Unlock What You Need to Know About Director Changes in Japan: Expert Legal Steps and Documentation

In Japan, managing a director change involves meticulous planning and adherence to strict regulatory requirements outlined by the Japanese Companies Act. Whether it’s appointing a new director, managing resignations, or removing an existing director, every step must align with legal mandates to ensure smooth corporate governance.

What Should You Consider Before Initiating a Director Change?

Preparation is key when planning a director change. Here’s what you need to address:

1. Compliance with Legal Requirements:

• Companies may require a representative director (daihyo-torishimari-yaku) to manage legal and business matters or outside directors (shagai-torishimari-yaku) for enhanced governance. Note that outside directors cannot hold executive roles or be affiliated with the company or its subsidiaries.
• For Kabushiki Kaisha (KK), private companies can operate without a board of directors, but those with a board must have at least three directors.

2. Effective Date of Change:

• The director change takes effect on the date specified in the resolution or, if unspecified, the date the resolution was passed.

3. Director Terms:

• Public company directors typically serve two-year terms, while private company directors may serve up to ten years. Reappointments must occur before the term expires.

How to Formalize the Decision?

Shareholder Resolutions:

• Shareholders are the primary decision-makers for appointing or removing directors. Resolutions passed at a general meeting must document the change and comply with the company’s articles of incorporation.

Board of Directors Meetings (if applicable):

• For companies with a board, directors meet regularly (at least quarterly) to make major operational decisions.
• Written resolutions are an alternative if all directors unanimously agree, provided the articles of incorporation allow for this.

Documentation:

• Resolutions and meeting minutes must clearly reflect decisions made, including the director’s appointment, removal, or resignation.

Resignation or Removal: What Are the Steps?

1. Filing Requirements: Register the resignation or removal with the Legal Affairs Bureau within two weeks of the resolution’s effective date.
2. Compensation for Unjust Removal: Directors dismissed without cause may claim damages for lost remuneration for the remaining term.
3. Documentation:

• Resignation requires a formal letter with a clear effective date.
• Removal requires a resolution passed by a majority vote at a shareholders’ meeting, unless higher thresholds are specified in the articles of incorporation.

What Documents Are Necessary?

To ensure compliance, prepare the following:

1. Resignation Letter: Signed by the outgoing director, stating the effective date.
2. Acceptance Letter: Signed by the incoming director, confirming their willingness to assume the role.
3. Board and Shareholder Resolutions: Document the decisions made and include these in the official company records.
4. Filing Proxy: Authorizes a third party to handle registration.
5. New Director Identification: Includes proof of address, passport copy, and specimen signature.

Important Note: Wet-ink signatures are mandatory for legal filings in Japan.

What Are the Filing Deadlines?

The director change must be reported to the Legal Affairs Bureau. While delays are often accepted, non-compliance can result in penalties of up to JPY 1,000,000.

How Does the Change Impact the Company’s Bylaws?

1. Number of Directors: Amendments may be needed if appointing a new director exceeds the maximum allowed by the articles of incorporation.
2. Vacancies: Bylaws might need updates to outline procedures for filling vacancies or address shifts in board structure.
3. Roles and Responsibilities: If the new director assumes significant roles (e.g., representative director), bylaws must reflect these changes accurately.

Does a Foreign National Need Special Consideration?

Foreign nationals can serve as directors without residency or Japanese citizenship. No additional visa requirements apply unless the director plans to reside in Japan. However, all directors are subject to the same duties and liabilities.

What Are the Responsibilities of Incoming and Outgoing Directors?

Incoming Directors:

• Represent the company (if designated as a representative director).
• Ensure compliance with governance, financial reporting, and supervisory duties.

Outgoing Directors:

• Transfer company property and ongoing tasks.
• Remain liable for breaches of duty during their tenure.
• Resolve any pending legal or financial matters before stepping down.

How Can Klea Help?

Klea and its local partners ensure your director change process is seamless by managing filings, preparing documentation, and ensuring compliance with Japanese law. Book a demo to streamline your corporate governance today!

For more insights into processes in other jurisdictions, explore our article, The Ultimate Guide: What You Need to Know for a Successful AGM in Serbia.