Newsletter
DIRECTORSHIP ELECTIONS NOT LIMITED TO CUMULATIVE VOT-ING
Based on the legislative intent of the relevant amendments to the Company Act, the Ministry of Economic Affairs reiterated in an interpreta-tion dated 13 May 2005 that the method by which directors are elected is a matter for cor-porate self-governance. To allow greater flexi-bility, the amended Act relaxes the rules for the election of directors by providing that a company may stipulate the election method in its Articles of Incorporation.
Thus although the Act provides that in principle the directors should be elected by cumulative voting, it also allows a company to choose oth-erwise through provisions in its Articles of In-corporation. There is nothing to prevent a company’s Articles of Incorporation from de-fining any election method that complies with the rules for meetings prescribed by the Ministry of the Interior, and it is permissible for the Arti-cles of Incorporation to adopt straight voting (one vote per share), as stated in an MOEA in-terpretation dated 27 March 2002.
However, it should be noted that in a previous interpretation dated 4 December 2001, the MOEA stated that if the rules for the election of directors laid down in a company’s Articles of Incorporation contravene the relevant provisions of the Company Act, then such rules are unlaw-ful and invalid. For example, an MOEA inter-pretation dated 26 December 2001 stated that a provision to the effect that the incumbent board of directors may provide a list of candidates for the next term of office of directors and supervi-sors, was not acceptable; and an interpretation dated 6 May 2002 stated that provisions in the Articles of Incorporation that a separate resolu-tion should be passed with respect to each can-didate, and that such resolution required a vote in favor by a majority of the voting rights repre-sented at a meeting attended by shareholders representing a majority of issued shares, were not compatible with the provisions of the Company Act.