Following the declaration of a state of emergency due to COVID-19, Japan’s Financial Services Agency (FSA) made recent announcements extending the filing deadline for annual securities reports and other disclosure reports, and providing guidance on annual shareholder meetings. In addition, the government announced additional areas subject to the declaration and an amended assistance plan.
Under the Financial Instruments and Exchange Act of Japan (FIEA, Act No. 25 of 1948, as amended), corporations issuing certain securities (e.g., securities listed on a Japanese stock exchange) are required to file annual securities reports for each fiscal year. The deadline for filing these reports is within three months after the end of each fiscal year for Japanese corporations and within six months for foreign corporations. Japanese corporations generally set forth in their articles of incorporation that the fiscal year ends on March 31, and it is common for foreign corporations that the fiscal year ends on December 31. Accordingly, most Japanese and foreign corporations will need to file annual securities reports for the fiscal year 2019 by June 30, 2020.
While the FSA has been responding separately to each individual request for delayed reports, due to the declaration and COVID-19 pandemic, it would be difficult for many corporations to proceed to close their books and to conduct an audit as usual. In order to secure sufficient time for these activities, the FSA’s announcement on April 14 officially extended the deadline for the filing of annual securities reports for fiscal year 2019 to September 30. Following this announcement, subordinate regulations under the FIEA were amended, promulgated, and implemented on April 17. According to this amendment, the filing deadline for annual securities reports and other disclosure reports (e.g., quarterly securities reports, semi-annual securities reports, parent company status reports, and foreign company reports) that originally were needed to be filed during the period from April 20, 2020, to September 29, 2020, will be automatically extended to September 30, 2020, without separate applications for the extension needed.
Most Japanese corporations set forth in their articles of association that annual shareholder meetings must be held within three months after the end of each fiscal year. As previously noted, most Japanese corporations end their fiscal year on March 31. Accordingly, most Japanese corporations will need to hold annual shareholder meetings by the end of June each year.
In response to the COVID-19 pandemic, on April 15, the FSA announced that corporations with their fiscal year ending in March will be required to take the following into consideration for the annual shareholder meetings scheduled in June. These considerations balance the necessity of preparing financial statements and conducting related audits with the safety of employees and those who engage in audit activities:
The FSA also stated that investors will be expected to pay more attention to the necessity of ensuring financial stability from a long-term perspective in order to achieve sustainable growth of the corporations in which they invest. According to the FSA, investors will also be expected to understand the above measures, given the difficulty in preparing financial statements and performing audits due to the COVID-19 pandemic.
The Japanese government on April 16 announced that the scope of the declaration will be expanded to all prefectures and will be continued to all prefectures until May 6, the end of a week of holidays (“Golden Week”) in the country. Thirteen prefectures—the seven prefectures originally subject to the declaration (Tokyo, Kanagawa, Saitama, Chiba, Osaka, Hyogo, and Fukuoka), plus Hokkaido, Ibaraki, Ishikawa, Gifu, Aichi, and Kyoto—were designated as “Prefectures with Special Caution” due to the excessive prevalence of COVID-19 in those areas. The government is trying to reduce physical personal contact by at least 70%, and to the extent possible by 80%, and cautioned “Prefectures with Special Caution” that stronger measures (such as request, instruction, or publication to suspend usage of specific facilities) could be considered as necessary.
In addition, the government originally planned to pay assistance aid of JPY 300,000 for each household whose monthly income was JPY 100,000 or less. However, on April 17, the government announced the amendment of this plan and instead plans to pay JPY 100,000 for each citizen in order to provide generous assistance throughout the nation. The government is now preparing the amended supplemental budget accordingly.
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This is the fifth alert in a series from Morgan Lewis’s investment management team in Tokyo that summarizes how the COVID-19 pandemic has impacted investment fund-related businesses in Japan. For more, read our earlier alerts: COVID-19’s Impact on Notification Filings in Japan, COVID-19’s Impact on Annual Report Filing Requirements in Japan, Update: COVID-19’s Impact on Filings to Japan’s Kanto Local Finance Bureau, and COVID-19 in Japan: State of Emergency Declared, Emergency Economic Measures Issued.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Tokyo
Tomoko Fuminaga
Narumi Ito