The government has decided to amend the Act on Strengthening Industrial Competitiveness (hereinafter referred to as “Amendments to Competitiveness Act”) to allow the holding of virtual-only shareholders meetings, and will submit it to the Diet.
- Requirements for listed companies to hold virtual-only general meetings
According to the revised law, the requirements for a listed company to hold a virtual-only shareholders meeting are:
- after obtaining “confirmation” from the Minister of Economy, Trade and Industry (METI) and the Minister of Justice (MOJ) that the requirement (applicable requirement) that it “is stipulated as a case contributing to strengthening industrial competitiveness while giving consideration to securing the interests of shareholders by the Ordinance of the Ministry of Economy, Trade and Industry and the Ordinance of the Ministry of Justice” has been satisfied; and
- the articles of incorporation stipulate that a general meeting of shareholders can be held in a virtual-only manner.
This provision allows shareholders to hold shareholders meetings in a virtual-only manner (“shareholders meetings with no fixed location”).
In addition, in order to meet the deadline for shareholders meetings in June 2021, it is possible to hold virtual-only shareholders meetings without going through the procedures of changing the articles of incorporation (Article 3.1 of the Supplementary Provisions of the Amendments to Competitiveness Act) for two years after the enactment of the Amendments to Competitiveness Act, since provisions in the articles of incorporation (“Virtual Only Allowance Provision”) stating that virtual-only shareholders meetings can be held are deemed to exist (“Deemed Articles of Incorporation”) by obtaining “confirmation” from the METI and the MOJ.
- Deemed Articles of Incorporation
During the two-year special period, virtual-only shareholders meetings can be held without amending the articles of incorporation if one obtains “confirmation” from the METI and the MOJ, but the articles of incorporation cannot be amended to establish a new virtual-only allowance provision for shareholders meetings that were held in virtual-only manner (Article 3.2 of the Supplementary Provisions of the Amendments to Competitiveness Act).
Accordingly, in order to establish a virtual-only allowance provision in the articles of incorporation during the two-year special period, it is necessary to carry out the procedures for amending the articles of incorporation establishing a new virtual-only allowance provision while holding a general meeting in person, or a hybrid attendance (or participatory) virtual shareholders meeting—but not a virtual-only shareholders meeting—after obtaining “confirmation” by the METI and the MOJ.
If the Amendments to Competitiveness Act is passed by the Diet, and published and enacted in May this year, the two-year special period will end in May 2023, so if a company holds a general meeting in person this year (2021) and a virtual-only shareholders meeting next year (2022), the articles of incorporation cannot be amended to establish a new virtual-only allowance provision at the shareholders meeting next year (2022).
Therefore, even if a general meeting is not held in the form of a virtual-only shareholders meeting this year (and even if there is no plan to hold a virtual-only shareholders meeting in the future), why not consider taking steps to amend the articles of incorporation at an ordinary general meeting of shareholders in June this year by adding provisions to the articles of incorporation stating that virtual-only shareholders meetings can be held, after obtaining “confirmation” by the METI and the MOJ (or, on condition that the “confirmation” will be obtained)?
This year will see the first general meetings of shareholders since the revised Companies Act of 2019 came into effect. If you have any questions, please contact us.
