The Japanese government is planning to make it easier for companies to hold online-only shareholder meetings. This change was first introduced during the COVID-19 pandemic as a temporary measure, but now the government wants to update the Companies Law to allow such meetings permanently.
According to sources, the Justice Ministry will seek advice from the Legislative Council, an advisory group that helps create new laws. They will discuss these changes before the end of this month.
Current Types of Shareholder Meetings in Japan
At present, Japanese companies can choose from three types of shareholder meetings:
Traditional Meetings – These take place only in physical locations, and shareholders must be present to participate.
Hybrid Meetings – These allow participation both online and in person at a physical venue.
Online-Only Meetings – These are conducted entirely online, without any physical venue.
The Companies Law currently requires that shareholder meetings must have a physical location where people can attend. Because of this rule, online-only meetings were not allowed before COVID-19.
However, in 2021, the government made a temporary change to the law to allow companies to hold online-only meetings if they met certain conditions. These conditions included:
Making changes to their articles of incorporation (official company rules).
Getting special approval from the government.
Receiving confirmation from the justice and economy ministers.
Now, the government wants to remove these restrictions and make online-only meetings a permanent and easier option for companies.
Why Online-Only Meetings Matter
Online-only shareholder meetings offer several benefits:
More Participation – Shareholders from different cities or countries can join without traveling.
Lower Costs – Companies do not need to rent expensive venues or arrange travel for participants.
More Convenience – Meetings can be organized and attended easily from anywhere.
Many countries, including the United States, already allow online-only shareholder meetings as a common practice. Japan wants to follow this trend to modernize its business environment.
Challenges of Online-Only Meetings
Despite the benefits, there are some challenges with online-only shareholder meetings:
Difficult Approval Process – Companies currently need to apply for approval, which can take up to three months.
Technical Problems – Some shareholders might face internet issues, preventing them from joining the meeting. This can lead to legal complications.
Limited Adoption – Only 1.7% of Japan’s listed companies (71 out of 4,059) had introduced online-only meetings by November 2024, according to ICJ, Inc., a company linked to the Tokyo Stock Exchange.
If shareholders face connection problems and cannot vote, a decision made in the meeting could be canceled. This creates risks for companies relying on online-only meetings.
Planned Changes to the Law
To address these issues, the Legislative Council is expected to propose the following changes:
Removing the Requirement for a Physical Venue – Companies will no longer need to assign a location for shareholder meetings.
Simplifying the Approval Process – The need to get confirmation from the ministers will likely be removed.
New Rules for Connectivity Issues – The law may include guidelines on how to handle internet problems during meetings.
Support for Elderly Shareholders – Special measures may be introduced for older shareholders who do not have access to digital devices.
The Legislative Council will prepare a draft bill with these changes and submit it to the Diet (Japan’s parliament) as soon as possible.
Impact on Companies and Shareholders
If these changes are approved, they could make Japan’s corporate environment more modern and flexible. Companies would be able to:
Hold meetings more efficiently.
Reduce operational costs.
Increase shareholder engagement by allowing more people to participate easily.
For shareholders, the new rules would mean:
More access to meetings without the need for travel.
Easier participation using online platforms.
Better flexibility to engage in company decisions from anywhere in the world.
However, ensuring smooth technology and clear communication rules will be essential for the success of online-only meetings.
Japan is taking steps to make online-only shareholder meetings a permanent and practical option for companies. By updating the Companies Law, the government aims to create a more modern, cost-effective, and inclusive system for businesses and shareholders.
