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Corporate Governance Structures for Japanese Stock Corporations

The Japanese Companies Act (JCA) offers several types of corporate governance schemes, which are mainly designed for public “large” corporations (i.e. companies with a paid-in share capital of JPY 500 million or more, or liabilities of JPY 20 billion or more), as such companies are obliged to implement a corporate governance structure prescribed under the law. However, also for private companies voluntarily adopting a corporate governance structure prescribed under the JCA (e.g. by establishing a board of statutory auditors etc.) the provisions of the JCA are applicable and the options are defined by what is stipulated in the JCA. There exist now basically three alternative governance schemes a stock corporation can choose from, the latest having been introduced in 2015. These comprise the following: (1.) The establishment of a Company with a Board of Statutory Auditors; (2.) The Committee-type Company; and (3.) The Company with Audit and Supervisory Committee.

While the first alternative is the oldest and still most prevailing structure, the newer options, which have been introduced to improve deficits under the existing scheme, are gaining more popularity, which is particularly true for the most recent type (3.). This newsletter describes the available corporate governance schemes as prescribed by the law. It should be noted that due to the complexity of the newer schemes, most private stock corporations still opt for the traditional structure as described under (1.).

 

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