Director Appointment and Removal
This section summarizes how directors of a Japanese company (kabushiki kaisha) are appointed and removed.
Related: Governance Structures; Shareholder Rights
Appointment
Eligibility
There are no nationality or residency requirements to become a director. Only a natural person can be a director and a corporate entity cannot serve as a director.
Requisite votes and quorum
All directors of a Japanese company are appointed by the shareholders. The required vote is a simple majority (i.e., more than 50%) of the total votes cast by those participating in the shareholders’ meeting (in person, by proxy, or by ballot). The quorum necessary for the meeting is one-third of the total votes. Shareholder Rights)
While a company may establish stricter requirements in its Articles of Incorporation, it is uncommon for companies listed on the Tokyo Stock Exchange to do so.
Majority rule
The voting system is a majority system and not a plurality system. In other words, if you control more than 50% of the votes, you can appoint the entire slate of directors.
Cumulative voting
Under the Companies Act, any shareholder has the right to request that the company implement cumulative voting for the election of directors. However, the Articles of Incorporation of most, if not all, companies listed on the Tokyo Stock Exchange negate this right.
Term of office
The permissible term of office for directors varies depending on the company’s governance structure:
- Corporate Auditor Structure: Under this governance structure, the term of office for directors can be two years. However, for the company’s Articles of Incorporation to permit the board to declare dividends without shareholder approval, the term must be one year or less.
- Three-Committee Structure: Under this governance structure, the term of office for directors must be one year or less.
- Audit Committee Structure: Under this governance structure, the term of office for directors serving on the Audit Committee is set at two years, while the term for other directors is limited to one year or less.
Staggered board
A staggered board is not permitted under the Companies Act.
Removal and resignation
Removal
Shareholders can dismiss any director at any time by a simple majority vote, with or without cause. If a director is dismissed without justifiable reason, they may claim damages, typically equivalent to the total remuneration for the remainder of their term.
The required vote and quorum are the same as those for appointments.
Resignation
A director may resign at any time; however, if a resignation occurs at a time that is detrimental to the company and results in damages, the company may seek compensation for those damages, unless the resignation is due to unavoidable circumstances.