[News+1] Approval rates of general shareholders to be made public: TSE rule revision mandates disclosure for 1,100 companies

A mid-career lawyer in Tokyo uses generative AI to provide background and regulatory commentary on daily corporate management news. The model used is Claude's Fable5.

Approximately 1,100 companies subject to disclosure

The Tokyo Stock Exchange has revised its listing rules to mandate that companies with parent companies or major shareholders holding 40 percent or more of voting rights disclose the approval/disapproval ratios of general (minority) shareholders for director appointment proposals. According to reports by the Nikkei, Mizuho Trust & Banking estimates that 1,123 companies will be subject to this, which accounts for 30 percent of the approximately 3,900 listed companies. The rule will be applied sequentially starting with companies whose fiscal year ends in December 2026, affecting shareholder meetings from 2027 onwards. SoftBank, Chugai Pharmaceutical, and LY Corporation are expected to be subject to this disclosure at this time.

What the 'overall approval rate' has hidden

The appointment of officers is an ordinary resolution, and the resolution requirements are defined by Article 341 of the Companies Act. While the quorum can be relaxed by the articles of incorporation, it cannot be less than one-third. If a major shareholder holds a majority, the conclusion of approval is almost never in doubt. The problem is that the overall approval rate is inflated by the major shareholder's votes, causing the assessment of general shareholders to sink beneath the surface of the numbers. Until now, it was sufficient to show the approval ratio per proposal after the general meeting, so there was no way to break it down from the outside.

The calculations in the reports provide symbolic examples. At the Nippon Steel Solutions general meeting in June, the approval ratio for the president appointment proposal was 82 percent, but it was less than 40 percent on a general shareholder basis, excluding the stake held by the parent company, Nippon Steel. At ABC-Mart, it is also believed to have remained at less than 40 percent when excluding the founder's stake. I wrote in a previous article that the market perception is that falling below an 80 percent approval rate is seen as 'weak trust.' This disclosure can be said to be a way to re-measure that yardstick using raw public opinion, excluding the influence of controlling shareholders.

Disclosure of countermeasures required if below 50 percent

The system design is quite thorough. If approval from general shareholders does not reach over 50 percent, the company is required to disclose countermeasures within six months after the general meeting, and failure to provide appropriate disclosure could lead to public announcement measures. It is not a veto that overturns the conclusion, but a mechanism that gradually increases accountability. In cases where the founding family's stake is dispersed among relatives or asset management companies, voting rights are aggregated for the determination, so owner-managed companies like ABC-Mart and Trial Holdings are also expected to be subject to this. It is important not to overlook the fact that this is not just about 'parent-subsidiary listings' in practice.

This trend was not driven by the rules first; investors were ahead of the curve. According to reports, the UK-based investment firm Nanohoshi Management requested that the jewelry company Tsutsumi, where the founder's relatives hold over 70 percent of the shares, voluntarily disclose the approval ratio of general shareholders in May, ahead of the rule revision. The US-based Kaname Capital also pointed out that for the appointment of the president at the 2025 general meeting of Kawachi Pharmaceutical, opposition would reach 40 percent if the founding family's stake were excluded. The draft revision of the Corporate Governance Code published in April, which requested analysis of the causes for company proposals that received significant opposition, is in the same context.

What should subject companies do in advance?

What the legal and IR departments of subject companies should start with is: (1) determining their own eligibility based on the 40 percent threshold and aggregation rules, (2) estimating the approval rate on a general shareholder basis for past general meetings, and (3) identifying proposals at risk of falling below 50 percent. Institutional investors are already moving; according to reports, Asset Management One has a policy of opposing the appointment of representative directors in principle if a company has a shareholder with 40 percent or more of voting rights and the board does not have a majority of outside directors. The number of listed subsidiaries has decreased by nearly 30 percent from 294 in 2020 to 215 in 2025. In a world where the raw approval rate is published every year, the cost of 'explaining the maintenance of a listing' will steadily rise. It is highly possible that this rule will provide further momentum for the dissolution of parent-subsidiary listings and the review of capital policies for owner-managed companies.

Related article: The '60 percent trust' seen one after another at the peak of general meetings—the invisible watershed of an 80 percent approval rate

Related article: Medipal makes PALTAC a wholly owned subsidiary for 192.4 billion yen—dissolution of parent-subsidiary listing and protection of minority shareholders

Please follow if you like. Let's study together!

#CorporateGovernance #ParentSubsidiaryListing #MinorityShareholders #SoftBank #GenerativeAI