ClientEarth Submits Public Comment on Interim Draft Revisions to the Companies Act

ClientEarth submitted a public comment in May 2026 in response to the call for comments on the interim draft proposal for the review of the Companies Act (relating to shares and shareholders’ meetings, etc.), which commenced on April 2, 2026.

The interim draft discusses revisions to legal systems concerning the issuance of shares, shareholders’ meetings, and corporate governance. Constructive dialogue between shareholders and companies is becoming increasingly important in addressing climate change. We are concerned that, if some of the proposed revisions to the rules governing shareholders’ meetings are implemented, it will become difficult to raise issues through shareholder proposals on sustainability matters such as climate change. This risks hollowing out engagement by investors, both within and outside shareholders’ meetings, and would have significant adverse effects.

In our submission, we objected in particular to the most important proposed amendments affecting shareholders’ rights within the broader review of shareholders’ meetings, namely: (1) the shareholding requirements for submitting shareholder proposals at shareholders’ meetings and (2) a new system under which resolutions would be deemed approved based on advance exercise of voting rights.

1.    Comments on Proposed Amendments Concerning Shareholder Proposal Rights

Under the current rules, the requirements for exercising shareholder proposal rights are either holding voting rights equivalent to at least 1% of total voting rights or at least 300 voting rights. However, the interim draft proposes either abolishing the provision allowing for shareholders holding 300-voting-rights to make a proposal, therefore limiting the requirement to 1%, or more, of the total voting rights; or raising the 300-voting-rights threshold to between 1,000 and 1,500 voting rights by law or by provisions in the articles of incorporation.

ClientEarth opposes both proposals for the following main reasons:

• Abolishing the 300-voting-rights requirement would run counter to the original intent of this requirement introduced in 1981, which was to enable shareholder proposals even at large companies.
• Limiting the requirement to 1% or more of total voting rights would require holdings in practice often exceeding ¥10 billion in top listed companies by market capitalisation, making it difficult not only for individual investors but also for institutional investors to submit proposals.
• Such a limitation would significantly reduce the number of shareholder proposals and undermine the confidence of both domestic and international investors from a corporate governance perspective.
• Internationally, other jurisdictions such as the United States, the United Kingdom, Australia and Germany use combinations of total voting rights thresholds along with monetary or numerical requirements, and thus the proposed amendment would be excessively stringent from a comparative law perspective.
• Although some shareholder proposals may be abusive, not all rejected proposals are without value. Proposals that receive a substantial level of support can influence corporate management, meaning that proposals from minority shareholders are also of significant importance.

2.    Comments on Proposed Amendments Concerning Deemed Resolutions Based on Advance Voting

While the exercise of voting rights prior to the date of a shareholders’ meeting is currently permitted, the interim draft proposes allowing companies to include in their articles of incorporation a provision under which, if the requirements for a shareholders’ resolution are satisfied through advance voting, such resolution may be deemed to have been adopted by the shareholders’ meeting.

The purpose of this amendment is to reduce the burden on companies on the day of shareholders’ meetings and to lower the risk of actions seeking the cancellation of resolutions based on procedural defects, such as breaches of the duty to provide explanations at the meeting. Accordingly, it is also proposed to introduce a provision whereby, if a resolution is deemed adopted by advance voting, procedural defects at the shareholders’ meeting would not constitute grounds for cancelling the resolution.

ClientEarth opposes both proposals for the following main reasons:

• If resolutions deem to have been passed before the shareholders’ meeting, the meeting would cease to function as a forum for substantive discussion and would become a mere formality.
• It would restrict shareholders’ proposal rights on the day of the meeting, including by eliminating opportunities to request amendments to proposals.
• It would reduce companies’ incentives to fulfill their duty to provide explanations and run counter to the spirit of the Corporate Governance Code which positions shareholders’ meetings as a forum for dialogue with shareholders.
• Even under the current law, minor procedural defects can be addressed through the discretionary dismissal system, meaning that the necessity for such amendments is insufficient.