Q113   What is the background of the New Company Law?

A113   The Commercial Law, that in Japan determines the structure of companies, was established in 1899, based on the company systems of several European countries. The law was substantially revised in the 1950s, after which there were no further major revisions of laws and codes related ro company structure. How-ever, beginning at the end of the 1990s, a series of piecemeal revisions was made to the Commercial Law and related laws and
codes, to help reinvigorate the Japanese economy after the collapse of the economic bubble. The revisions included the removal of the prohibition on stock options, and led to the relaxation of regulations related to the structure of companies. This body of regulations was made independent from the Commercial Law, and became the New Company Law. In it, the responsibility of individuals was made much clearer, and the freedom of management to operate was increased significantly, creating a framework welcomed by highly motivated managers.