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CHAPTER VI.

JAPAN.

Japan having only recently adopted the business methods of Western countries, many conditions existing in some of those countries where the principle of laissez faire has been the rule have not yet arisen here. There are no special laws concerning the private capitalistic monopolies known in the United States as “trusts,”! the only monopolies here being Government ones, such as that of tobacco. Also there are no laws on the subject or regulations regarding prices of products. All the Japanese laws upon the subjects in question are embodied in the commercial code, civil code, business-tax law, law of registration fees, and law of stamp duties. The law of the operation of the commercial code might be mentioned, but it deals chiefly with the equitable adjustment to the new commercial laws of business arrangements begun or made before. Copies of all the above are herewith inclosed, as it may be of interest to examine the context in addition to the articles which I transcribe as bearing directly upon the topics.

In Japan there are 4 kinds of commercial companies, namely, ordinary partnerships, limited partnerships, joint stock companies, and joint stock limited partnerships--limited partnerships some of whose capital is provided by the issuance of shares. All these are juridical persons which have to be registered, etc., under the laws, and so may be considered corporations. The only one, however, which seems to correspond to a commercial or industrial corporation in the United States is the joint stock company (kabushikikwaisha), so the laws governing that type have been consulted. The joint stock limited partnership is under quite similar laws in so far as it partakes of the character of a stock company.

It will be observed that a great degree of publicity is enforced upon all the affairs of corporations from the point of view of Government, the shareholders, and the public. Examiners are appointed by the courts to see that the organization, etc., of the company is proper. In addition to the directors of the company, every year inspectors are appointed by the general meeting of shareholders. The duty of these is to inquire into the affairs of the company and the management by the directors, and to report upon the same to the general meeting (which they may call). They are liable for neglect of duty. An inspector can not be at the same time a director or procurator, i. e., one authorized to act for the company. Special examiners also may be appointed by the general meeting for duties like those of inspectors. Very detailed registration of all matters relating to the company is required by law; and the court is charged with the immediate publication of facts so entered in the commercial register. Balance sheets, too, must be published by the directors.

It will be observed that the new Japanese codes are closely modeled after those of Germany.

A.-CAPITALIZATION AND METHODS OF PAYING IN CAPITAL.

The legislation concerning capitalization and methods of paying in capital is included in the articles following: 143. The capital of a joint stock company must be divided into shares.

145. The amount of money of all the shares must be equal. The amount of a share can not be less than 50 yen, except that where the whole amount is to be paid up at one time the amount of a share may be reduced to not less than 20 yen.

146. If a share is held by two or more persons in common, they must appoint one

1 Prepared by Huntington Wilson, second secretary of legation, Tokyo, Japan.
2 The yen equals $0.498.

person to exercise their rights as shareholders. Persons holding a share in common are jointly and severally liable to the company for the payment of the amount of the share.

147. Certificates of shares can not be issued before registration according to the provisions of article 141 has been made at the place of the principal office. Certificates issued in contravention of this provision are invalid, but this does not affect the right to claim damages against the persons who have issued certificates. (The provisions of article 141 are that the promoters must register within two weeks in the place of its principal and of each branch office the object for which the company is formed, its trade name, the total amount of its capital, the amount of each share, and the manner in which the public notifications of the company are to be made.)

148. Each certificate must be signed by the directors, bear a number, and contain the following particulars: (1) The trade name of the company; (2) the date when registration according to the provisions of article 141 has been made at the place of the principal office (see under B below); (3) the total amount of the capital; (4) the amount of each share. Unless the whole amount of the shares is to be paid up at one time, the amount of each payment made upon the shares must be inserted in the certificate at the time of payment.

149. Unless it is otherwise provided by the company contract, a share may be assigned to another person without the assent of the company. Such assignment or a provisional agreement for an assignment, however, can not be made until registration according to the provisions of article 141, 1 (see under B below), has been made at the place of the principal office.

150. The assignment of a name share can not be set up against the company or any other third person unless the name and domicile of the assignee have been entered in the list of shareholders, and his name has also been inserted in the certificate.

151. A company can not acquire its own shares or take them in pledge. An amortization of shares can only be made according to the provisions of law as to the reduction of the capital. This, however, does not apply where, pursuant to a provision of the company contract, such amortization is made from the profits which might have been distributed among the shareholders.

152. Notice of a call on the shares must be given to each of the shareholders at least two weeks beforehand. If a shareholder does not make payment by the day fixed, the company may again notify such shareholder that payment must be made within a fixed time, which must not be less than two weeks, and that otherwise his right as shareholder will be forfeited.

