When forming a corporation in Japan, especially a company with multiple directors on its board, it is not unusual to have the shareholders appoint a company auditor as well. The company auditor system is relatively unique to Japan and is rarely seen in corporate legal systems in America or Europe. However, the position of company auditor has a long history in Japan and therefore has been incorporated into the modern Company Act.
Company auditors cannot be employees or directors of the corporation because their job is to remain neutral and ensure that the directors of the company are acting in the shareholders’ best interests. However, the auditor’s review power does not extend to deciding whether the directors’ business decisions were appropriate, as an outside director might in the American system. Company auditors are usually required to prepare an audit report once a year for the company as well as attend board of director meetings.
If you have any questions about starting a business in Japan, please contact our office for a legal consultation.