MK @ Legal Biz Leaf What is an Executive Partner?
Although an executive partner is sometimes comparable to a director of a Kabushiki-Kaisha (a join-stock company), strictly speaking, there are some differences.
As there is a principle of “separation of ownership and management” in a Kabushiki-Kaisha, it is directors who are delegated by the company (shareholders) to manage the company. On the other hand, in the case of a Godo-Kaisha (limited liability company), an ownership and management is unified, hence it is the “partners” (the investors themselves) who manage the company, in principle.
In a Godo-Kaisha, all partners have authorities to execute business operations of a company as basis. On the other hand, a Godo-Kaisha is also legally allowed to select a specific person/entity to execute business by stipulating their names in the Articles of Incorporation. In such cases, the authority of unelected partners to execute business operations shall be limited, while the authority to investigate the status of the company’s business and assets (supervisory authority) shall be remained.
*If there is no provision in the Articles of Incorporation for selecting executive partners, all partners of the company are to be registered as executive partners.
Procedures for Admission of Executive Partners
If a company newly select a particular person/entity as an executive partner, the Articles of Incorporation shall be amended with the consent of all partners. The same procedures shall apply, when changing the current executive partners.
*When an entity is to become as an executive partner, it is necessary to appoint at least one person as an executive manager who executes their duties and to notify the other partners of the name and address of such person.
Written Consent
The following items regarding executive partners are to be added to the Articles of Incorporation of the Company.
Partner “A” shall be an executive partner and shall execute the business of the Company.
We hereby agree to the above.
September 14, 2022
ABC Godo-Kaisha
Seal of Partner A
Seal of Partner B
Resignation of Executive Partner
In principle, a person/entity who has become as an executive partner cannot resign their position of their own volition unless they leave the company as a partner. On the other hand, those executive partners who are stipulated in the Articles of Incorporation are exceptionally allowed to resign their position in two ways.
Resignation with justifiable grounds
Under the Companies Act, an executive partners who has ” justifiable grounds” may resign from their positions. The definition of “justifiable grounds” is not stated in the laws, as it is determined by a judge in light of individual circumstances when a dispute arises. One of an example of such cases would be when executive partners are unable to fulfill their duties due to illness, etc.
Resignation by consent of all partners
In registration practice, executive partners stipulated in the Articles of Incorporation may resign with the consent of all partners. However, this is not realized by a unilateral resignation by executive partners, but it is understood that the Articles of Incorporation are rewritten with the consent of all partners in response to such executive partners’ requests to revoke their authorities.
Term of Office of Executive Partners
In a Godo-Kaisha, the term of office of executive partners (or representative partners) is not stipulated in the law, unless it is included in the Articles of Incorporation with the consents of all partners.
Article X The term of office of an executive partner shall expire at the end of the last fiscal year within two years after assuming office.
For example, assume that, out of the partners “A” and “B”, only “A” is designated as an executive partner in the Articles of Incorporation and his term of office is 2 years.
After two years, if “A” re-assumes the position of executive partner, there is no need to apply for registration. (In the case of a Kabushiki-Kaisha, even if the same person is reappointed after the expiration of the term of office, an application for registration to that effect is required.)
On the other hand, if “A” does not become an executive partner after 2 years, “A” does not lose his position, but “B” will be re-granted the authorities to operate the business (i.e., the restrictions on the right to operate the business that he originally had are lifted). As a result, an application for registration of “granting of the authorizes to manage the business” to B shall be filed.
Despite of above, the fact that the term of office is not stipulated by the law is one of the advantages of a Godo-Kaisha, so unless there are special internal circumstances, it is advised not to to stipulate such terms.
MK@ 09/14/2022
