Japan's economic environment is being transformed by a range of factors, including economic globalization, the information technology revolution, changes in the industrial structure, and the expansion of capital markets.
To enhance the international competitiveness of Japanese industry, it will be necessary to restructure and improve commercial law flexibly to reflect these social and economic changes.
European nations are already reforming their commercial laws to improve their international competitiveness. Japan, too, needs to take urgent action to reform its company-related laws and create world-class standards.
The Commercial Law Subcommittee of the Legislative Council of the Ministry of Justice has undertaken a major review of company law. It will carry out studies with a view to the submission of a bill during the ordinary session of the Diet in 2002.
In view of the rapid environmental changes that are occurring in Japan and overseas, Keidanren hopes that the legislative schedule for urgent aspects of reform will be brought forward so that policies can be implemented speedily.
It will also be necessary to develop a legislative system suitable for this new era, including the reform of the Legislative Council.
Commercial law reform should focus on the following five goals:
Both ruling and opposition Diet members are considering drafting legislation relating to the reform of commercial law as it affects corporate governance. The aims of the proposed legislation are the reinforcement of the auditor system and the rationalization of the shareholders' derivative suit system, including the easing of the responsibilities of directors under company articles and other statutes, company participation in lawsuits through support for and subsidization of accused directors, and a review of a plaintiff's standing (the principle of contemporaneous ownership). The framework for a reform bill has already been developed, and Diet members have initiated efforts to prepare legislation for submission to the ordinary session of the Diet next year. As a representative of the business community, Keidanren strongly supports this move and is working to ensure the speedy enactment of the bill.
There are five areas in which legislation should be implemented without delay. It should be possible to take action in these areas relatively independently from the fundamental reform of commercial law. Items (1) through (3) are especially urgent because of their potential to enhance the effectiveness of the legal framework relating to the corporate restructuring that has occurred in recent years. In addition, the new legal framework for company breakups that was enacted in May 2000 should be managed in such a way that it can be implemented no later than the start of the new fiscal year in April 2001 and so that company break-ups can be carried out with suspensory conditions.
The following changes should be made to facilitate the use of the stock option system:
The net asset per share requirement for stock splits should be abolished, especially with regard to no-par stocks. In addition, the authorized capital requirement, which is an obstacle to large-scale stock splits, should be eased.
Inspector examinations are required for investment in kind, subsequent establishment, and transfers of property. A system should be introduced whereby an attorney or certified public accountant appointed by the directors or founders of the company can carry out such examinations of property in place of court-appointed inspectors. Also, if it can be proved that the total current value of all investment in a company or all property transferred to it is greater than its book value, there should be no requirement for an asset examination.
A fully paperless electronic registration system should be introduced for commercial papers at all levels from issuance through to secondary markets and redemption. This system should be designed to take advantage of flexible issuing.
Japan should adapt to the information technology revolution by aggressively introducing a legal framework that can cope with IT. For example, e-mail notification of shareholders' general meetings and electronic voting should be allowed. Specific steps that are needed are an easing of the requirement for notices of meetings and attached documents to be provided in paper form, the establishment of a regulation stating that notification will be deemed to have occurred if a message is sent to a shareholder's e-mail address as shown in the register of shareholders, and the abolition of the requirement that seals be affixed to documents.
In addition, user costs should be reduced by permitting electronic notification.