Companies Act

Officers (meaning directors, accounting advisors and company auditors; hereinafter the same applies in this Section, Article 371, paragraph (4) and Article 394, paragraph (3)) and financial auditors are elected by a resolution at a shareholders meeting.

In cases of a company with audit and supervisory committee, the election of directors pursuant to the provisions of the preceding paragraph must be implemented by distinguishing directors who are audit and supervisory committee members and other directors.

In case of the resolution under paragraph (1), substitute officers may be elected as prescribed by Ministry of Justice Order by way of precaution against the cases where there are no officers (in cases of a company with audit and supervisory committee, directors who are audit and supervisory committee members or other directors, or accounting advisors; hereinafter the same applies in this paragraph) in office or the cases where there is a vacancy which results in a shortfall in the number of officers prescribed in this Act or articles of incorporation.

The relationship between a stock company and its officers or financial auditors is governed by the provisions on mandate.

The following persons may not act as directors:

a corporation;

deleted;

a person who has been sentenced to a penalty for having violated the provisions of this Act or the Act on General Incorporated Association and General Incorporated Foundation (Act No. 48 of 2006), or for having committed: a crime under Article 197, paragraph (1), items (i) through (iv)-3, (v) or (vi) or paragraph (2), Article 197-2, paragraph (1), items (i) through (x)-6 or (xiii) through (xix), Article 198, paragraph (1), item (viii), Article 199, Article 200, items (i) through (xii)-2, (xii)-5 through (xii)-10 or (xx) through (xxiii), Article 203, paragraph (3) or Article 205, items (i) through (vi), (vi)-9 through (vi)-12 or (xix) through (xxi) of the Financial Instruments and Exchange Act; a crime under Articles 255, 256, 258 through 260 or 262 of the Civil Rehabilitation Act (Act No. 225 of 1999); a crime under Articles 65, 66, 68 or 69 of the Act on Recognition and Assistance for Foreign Insolvency Procedures (Act No. 129 of 2000); a crime under Articles 266, 267, 269 through Article 271 or 273 of the Corporate Reorganization Act (Act No. 154 of 2002); or a crime under Articles 265, 266, 268 through 272 or 274 of the Bankruptcy Act (Act No. 75 of 2004), for whom two years have not elapsed since the day on which the execution of the sentence was completed or the sentence no longer applied;

a person who violated the provisions of laws and regulations other than those provided for in the preceding item, was sentenced to imprisonment or severer penalty and who has not completed the execution of the sentence or to whom the sentence still applies (excluding persons for whom the execution of the sentence is suspended).

A stock company may not provide in the articles of incorporation that directors must be shareholders; provided, however, that this does not apply to a stock company that is not a public company.

A director who is an audit and supervisory committee member may not concurrently act as an executive director, manager, or other employees of a company with audit and supervisory committee or its subsidiary company, or accounting advisor (if the accounting advisor is a corporation, the member who is in charge of its affairs) or an executive officer of the subsidiary company.

A director of a company with nominating committee, etc. may not concurrently act as a manager or other employee of the company with nominating committee, etc.

A company with board of directors must have three or more directors.

A company with audit and supervisory committee must have three or more of directors who are audit and supervisory committee members and the majority of them must be outside directors.

For an adult ward to assume the role of a director, the guardian of the adult ward must obtain the consent of the adult ward (if there is a supervisor of guardian, the consent of the adult ward and the supervisor of guardian), and the guardian must approve the assumption on behalf of the adult ward.

For a person under curatorship to assume the role of a director, the content of the curator must be obtained.

The provisions of paragraph (1) apply mutatis mutandis if a curator approves assumption on behalf of a person under curatorship pursuant to an order to the effect that the power of representation are granted under Article 876-4, paragraph (1) of the Civil Code. In this case, the term "consent of the adult ward (if there is a supervisor of guardian, the consent of the adult ward and the supervisor of guardian)" in paragraph (1) is to be replaced with "consent of the person under curatorship."