153. If a shareholder fails to pay a call even after the company has taken the proceedings mentioned in article 152, his rights are forfeited.

In such case the company shall notify all the assignors of the share to pay within a fixed time, which must not be less than two weeks. The assignor who first pays the amount in arrear acquires the share.

If no assignor pays, the share must be publicly sold by the company. If the amount realized by such sale is not sufficient to cover the amount in arrear, the original holder of the share may be required to pay the deficit. If he does not perform within two weeks, the company may demand performance of any of the assignors.

The provisions of the last three paragraphs do not affect the right of the company to claim damages and any penalty specially provided for in the company contract.

154. The liability of any assignor mentioned in the preceding article is extinguished after 2 years have elapsed since the time when the assignment was entered in the list of shareholders.

155. When the whole amount of the share has been paid up, a shareholder may require his certificate to be made out to bearer. A shareholder may at any time have a share to bearer changed into a name share.

210. The capital of a company can be increased only after the total amount has been paid in upon the shares.

211. A company may issue preferred shares only in case the capital is to be increased. Such fact must be entered in the company contract.

213. When in the case of an increase of the capital the payment provided for in article 129 has been made on all the new shares, the directors must without delay call a general meeting of shareholders and must communicate to it all the facts relating to the subscriptions for new shares.

215. If the general meeting of shareholders finds that the number of shares given in exchange for property other than money is improper, it may reduce them, in which case the proviso of article 135 applies correspondingly. Article 135 reads: “If it appears in the general meeting for organization that the matters specified in article 122, Nos. 3 to 5, are not proper, they may be altered; but if in the case of a per

son whose contribution is to be made in property other than money, the number of the shares to be granted therefor is diminished, he may make payment in money." Article 122, Nos. 3 to 5 read: “ (3) Any special benefits to be granted to promoters, and the names of such persons; (4) the names of those persons whose contributions consist in property other than money, the nature and value of such property, and the number of shares given in exchange. In case any determination is made in the following (foregoing) particulars, it is valid only if inserted in the company contract.

216. If there are shares not yet taken, or if the payment provided for in article 129 has not been fully made, the directors are jointly and severally bound to take such shares or to make such payment. The same applies if a subscription for shares has been rescinded.

217. The company must register the following particulars at the place of the principal and of each branch office within two weeks from the day of the ending of the general meeting of shareholders convened in accordance with the provisions of article 213 (see ante), namely: (1) The whole amount of the capital increased; (2) the date of the resolution to increase the capital; (3) the amount paid in upon each new share; (4) if preference shares have been issued, the rights of their holders. Until registration in accordance with the foregoing provisions has been made at the principal office no certificate for the new shares may be issued, and no assignment of them or provisional arrangement for assignment may be made.

220. If a resolution is passed at a general meeting of shareholders to reduce the capital, the manner of such reduction shall be determined at the same time. The provisions of articles 78 to 80 apply correspondingly to the case of a reduction of capital. (See code.)

129. When all the shares have been taken, the promoters shall without delay cause the first payment to be made upon each share.

B.-METHODS OF PROMOTION AND LIABILITY OF PROMOTERS.

119. For the formation of a joint stock company at least 7 promoters are required.

120. The promoters must make and sign a company contract which must contain (1) the object for which the company is formed; (2) its trade name; (3) the total amount of its capital; (4) the amount of each share; (5) the number of shares which the directors must hold; (6) the place of the principal and of each branch office; (7) the manner in which the public notifications of the company are to be made; (8) the names and domiciles of the

promoters. 121. If the particulars mentioned in article 120, Nos. 5 to 7, are not inserted in the company contract, such omission may be supplied at the general meeting for organization or at the general meeting of shareholders.

The resolution of the general meeting of shareholders above mentioned must be niade in compliance with the provisions of article 209. (See code.)

122. In case any determination is made as to the following particulars, it is valid only, if inserted in the company contract, namely: (1) The time of the duration of the company or the causes for its dissolution; (2) the issue of shares above the par value; (3) any special benefits to be granted to promoters, and the names of such persons; (4) the names of those persons whose contributions consist in property other than money, the nature and value of such property and the number of shares given in exchange; (5) any expenses of formation to be borne by the company, and the amount of any compensation to be given to the promoters.

