Key points

  • The third revision in June 2025 focused on transparency of beneficial owners and collaborative engagement. Existing signatories were required to update their policies for the revised version by the end of 2025.
  • Just because multiple investors interact with the same company does not mean they immediately become joint holders under the Financial Instruments and Exchange Act. Judgments will be made based on specific relationships, such as the continuity of the agreement and the purpose of jointly making important proposals.
  • Rather than rejecting collaborative engagement outright, issuing companies need to confirm the participants, purpose, agenda, authority, and information management, and then establish a system to accept it as normal shareholder dialogue.

What changed in the third revision?

After the Japanese version of the Stewardship Code was formulated in 2014, it was revised in 2017, 2020, and 2025. In the third revision, two issues came to the fore in order to increase the effectiveness of dialogue.

1. Transparency of beneficial owners

If the nominal shareholders listed in the shareholder register are different from the beneficial owners who make investment decisions and exercise voting rights, the issuing company may not know who to talk to. The revised version encouraged institutional investors to publish policies on how to respond when asked by portfolio companies to explain their holdings.

This is not a system that allows companies to unconditionally know the details of all investors. The move is to clarify who will be in charge of investment decisions and who will decide on the policy for exercising voting rights, to the extent necessary for constructive dialogue, based on structures such as custody, trust, and management outsourcing.

2. Collaborative engagement

When it is difficult for a single investor alone to convey a sufficient awareness of an issue to a company, multiple institutional investors may engage in joint dialogue on common issues. The third revision clearly positions collaborative engagement as a potentially effective stewardship activity depending on the circumstances.

Collaborative engagement is not just a method for activists. It is also used by long-term asset managers, pension funds, ESG investors, and others to communicate their opinions on common issues such as climate change, board effectiveness, cross-shareholdings, and capital allocation.

Relationship with the large-shareholding reporting system

One of the reasons why institutional investors have been hesitant to engage in collaborative engagement has been the fear that multiple investors would be considered "joint holders" and would be subject to aggregation and reporting obligations under the large-shareholding reporting system.

With the revision of the Financial Instruments and Exchange Act in 2024 and the subsequent arrangement of Cabinet Orders, Cabinet Office Orders, and Q&As, the relationship between collaborative engagement and joint holders has been clarified. The system is effective from May 1, 2026.

issue Practical thinking
attended the same meeting That alone does not immediately make you a joint holder.
Expressing shared concerns Without a continuing agreement or an intention to undertake material proposal actions jointly, this does not necessarily establish joint-holder status.
Agreeing to exercise voting rights jointly Joint-holder status may arise, depending on the agreement and its continuity.
jointly seek material changes in management control; It is necessary to individually confirm whether it falls under “important proposal acts, etc.”

Collaborative engagement should not be treated as unrestricted, nor should every instance be assumed to establish joint-holder status. Investors need to record its purpose, any agreements and the independence of voting decisions. Issuers should establish what the engagement involves rather than assume its legal classification.

How will issuers respond?

When you receive an offer for collaborative engagement, check the following five points.

  1. Participants. Which managers, asset owners and advisors will participate?
  2. Purpose. What is the purpose of the meeting, such as collecting information, exchanging opinions, requesting specific improvements, considering shareholder proposals, etc.?
  3. Agenda. What are the specific issues such as capital allocation, board of directors, climate, cross-shareholdings, etc.?
  4. Authority. Will participants speak on behalf of their institutions? Will each company make voting decisions independently?
  5. Information management. What to do about not handling undisclosed important facts, what to do with meeting records, and what to do with the scope of sharing among participants.

After confirming these, decide on a response policy with the company's attendees, just like in regular investor dialogue. If the topic is the composition of the board of directors or CEO succession planning, consider involving not only IR and management, but also the chairman of the board and the lead independent outside director. When it comes to capital allocation and business portfolios, the CFO and corporate planning are central.

Prepare for inquiries from beneficial owners

The third revision encourages investors to disclose their policies, but issuers also need to prepare. Rather than just leaving the shareholder investigation to an outside company, issuers should maintain the following information centrally.

  • Name on shareholder register
  • Known beneficial owners and managers
  • Holding policy, investment period, voting policy
  • Past interviews, questions, requests, and company responses
  • History of participation in collaborative engagement
  • Consistency with large holding reports, change reports, and voting results

Even if investors do not respond to explanations about their holdings, you should not immediately refuse dialogue. There may be restrictions such as laws, contracts, customer confidentiality, etc. It is better to narrow down your inquiries to the information that the company really needs - those who are the ones who are talking, those who make investment decisions, and those who exercise voting rights.

Principles for not degrading the quality of dialogue

In collaborative engagement, the more participants there are, the more likely the conversation will drift toward generalizations. Issuing companies should be aware of the following three points.

Do not read the same material aloud

Merely reexplaining financial results briefing materials has no meaning in collaborative engagement. Ask why investors collectively chose the issue and identify where the company's judgment and investor concerns diverge.

Do not give out undisclosed information individually

Even if multiple investors participate, the risk of selective disclosure remains the same. Do not share unpublished results, M&A, capital policies or director appointments. Necessary information will be provided to the entire market through timely disclosure and public materials.

Connect answers to the board of directors

Important points raised should be reported to the board of directors or the competent committee, rather than being recorded in the interview records. Be able to explain the reasons for opinions that were not adopted by the company. Dialogue is not a place to comply with investors' wishes, but a place to increase the board of directors' input for decision-making.

Implications that IR personnel should be aware of

  1. Unify the point of contact for collaborative engagement. Decide who will be responsible for accepting applications, confirming participants, internal distribution, recording, and responding.
  2. Do not reject outright or accept unconditionally. Check the purpose, agenda, participants, and information management, then select appropriate attendees.
  3. Do not judge whether a person is a joint holder based solely on the format of the meeting. Determined by objectives such as agreement content, continuity, exercise of voting rights, and important proposals.
  4. Link beneficial shareholder information with dialogue history. In addition to creating a list of shareholders, record who is interested in which issues.
  5. Return the results of the dialogue to the Board of Directors. Explain which opinions were adopted and which opinions were not adopted, and the reasons thereof, at the next disclosure or interview.

Source/reference materials

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