Acts performed by an adult ward or person under curatorship pursuant to their capacity as a director may not be revoked on the grounds of limited capacity.

Directors' terms of office continue until the conclusion of the annual shareholders meeting for the last business year which ends within two years from the time of their election; provided, however, that this does not preclude the shortening the term of the directors by the articles of incorporation or by the resolution of the shareholders meeting.

The provisions of the preceding paragraph do not preclude a stock company which is not a public company (excluding a company with audit and supervisory committee and company with nominating committee, etc.) from extending, by the articles of incorporation, the term of office under that paragraph until the conclusion of the annual shareholders meeting for the last business year which ends within ten years from the time of the election.

With regard to application of the provisions of paragraph (1) to directors (excluding those who are the audit and supervisory committee members) of a company with audit and supervisory committee, the term "two years" in the same paragraph is deemed to be replaced with "one year".

The provisions of the proviso to paragraph (1) do not apply to the terms of office of directors who are the audit and supervisory committee members.

The provisions of the main clause of paragraph (1) do not preclude to stipulate by articles of incorporation that the term of office of the director who is an audit and supervisory committee member and elected as substitute for a director who is an audit and supervisory committee and retired before expiry of its term of office is to be by the time when the term of office of the retired director who was an audit and supervisory committee member expires.

For the purpose of the application of the provisions under paragraph (1) to the directors of a company with nominating committee, etc., the term "two years" in that paragraph is deemed to be replaced with as "one year".

Notwithstanding the provisions of the preceding paragraphs, if any of the following amendments in the articles of incorporation is made, the directors' term of office expires when relevant amendment in the articles of incorporation takes effect:

an amendment in the articles of incorporation to the effect that an audit and supervisory committee or nominating committee, etc. is established;

an amendment in the articles of incorporation to repeal the provisions of the articles of incorporation to the effect that an audit and supervisory committee or nominating committee, etc. is established; or

an amendment in the articles of incorporation to repeal the provisions of the articles of incorporation to the effect that, as a feature of all shares the stock company issues, the approval of the stock company is required for the acquisition of relevant shares by transfer (excluding an amendment made by a company with audit and supervisory committee and company with nominating committee, etc.).

An accounting advisor must be a certified public accountant or audit corporation, or a certified public tax accountant or tax accountancy corporation.

An audit corporation or tax accountancy corporation which has been elected as the accounting advisor must appoint, from among its members, a person who is in charge of the affairs of an accounting advisor, and notify the stock company to that effect. In these cases, the persons set forth in each item of following paragraph may not be appointed.

The following persons may not act as accounting advisors:

a director, company auditor or executive officer, or an employee, including a manager, of a stock company or its subsidiary company;

a person who is subject to the disciplinary action ordering a suspension of operations and for whom the period of relevant suspension has not yet elapsed; or

a person who, pursuant to the provisions of Article 43 of the Certified Public Tax Accountant Act (Act No. 237 of 1951), may not engage in the business of the certified public tax accountant prescribed in Article 2, paragraph (2) of that Act.

The provisions of Article 332 (excluding paragraphs (4) and (5); the same applies in the following paragraph) apply mutatis mutandis to the accounting advisors' terms of office.

Notwithstanding the provisions of Article 332 applied mutatis mutandis under the preceding paragraph, if a company with accounting advisor effects an amendment in the articles of incorporation to repeal the provisions of the articles of incorporation to the effect that it has an accounting advisor, the accounting advisor's term of office expires when relevant amendment in the articles of incorporation takes effect.

The provisions of Article 331, paragraph (1) and paragraph (2) and Article 331-2 apply mutatis mutandis to company auditors.

A company auditor of a stock company may not concurrently act as a director, employee, including manager, of that stock company or its subsidiary company, and may not act as an accounting advisor (if the accounting advisor is a corporation, the member who is in charge of its affairs) or an executive officer of relevant subsidiary company.

A company with board of company auditors must have three or more company auditors, and the half or more of them must be outside company auditors.