The Diet passed a bill Wednesday to revise the Commercial Code to ease restrictions on the granting and exercising of stock options in a bid to stimulate business activity.
The House of Councilors approved the bill at a plenary session. The House of Representatives has already endorsed it. The revision will take effect April 1.
Stock options are the rights to buy a specific number of shares at a fixed price. They are often used by companies, especially startup firms, to improve the morale of corporate officers and other employees because they can earn capital gains by selling acquired shares when their prices rise above the exercise price.
Under the current system, companies are only allowed to grant stock options to directors and employees, but the revision will allow firms to offer stock options to anyone, subject to approval by shareholders.
For example, companies will be able to offer stock options to directors and employees at subsidiaries in efforts to boost groupwide operations. Startups will also be able to use stock options to compensate business consultants.
The amendment also abolishes restrictions on stock options. The number of shares granted had been limited to a maximum of 10 percent of all shares issued and shareholders had been required to exercise the stock options within 10 years.
Companies will also be allowed to make up as much as half of their total outstanding shares with stocks that come with limited voting rights.
Companies will be able to notify shareholders about general meetings and receive shareholder votes by e-mail.