MK @ Legal Biz Leaf Term of Office of Directors
The term of office for directors and auditors of Kabushiki-Kaisha is legally stipulated by the law as follows. Also, almost all Kabushiki-Kaisha contain provisions regarding the term of office of officers in their Articles of Incorporation.
Term of Office of Directors
- The term of office of directors shall expire at the conclusion of the ordinary general meeting of shareholders for the last fiscal year which ends within two years from the time of their election.
- If the company is not a public company, the term may be extended to 10 years by stipulating in the Articles of Incorporation (Except for the company with committees).
- The term of office can be shortened by a resolution of the shareholders meeting or stipulating in the Articles of Incorporation.
In other words, in general, the term of office of directors of a private company can be selected from 1 to 10 years.
Term of Office of Auditors
- The term of office of auditors shall expire at the conclusion of the ordinary general meeting of shareholders for the last fiscal year which ends within four years from the time of their election.
- If the company is not a public company, the term may be extended to 10 years by stipulating in the Articles of Incorporation
*Unlike directors, in principle, the term of office of auditors cannot be shortened by a resolution of the shareholders meeting or stipulating in the Articles of Incorporation.
In other words, in general, the term of office of auditors of a private company can be selected from 4 to 10 years.
How to calculate the term of office for Kabushiki-Kaisha
For Example
1. End of fiscal year: December 31
2. Term of office of directors: 2 years
Step 1. Find the date when the director was elected. ex.) March 15, 2022
Step 2. Adding 2 years + 1day to the Step 1’s date. Ex) March 16, 2024
Step 3. Find the most recent fiscal year-end from the Step 2’s date. ex.) December 31, 2023
Step 4. The directors’ term of office continue until the end of the ordinary general meeting of shareholders to be held within 3 months from the Step 3’s date.
ex.) from January 1, 2024 to March 31, 2024
*If the ordinary general meeting of shareholders is not held within this period, the term of office will expire at March 31, 2024.
Starting Date of Term of Office
A election process of directors/ auditors complete when both “election” at the shareholders meeting and “acceptance of office” by himself/herself are obtained. This is because the relationship between a director and a Kabushiki-Kaisha is governed by the provisions on mandate (i.e., It is concluded as an agreement when both parties agree on the declaration of intent.).
On the other hand, the starting date for the term of office of a director/ auditor shall be counted from the date of his/her “election” is made at the shareholders’ meeting (The first day shall be excluded). Therefore, it must be careful not to count the period from the date of acceptance of the office if the director accepts the election at a later date.
Registration of Change of Officers and Non-registration
Even if the same persons are reappointed to the same positions at an ordinary meeting of shareholders, it is necessary to update the corporate registry.
Also, the face it is not widely known even among domestic companies, the application for registration of a change of officers must be made within two weeks (first date excluded) from the date of the appointment, in principle. If the application is left unregistered for a long period of time, a non-penal fine of up to one million yen may be imposed.
Unfortunately, it is not publicly known how much fine will be charged for how long the registration remain unregistered. On the basis of an empirical rules, the risk of a fine of approximately 30,000 JPY increases after approximately three months for the violation of the registration deadline, and the longer the registry remain unregistered, the more the fine tends to increase.
A written decision on the fine is sent by the “court,” directly to the representative director’s personal address registered in the corporate registry. However, please keep in mind that the fine is an administrative penalty, not a criminal penalty. So it will not result in a criminal record or deprivation of the representative director’s position or qualifications.
Conclusion
If there are any registrations that you have forgotten to apply for, request a judicial scrivener to apply for them as soon as possible. And most importantly, please do not forget to update your corporate registry after electing the officers of the company.
MK@ 06/09/2022
