Shareholder meetings in Japan – the post-COVID-19 new normal

As many jurisdictions are easing their COVID-19 restrictions, many of our clients are asking how they should conduct their annual general meetings (AGMs). 

Shareholders are understandably concerned and this blog assesses the extent to which companies in Japan can cater for those concerns. 

Are written resolutions possible?

In theory, 'yes' for Japan-listed companies, but in practice 'no' as they would require the approval of every shareholder. Japanese private companies may hold ‘deemed’ shareholder meetings with the consent of all shareholders, which are the equivalent of written shareholder resolutions in the West.

Are we allowed to hold virtual AGMs?

Unclear, but the general consensus is 'no'.

The Japanese Companies Act does not provide for virtual AGMs. All it states is that directors must decide on the location of the shareholder meeting and notify the shareholders accordingly (articles 298 and 299). 

The reference to ‘location’ is widely understood to mean a physical location.

What should we do if we are required to hold a physical AGM?

We suggest you either hold the AGM, or postpone or adjourn it.

If you decide to hold a physical AGM, you should do the following:

• Limit the numbers of shareholders attending in person and hold a hybrid physical/virtual meeting if permitted by the company’s articles of incorporation. The Japanese Ministry of Economy, Trade and Industry (METI) recommended this in its recent guidance. This procedure is not common in Japan and many listed companies would need to hold a physical shareholder meeting to amend their articles to cater for this.
• Ensure that virtual attendees can vote during the meeting and check that the company has the IT infrastructure in place to record their votes.
• Ask shareholders to submit questions in advance.
• Consider setting up a space on the company’s website for shareholder Q&As.
• Encourage proxy voting (or voting in writing or online).
• Require participants attending in person to wear masks.
• Take temperatures of all participants attending in person.
• Have the meeting in separate rooms with a video link in each room.
• Maintain social-distancing rules during the meeting.

If you decide to postpone or adjourn the AGM, METI has stated that companies are permitted to do so as long as the AGM is held within a reasonable time period following the end of the COVID-19 national/regional restrictions, regardless of what the company’s articles say. We understand most companies have chosen not to do so. 

You also need to ensure that you adhere to the procedures set out in the Japanese Companies Act and the company’s articles, such as complying with notification requirements.

Where do we go from here?

There is momentum to modernise certain aspects of corporate governance in Japan because of COVID-19 (for example, having e-signatures instead of company seals, and using digitalised share certificates). However, discussions around physical shareholder meetings have just started.

The modernisation of shareholder meetings is long overdue, especially given that Japan is prone to natural disasters and it is highly likely that this issue will occur again in the future.