Newsletter
PRIVATE COMPANIES MAY NOT APPOINT EXTERNAL OR INDE-PENDENT DIRECTORS
In an interpretation dated 14 August 2006, the Ministry of Economic Affairs stated that as the Com-pany Act contains no provisions regarding independent directors, a company that does not issue its shares publicly may not stipulate in its articles of incorporation that an independent director is exempt from the statutory grounds for automatic removal of a director.
Based on the same reasoning, on 8 September 2008 the MOEA repeated this view, stating that when a public-issuing company appoints an independent director, it does so based on the provisions of the Securities and Exchange Act (SEA), by a system of election of nominated candidates; but when di-rectors are appointed according to the provisions of the Company Act, although the Act does not make such appointment conditional on shareholder status, nonetheless such appointment differs in nature from the appointment of independent directors under the SEA. Because the Company Act contains no provisions regarding "external directors" or "directors of an independent nature," it follows that a non-public-issuing company may not make provisions in its articles of incorporation to establish the positions of "external director" or "independent director."