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Editorial: Flexibility needed as season of shareholder meetings approaches

  • April 7, 2020
  • , The Japan News , 12:55 p.m.
  • English Press

Companies face the unprecedented situation of “corona shock.” Flexible responses must be taken when companies announce their business results and hold general shareholders’ meetings, a process that is set to get into full gear from now on.


Most Japanese companies conclude their business year at the end of March, usually compile business results for the full business year from April to May, and hold general shareholders’ meetings around June.


The Financial Services Agency, the Japanese Institute of Certified Public Accountants and the Japan Business Federation (Keidanren) have confirmed that they will consider flexible application of accounting rules. This is a reasonable decision.


Normally, if a company’s business performance deteriorates due to poor sales, it will be forced to reduce production at factories and shorten operating hours. As a result, the company has to book a loss by reducing the asset values of its factories and stores.


However, it is impossible to mechanically apply normal accounting rules under special circumstances in which demand has temporarily evaporated. Accounting should be carefully determined by considering the cause of the loss and the future prospects of the business.


In principle, listed companies are required to report their financial results within 45 days from the end of the business year and submit financial statements within three months.


The Financial Services Agency and the Tokyo Stock Exchange said they would ease this rule and accept a delay in the release of financial results. This is only natural in light of the fact that an increasing number of subsidiaries in the United States and Europe are unable to complete paperwork in time.


However, companies should not be allowed to neglect to disclose information in a timely manner. This is because it can help investors decide whether to buy or sell stocks. Even if the announcement is delayed, it is necessary to make efforts to disclose information, including the impacts on business performance, as soon as possible.


Meanwhile, the Economy, Trade and Industry Ministry has drawn up its views on management of shareholders’ meetings, saying it is possible to reduce the size of the meeting venue and limit the number of participants.


The general meeting is an important opportunity for shareholders to examine the company’s management policies and the appropriateness of the appointment of directors. In general, it is not desirable to limit the number of people allowed to attend, but this time it could be unavoidable from the viewpoint of preventing infection.


If the number of participants is limited, it will be a small meeting. This will ensure the safety of shareholders and reduce the burden on companies.


According to the provisions of the Companies Law, a general meeting must be held. Companies are urged to fully inform their shareholders to exercise their voting rights in advance in writing or via the internet.


It is indispensable to set up the telecommunications environment so that shareholders can ask questions to management through the internet and by telephone on the day of the meeting.


At the same time, the government should enhance its vigilance so that companies do not exclude shareholders critical of the company when reducing the number of attendees.


— The original Japanese article appeared in The Yomiuri Shimbun on April 7, 2020.

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