Newsletter
CLARIFICATION ON SINGLE SHAREHOLDER COMPANIES
Article 128-1 of the Company Law provides that in the case of a company limited by shares that has a single government or corporate shareholder, the powers that normally belong to the share-holders' meeting are exercised by the board of directors. Like other board resolutions, resolu-tions made when exercising the powers of the shareholders' meeting must comply with the re-quirements of Article 206 Paragraph 1 of the Law; the methods of resolution prescribed for shareholders' meetings do not apply. Accord-ingly, matters normally decided by resolution of a shareholders' meeting, such as those under Ar-ticle 185 (important matters such as lease of the company's entire business operations) or Article 277 (amendments to the articles of incorpora-tion), are all instead decided by resolutions of the board of directors. Unless the articles of incor-poration provide otherwise, a board resolution requires a majority vote in favor at a meeting attended by more than half of the directors; there is no need for special resolutions as would be the case with a shareholders' meeting.
The preparation of statements and records of account in accordance with Article 228 of the Company Law falls within the normal power of the board of directors; this is different from the powers of the shareholders' meeting being exer-cised by the board in the case of a single share-holder company. Conversely, under Article 230 of the law, the power to approve the statements and records of account prepared by the board of directors belongs to the shareholders' meeting, but in the case of a single shareholder company this power is exercised by the board of directors. As for the time period for examination of state-ments and records of account required under Article 228, the board of directors of a single shareholder company must still pass them to the supervisors for examination at least 30 days be-fore its relevant meeting.
Furthermore, under Article 317 Paragraph 2 of the Company Law, if a newly established demerging company issues shares to the demerged company and the demerged company holds 100% of the shares of the demerging company, the demerging company is a single shareholder company, and the directors and su-pervisors of the new demerging company should be directly appointed by the demerged company in accordance with Article 128-1 of the Com-pany Law. Thus the need for the directors and supervisors to be elected by a shareholders' meeting does not arise.