123. If all the shares have been taken by the promoters, the company comes into existence thereby. In such case the promoters must without delay make the first payment, which shall not be less than one-quarter of the whole amount to be paid in, and must appoint the directors and inspectors. Such appointment is determined upon by a vote of the majority in value of the promoters.

124. After the directors have been appointed, they must without delay make an application to the court for the appointment of examiners, in order that the latter may inquire into the matters mentioned in article 122, Nos. 3 to 5, and whether the first payment has been made. The court on hearing the report of the examiners may make any proper disposition, following correspondingly the provisions of article 135.

(See code.) 125. If the promoters do not take all the shares they must invite subscriptions for them.

126. A person who intends to subscribe for shares must insert in two copies of the instrument of subscription the number of shares to be taken by him, and must add his signature. Instruments of subscription are to be made up by the promoters and shall contain the following particulars: (1). The date of the making of the company contract; (2) the particulars specified in articles 120 and 122; (3) the number

of shares taken by each promoter; (4) the amount of the first payment. If shares are issued at a value higher than the par value, the value for which shares are taken is to be inserted by the subscriber in the instrument of subscription.

129. When all the shares have been taken, the promoters shall, without delay, cause the first payment to be made on each share. When shares are issued at a value higher than the par value, the excess amount must be paid together with the first payment.

130. If a person who has taken shares does not make the payment provided for in article 129, the promoters may notify him that he must pay within a fixed time, which must be not less than two weeks, and that he will lose his rights if he does not pay within that time. If such person does not pay after having received such notification, he loses his right, and the promoters may again invite subscription for the shares taken by him. By these provisions the right of claiming damages against the person who has taken shares is not affected.

131. When payment upon all the shares as provided in article 129 has been made, the promotors shall, without delay, call the general meeting for organization. In that meeting all resolutions must be passed by a vote of the majority in value of those present, who must be at least half in number and value of the persons who have taken shares. The provisions of artieles 156 (1 and 2), 161 (3 and 4), 162, and 163 (1 and 2) apply correspondingly to the general meeting for organization.

156. Notice of a general meeting must be given to each shareholder 2 weeks before the date fixed for such meeting. The notice must state the object of the meeting and the matter to be voted upon. If the company has issued shares to bearer, a public notification of the general meeting and of the particulars specified in the preceding paragraph must be given 3 weeks before the date fixed for the meeting.

161. Except as otherwise provided by this code or by the company contract, a resolution of the general meeting must be passed by a vote of the majority in value of the shareholders present. Persons holding certificates to bearer can not exercise their right of voting unless they have deposited their certificates with the company 1 week before the day of the meeting. A shareholder may exercise his right of voting by a proxy, who must produce to the company a document proving his right of representation. A person who has a special interest in a resolution of the company can not exercise the right of voting.

162. A shareholder has 1 vote for each share. The company contract may, however, restrict the voting powers of a person holding 11 shares or more.

163. If the procedure for convening a general meeting or the manner in which resolutions are passed is contrary to law or regulations or to the company contract, the shareholders may apply to the court for a decree of invalidity of the resolutions. Such application must be made within 1 month of the day of the passage of the resolution. If a shareholder who is not a director or inspector makes such application he must deposit his certificates, and upon demand of the company he must give proper security.

132. The promoters must make a report to the general meeting for organization on all facts relating to the organization of the company.

136. If there are shares which have not been taken, or upon which the payment provided for in article 129 has not been fully made, the promoters are jointly and severally bound to take such shares or to make such payment. The same applies if subscriptions for shares are rescinded.

137. The provisions of the preceding two articles do not affect the right of claiming damages against the promoters.

138. In the general meeting for organization a resolution may be passed to alter the company contract or to abandon the formation of the company.

139. In the case where the promoters have not taken all the shares the company comes into existence upon the ending of the general meeting for organization.

140. If the payment provided for in article 129 is not completely made within 1 year after all the shares have been taken, or if the promoters do not call the general meeting for organization within 6 months after such payments have been completely made, any person who has taken shares may rescind his subscription and demand that any amount already paid by him be refunded.

141. A company must register within 2 weeks in the place of its principal and of each branch office the following particulars: (1) The facts specified in article 120, Nos. 1 to 4 and 7; (2) the principal and each branch office; (3) the date of the formation of the company; (4) if the term of duration of the company or causes for its dissolution are fixed, such term or causes; (5) the amount paid upon each share; (6) if it has been determined that interest shall be paid before the commencement of business, the rate of interest; (7) the names and domiciles of the directors and inspectors. The period of 2 weeks above mentioned begins, in case the promoters have taken all

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