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Keisuke Sadamori, Counsellor of the Cabinet Secretariat of the Government of Japan, played a key role in shaping reforms to Japan's Corporate Law.  "The most important aspect of the new company law," he emphasized, "is the increased level of flexibility and diversity for new companies.  It is up to individual companies how to use the provisions wisely, but it has definitely become easier to establish a company in Japan."

Strengthening corporate governance

Over the last several years, the value of corporate governance has gained significant attention in Japan, and regulators have moved to strengthen it, providing a more appealing environment for foreign investors.  The recent reforms require:

•  Large corporations and corporations with committees to adopt internal control systems to ensure that actions by directors conform with applicable laws, regulations and articles of incorporation
•  Listed companies to abide by the Financial Instruments and Exchange Law, which requires submitting to the Financial Services Agency (FSA) an internal control report to ensure appropriate financial account reporting
•  A lower requirement for dismissing directors.  Previously, a 2/3 resolution was required for dismissing under-suited directors; now only a 1/2 resolution is required.

Read about the state of corporate governance in Japan and opportunities for proxy voting services in JETRO's interview with Makoto Seta, Associate Director of Corporate Governance in Asia Pacific & Japan for Hermes Pensions Management Ltd.

Triangular Mergers
A special provision will come into effect in May 2007, allowing a subsidiary of a foreign company in Japan to engage in a triangular merger, using shares of its parent company to merge with or acquire another entity in Japan.