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X.Guidelines on the convention of shareholders' meetings
- Significance:
The shareholders' meeting is a meeting body. Its authority is exercised only by a shareholders' meeting composed of all shareholders. Shareholders' meetings shall be convened by persons with the right to convene according to the prescribed procedure.
- Time of meeting:
The time to convene a shareholders' meeting varies depending on whether it is a egular or special meeting. A regular meeting of shareholders is held at least once every year, within six months after the close of each fiscal year, unless otherwise approved by the competent authority for good cause shown. A special meeting of shareholders is held when necessary. (Company Act §170)
- Persons with the right to convene
- Board of directors:
A shareholders meeting is convened by the board of directors unless the Company Act otherwise provides (Company Act §171).
- Shareholders with minority shareholder rights (Company Act §173):
Shareholders continuously holding 3% or more of the total number of outstanding shares for a period of one year or longer may, by filing a written proposal setting forth therein the subjects for discussion and the reasons, request the board of directors to call a special meeting of shareholders. If the board of directors fails to give a notice for convening a special meeting of shareholders within 15 days after the filing of the request, the proposing shareholder may, after obtaining an approval from the competent authority, convene a special meeting of shareholders on his own.
- When the board of directors fails or cannot convene a shareholders' meeting on account of share transfer or other causes, shareholders holding 3% or more of the total number of outstanding shares of the company may, after obtaining an approval from the competent authority, convene a shareholders' meeting. As such, shareholders may still convene a shareholders' meeting subject to approval obtained, without being affected, when all the directors and supervisors are discharged on account of a transfer of all their shares.
- Supervisors:
- Subject to the condition that the board of directors does not or is unable to convene a meeting of shareholders, the supervisors may, for the benefit of the company, call a meeting of shareholders when necessary (Company Act §220).
- Shareholders continuously holding 3% of total number of the outstanding shares for a period of one year or longer may apply to court for appointment of an inspector to inspect the current status business operations, financial accounts and property of the company. The court may, based on the report made by the inspector, order the supervisors of the company to convene a meeting of shareholders when it deems such meeting necessary. (Company Act §245I and II)
- Reogranizers:
Reorganizers of a company shall complete the reorganization plan within the implementation schedule specified therein; and upon completion of the reorganization plan, shall apply to the court for a court ruling of recognition of the completion of the reorganization, and shall, after such court ruling became final, convene a meeting of shareholders for election of directors and supervisors (Company Act §310)
- Liquidators:
A liquidator has the same rights and obligations as the directors within the scope of its functions in liquidation (Company Act §324), and shareholders' meetings still exist in a company in liquidation. AS such, a liquidator may convene a shareholders' meeting.
- Convention procedure
- Time to give notice and publicly announce of a shareholders' meeting (Company Act §172 and Securities and Exchange Act §26-1):
- A notice to convene a regular meeting of shareholders shall be given to each shareholder no later than 20 days prior to the scheduled meeting date; while a public notice shall be given to holders of bearer share certificates no later than 30 days prior to the scheduled meeting date. A notice to convene a special meeting of shareholders shall be given to each shareholder no later than 10 days prior to the scheduled meeting date; while a public notice shall be given to holders of bearer share certificates no later than 15 days prior to the scheduled meeting date.
- For a company offering its shares to the public, a notice to convene a regular meeting of shareholders shall be given to each shareholder no later than 30 days prior to the scheduled meeting date, and to the holders of bearer share certificates no later than 45 days prior to the scheduled meeting date. In case a company offering its shares to the public intends to convene a special meeting of shareholders, a meeting notice shall be given to each shareholders no later than 15 days prior to the scheduled meeting date, and to the holders of bearer share certificates no later than 30 days prior to the scheduled meeting date.
- In view of constant capital increases and stock distributions over the years, shareholders with under 1,000 shares of nominal stocks of a publicly held company have become numerous. Sending meeting notices to such huge number of odd-lot shareholders by registered mail creates tremendous burden on both human and material resources. To alleviate such burden on an issuer, Article 26-2 of the Securities and Exchange Act therefore stipulates that the notice of the shareholders meeting to be given by an issuer to shareholders who own less than 1,000 shares of nominal stocks may be given in the form of a public announcement, 30 days in advance of a regular shareholders' meeting and 15 days in advance of a special shareholders' meeting.
- A company is deemed to have fulfilled its duty to give notice so long as it is able ot prove it has given notice to the shareholders named, at the addresses shown, in the shareholder roster within the aforementioned period. The "20-day" period etc. above shall count from the day prior to the day of the meeting, excluding the day of the meeting.
- Where a meeting of shareholders resolves to postpone the meeting for not more than, or to reconvene the meeting within, five days, no notice or public announcement as in Paragraphs A to C above is required (Company Act §182). Postponement means rescheduling of the shareholders' meeting to a later day as resolved, after the commencement of the meeting and prior to the calling of orders of the day. Reconvention means continuation of the shareholders' meeting on another day as resolved, after the commencement of the meeting and call for orders of the day, for the reason that decisions are not made in time on the day of the meeting on all the issues presented.
- Causes or subjects of the meeting to be specified in the notice and public announcement (Company Act §172V and Securities and Exchange Act §26-1):
Matters pertaining to election of new directors and supervisors, amendment of the articles of incorporation, dissolution, merger, spin-off, approval of the shareholders' meeting in regard to noncompetition of directors in Article 209 of the Company Act, approval of the shareholders' meeting for the distribution of dividends in the form of new shares to be issued in Article 240, Paragraph 1 of the Company Act, and approval of the shareholders' meeting for the capitalization of the legal reserve in Article 241, Paragraph 1 of the Company Act are material events that shall be itemized in the causes or subjects of the meeting and may not be brought up as extemporary motions. The purpose is to protect shareholders' rights and interests, aleret shareholders and encourage active participation in shareholders' meetings on their part.
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