Is it better to have a board of directors or company auditor?
★ Explanation ★
The minimum requirements include the necessary establishment of two organs: the annual general meeting, and the director(s).
From May 1, 2006 onwards, following the enforcement of the Companies Act, stock companies could be incorporated as long they had at least one shareholder and one director. The shareholder and director can be one and the same person, making it possible to incorporate a business alone.
Based on Companies Act alone, a stock company can choose to have neither a board of directors nor company auditor. Whether it would be recommended for a company to have either can vary on the status of the business.
One merit of having a board of directors is that decisions involving the company can be made faster, and this increases the company’s appeal to the public. For a stock company with several shareholders that would make it difficult to hold shareholders general meetings, having a board of directors that could meet to resolve company matters without the need for a shareholders general meeting would be especially advantageous.
As for the merits of having a company auditor, having an officer who inspects (audits) the company’s operations and/or accounts would increase its appeal to the public. Officers, etc. of companies with auditing bodies (limited to those with operational audit authority) can also be granted some level of liability exemption, provided by Article 426, paragraph (1) of the Companies Act.
Source: Japanese Law Translation Database System
Also, it not always the case that only one director is required of a company. For example, a Large Company (meaning any Stock Company with a capital of more than 500 million yen or 20 billion yen or more in liabilities) must have a company auditor (or a board of company auditors) and a financial auditor. As the required organs for each company may vary, it is necessary to take these into consideration.
On an additional note, shareholders rights may vary between companies with or without a board of directors and/or a corporate auditor(s).