise violates any law or the articles of incorporation (Article 367, Paragraph 1 of the Companies Act). If, despite a shareholder’s request for a meeting of the Board of Directors, a notice of convocation of a meeting of the Board of Directors is not issued within five days from the date of such request, setting a date within two weeks from the date of such request, the shareholder who made such request may convene a meeting of the Board of Directors by himself (Article 367, Paragraph 3 of the Companies Act). In this case, the shareholder may attend and express his/her opinion at the meeting of the Board of Directors held in accordance with such request or at the meeting of the Board of Directors he/she has called (Article 367, Paragraph 4 of the Companies Act).

Procedure for convening a meeting of the Board of Directors

The person who convenes a meeting of the Board of Directors must give notice of the meeting to each director at least one week prior to the date of the meeting (Article 368, Paragraph 1 of the Companies Act). However, since it is the right of each director to receive a notice of convocation, even if he/she has not received a notice of convocation, if he/she waives the right to receive a notice of convocation, the lack of notice does not constitute a defect in the procedure. In addition, a meeting of the Board of Directors may be held without a convocation procedure if all members are present or if all members give their consent (Article 368, Paragraph 2 of the Companies Act). In this case, it must be noted in the minutes of the board of directors that the meeting was held without a convocation procedure.

Method of Resolutions of Meetings of the Board of Directors

Resolutions of a meeting of the Board of Directors shall be adopted by a majority of the votes of a majority of the directors present (quorum) who are entitled to participate in the voting (Article 369, Paragraph 1 of the Companies Act). Unless otherwise stipulated in the Articles of Incorporation, the adoption or rejection of a proposal is determined by a simple majority vote.

Preparation of minutes of board of directors’ meetings

Minutes of the proceedings of the Board of Directors meetings must be prepared in accordance with the applicable Ordinance of the Ministry of Justice, 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). Any director who participates in a board meeting and does not object to the minutes is presumed to have agreed to the resolution. In the event that a shareholder makes a claim for damages in the future in connection with a proposed loan to a director, the extent of liability will depend on whether or not the director has stated his/her objection in the minutes of the board of directors meeting.

Omission of Resolution when All Directors Approve

In a company with a board of directors, a resolution of a meeting of the board of directors may be omitted if all directors agree to the resolution proposed by the directors (Article 370). In this case, the minutes of the board of directors meeting shall state that the resolution was omitted because the previous director voted in favor of the proposal.

Keeping the minutes of the Board of Directors

In a company with a board of directors, the minutes of the board of directors meeting must be kept at the head office for 10 years from the date of the board of directors meeting (Article 371, Paragraph 1 of the Companies Act).

Request for inspection and copying by shareholders

In principle, a shareholder may request to inspect or copy the minutes at any time during the business hours of a stock company if necessary to exercise his/her rights (Article 371, Paragraph 1 of the Companies Act). However, in the case of a company with corporate auditors or a company with audit committee, it is necessary to obtain prior permission from the court to inspect or copy the minutes of the board of directors (Article 371, Paragraph 3 of the Companies Act). This is because in a company with corporate auditors, illegal acts of directors should be monitored by corporate auditors, etc. in the first place.

Request for inspection and copying by creditors

In addition, creditors of a company with a board of directors may, with the permission of the court, request to inspect and copy the minutes of the board of directors’ meetings when necessary to pursue the liability of the directors or executive officers (Article 371, Paragraph 4 of the Companies Act).

Permission by the court for a request for inspection and copying of the minutes of the board of directors

The court may not grant a shareholder or creditor’s request to inspect and copy the minutes of the board of directors if the court finds that granting such request would cause significant damage to the company or its parent company or subsidiaries (Article 371, Paragraph 6 of the Companies Act). In the case of a company’s request for inspection and copying of its minutes, it is likely that the dispute will be over whether or not there is a risk of causing “significant damage”.