This article provides an overview of managing a Japanese subsidiary structured as a joint-stock corporation (kabushiki kaisha). The explanation assumes the subsidiary adopts the simplest corporate structure—without a board of directors or statutory auditor and has only one director.

Author of this column: Takasumi Munakata, Chairman of Munakata International Law Office (attorney-at-law (Japan) and Certified Public Accountant (USA, Inactive))

1. Election and Compensation of Directors

Election of Directors

Directors are elected at the shareholders’ meeting. The director’s term of office is specified in the Articles of Incorporation and cannot exceed 10 years.

Approval of Director Compensation

The shareholders’ meeting must approve the cap on directors’ compensation. Key points include:

• The cap applies to the total compensation for all directors, not individual amounts.
• As long as the compensation remains within the approved cap, annual resolutions are not required.

2. Conducting Shareholders’ Meetings

Shareholders’ meetings can be held physically or conducted through a resolution in writing (shomen ketsugi). The latter is often the simplest method.

Under the “resolution in writing” method, typically:

• A director circulates the proposed agenda to all shareholders.
• If all shareholders approve the agenda in writing or e-mail, the resolution is deemed adopted, and the meeting is considered complete.

This method reduces administrative burden and is widely used for smaller subsidiaries. Please note that the company should prepare the minutes even though it uses a resolution in writing.

3. Execution of Contracts

Role of the Representative Director

In Japan, contracts are typically executed by the representative director, who is often the CEO or President.
Director of a company without BOD is deemed representative director, unless the company has two or more directors and specifies one of them as the representative director.

Use of a Seal

In Japan, “seal” has been commonly used for contract execution instead of signing. (Recently, the e-signature is becoming common.)

To streamline operations and reduce the burden on the representative director:

• The seal of the representative director is often held by the company’s secretariat team.
• Once internal approvals—including approval by the representative director—are completed, the secretariat affixes the seal to execute the contract on behalf of the representative director.

Disclaimer: This column intends to provide a high-level summary of the subject matter, and it does not aim to provide exhaustive information. Also, this column is for informational purposes only and does not constitute legal advice. For specific issues, we recommend consulting an expert. If you have any query, please contact us via inquiry form in this homepage.