What happens if the minutes of a Shareholders Meeting are not prepared?
Minutes of Shareholders Meeting must be prepared in accordance with Japanese Company Act. And companies need to keep it for 10 years. If they fail to prepare the minutes, there are some legal and taxation risks.
For example, executive remuneration can be treated as deductible expense under the Corporate Tax Law, provided that the resolution was adequately made at the Shareholders Meeting. Therefore, if a company fails to prepare the minutes, tax office may regard the remuneration as non-deductible. (For more information on this point, please refer to “How to Decide Executive Remuneration“.)
In addition, when a company dismisses an executive by resolution at a Shareholders Meeting, there is a risk that the dismissed executive may sue the company for wrongful dismissal. In such a case, the minutes of the Shareholders Meeting are important evidence to show that the resolution was appropriately made in accordance with laws.
Furthermore, when a company receives a large investment from third party or goes public in the future, whether minutes of shareholders meeting have been properly made and recorded from the establishment of the company will be one of the important points which are carefully examined during due diligence by the investor or the IPO examination.
Are Minutes of Shareholders Meeting required to be written in Japanese?
If there are no Japanese shareholders, some business manager may wish to prepare the minutes in a language other than Japanese, such as English or Chinese. However, the minutes of a Shareholders Meeting must be prepared in Japanese. Even if they are prepared in other languages, they must be translated into Japanese and the Japanese version must be the original.
Items to be included in the Minutes of Shareholders Meeting
The items to be included in the minutes of a Shareholders Meeting vary from case to case, depending on the agenda and the progress of the meeting. In this article, we explain the minimum requirements for minutes of shareholders meeting.
1. Date, Time and Place of the Shareholders Meeting
Companies needs to specify the date, time and place of the Shareholders Meeting. Although it is possible to allow some shareholders to attend the meeting online, companies, in principle, cannot hold shareholder without physical location of the meeting.
2. The number of shareholders attended the meeting and the number of voting rights of the shareholders present.
This information is very important to determine whether the quorum of the meeting and the requirements for resolution were met.
For information about quorum and requirements for resolution, please refer to our article titled “How to hold Shareholders Meeting in Japan “.
3. Summary of Proceedings and Outcome of Shareholders Meeting
“Proceedings” here means the process and content of the discussions held at the Shareholders Meeting from the opening to the closing of the meeting.
Specifically, it must include:
(i) the content of reports and questions and answers concerning matters to be reported, and
(ii) the agenda to be resolved, how the agenda was discussed and the method of voting introduced.
It is not necessary to include every detail of these matters but the main points needs to be described.
“Outcome” here means the result of the resolution made on the proposal submitted to the Shareholders Meeting.
Specifically, it should state whether the proposal was approved as originally proposed, approved with amendments, or rejected.
4. Statements and Opinion
A summary of any comments or opinions expressed at the Shareholders Meeting based on the rights of shareholders, directors, or auditors under the Companies Act must also be recorded.
5. Names of executives attending
Executives are not legally required to attend shareholders meeting. However, if there are some questions from shareholders, directors or auditors may need to answer to the question. So executives are supposed to attend the meeting and the name of executives who attended the meeting must be recorded in the minutes.
6. Name of the chairperson
The method of appointing the chairperson should be in accordance with the Articles of Incorporation. In most cases, the representative director chairs the meeting. The name of the chairperson must be recorded in the minutes.
7. Author of the minutes
Minutes are usually made by one of the directors. Companies need to record the name of the person who made the minutes.
For more specific advice or template of shareholders meeting, you should contact a business lawyer. And if you need assistance of English speaking business lawyer, we recommend Ashita no Shishi Legal Office.
