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Looking at the trends of annual shareholders meetings held in Japan in 2020, it can be said that many companies have been slow to close their accounts due to the ongoing pandemic and the associated difficulties in responding to shareholders meetings. According to Article 124 of the Japanese Companies Act (JCA), if the record date for exercising shareholders’ rights is specified in the articles of incorporation (AOI), such rights must be exercised within three months from said date. 

Many Japanese companies set the record date at the end of March and hold an annual shareholders meeting by the end of June. However, if the date of the annual shareholders meeting is delayed, it is, in principle, necessary to shift the record date as well. Under the JCA it is also possible to hold, as originally scheduled, a shareholders meeting to propose a resolution regarding dividends and then to report financial statements at a later date. However, in situations where audited financial statements do not exist, there is some opposition to the resolution on dividends and to the appointment and dismissal of directors at shareholders' meetings because the information that is the premise for such a resolution is insufficient. Therefore, companies that decide about dividends at shareholders’ meetings are likely to face a difficult decision.

In Japan, in principle, resolutions regarding the determination of dividends of surplus are made at shareholders’ meetings (Article 454, Paragraph 1, JCA). However, under the JCA, the authority to determine dividends does not lie solely with the shareholders meeting. If a company meets all three requirements—ie, (1) it is a company with accounting auditors; (2) the term of office of directors does not exceed one year; and (3) it is a company with a board of corporate auditors, or a company with audit and supervisory committee, or a company with nominating committee—the AOI may stipulate that matters concerning dividends of surplus can be decided by a resolution of the board of directors (BOD) (Article 459, paragraph 1, JCA). If the board determines dividends this way, it is not necessary to shift the dividend record date, even if the annual shareholders’ meeting is postponed, and there is no need to adopt the two-step method mentioned above. The Act allows such a provision because it is generally difficult for shareholders, especially those not having sufficient management knowledge or ability, to make appropriate judgements regarding matters such as dividends of surplus. In such a company, the board’s authority is enhanced by this provision. Therefore, once a year, there is an opportunity to ask shareholders to confirm the board’s authority.

While in Japan, it is generally believed that the dividends are to be determined at shareholders meetings, several Japanese listed companies have been able to determine dividends by a resolution of the BOD even before the recent coronavirus crisis. In the United States, it is common for the BOD to determine dividends. In the United Kingdom, dividend determination can be carried out by either the shareholders or the BOD, depending on the provisions in the AOI. Even in Germany, whose laws provide the authority to determine dividends to shareholders’ meetings, the BOD (including the supervisory board) assume authority to reserve up to half of the annual surplus as a voluntary reserve fund. 

According to a survey conducted by the Tokyo Association of Shareholder Affairs, which comprises corporate legal staff, for 1,307 listed companies in 2019, based on the provisions of the AOI, about 40% of the companies determine dividends only at the shareholders meeting, about 30% determine these through the BOD and about 30% determine them either at the shareholders meeting or through the BOD (see Nikkei Shimbun 18, May 2020 morning edition legal affairs). Thus, among Japanese listed companies, about 40% stipulate that dividends will be determined only at the shareholders meeting in their AOI, and about 60% can determine dividends through a resolution of the BOD.

Furthermore, many listed companies in Japan postponed the annual shareholders' meeting in 2020. According to the Material Version of Shojihomu (July 2020 issue), 21 listed companies have held an ‘adjourned meeting’ (two-step method) in 2020 and 47 changed the record dates of the right to receive dividends and postponed their annual shareholders meetings. Also, it is noteworthy that by the end of June 2020, at least 15 listed companies (eg, Olympus), had submitted a proposal at their shareholders meetings and amended the AOI to allow the determination of dividends by resolution of the BOD. 

While companies have been increasingly transferring the authority to determine dividends to the BOD for the past several years, this trend accelerated in 2020. However, the opposite has also been observed–Mizuho FG had, so far, introduced provisions where only the BOD determines dividends in its AOI, but at the shareholders meeting in 2020, this was changed to enable a determination either through the BOD or at the shareholders meeting. Toshiba also made similar changes through its shareholders’ meeting. It seems that the current institutional investors of both companies are highly influential in such matters. 

Nevertheless, changing the authority regarding dividend determination is burdensome because the AOI must be changed (which needs a special resolution at the shareholders’ meeting). However, it is not common for dividends to be determined only at shareholders meetings, even in other jurisdictions. For instance, as cited above, it is often the case that the BOD determines dividends in the United States; this is an important point that should not be overlooked while advocating for ‘American-style corporate governance.’ More importantly, currently, about 60% of Japanese listed companies can still determine dividends by a resolution of the BOD, and the number of such companies continues to grow. In this context, future issues regarding companies’ dividend distribution should be discussed.


Hiroyuki Watanabe is a Professor at the Faculty of Law at Waseda University, Japan.