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BEC JCE English study materials
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BEC JCE English practice questions

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Question 1JCE Administration

Which document must a company prepare before holding its annual shareholders' meeting in order to give shareholders advance notice of the matters to be voted on?

  1. The articles of incorporation
  2. The business report
  3. The audit report
  4. The notice of convocation Correct answer.

Explanation

Company law requires the board to prepare a notice of convocation (shoshu tsuchi) and send it to every shareholder with the reference documents at least two weeks before the meeting. It sets out the date, place and agenda items so shareholders can exercise their voting rights. The other documents serve different statutory purposes.

Question 2JCE Administration

At a shareholders' meeting, a resolution on a matter that is not a special resolution requires the approval of shareholders holding at least what proportion of the voting rights of those present?

  1. Two-thirds
  2. Three-quarters
  3. A simple majority Correct answer.
  4. Unanimity

Explanation

Ordinary resolutions under the Companies Act are passed by a majority of the voting rights of shareholders present at the meeting. Special resolutions, which are reserved for fundamental changes, require two-thirds or more. Knowing this distinction is central to running a valid meeting.

Question 3JCE Administration

A company wants to change its articles of incorporation to add a new business purpose. Which body must approve this change?

  1. The representative director alone
  2. The shareholders by special resolution Correct answer.
  3. The board of directors by majority vote
  4. The statutory auditor alone

Explanation

An amendment to the articles of incorporation is a fundamental corporate change and requires a special resolution of the shareholders' meeting. The board may propose the amendment, but it cannot adopt it alone. This protects shareholders from unilateral changes to the company's constitution.

Question 4JCE Administration

Under Japanese company law, within how long after the close of the fiscal year must the board of directors approve the financial statements?

  1. Within one year
  2. Within three months Correct answer.
  3. Within two weeks
  4. Within six months

Explanation

The board of directors must approve the financial statements within three months after the end of the fiscal year. This timetable ensures timely reporting to shareholders and supports the annual shareholders' meeting cycle. Companies then prepare the business report and audit documents in the same period.

Question 5JCE Administration

A company with a statutory auditor (kansayaku) must have its financial statements audited. Who performs this audit?

  1. The board of directors acting as a whole
  2. The representative director
  3. The statutory auditor and, if required, an accounting auditor Correct answer.
  4. An independent accounting firm only

Explanation

In a company with statutory auditors, the statutory auditor audits the financial statements and, for large companies, an accounting auditor also conducts an audit. The two roles complement each other: the statutory auditor examines legality and methods, while the accounting auditor examines accounting accuracy. The directors prepare, not audit, the statements.

Question 6JCE Administration

Which of the following best describes the role of a statutory auditor (kansayaku) in a company?

  1. Preparing the company's financial statements
  2. Managing day-to-day operations of the company
  3. Independently monitoring the directors' performance of duties Correct answer.
  4. Setting the company's product strategy

Explanation

Statutory auditors independently audit the performance of duties by directors, including legality and appropriateness, and report to shareholders. They do not manage the business or prepare financial statements. This independent oversight function is a key governance safeguard.

Question 7JCE Administration

A company's board of directors has five members. How many directors typically constitute a quorum for a board meeting?

  1. All directors must attend
  2. A majority of the directors Correct answer.
  3. Two directors regardless of board size
  4. One director with written proxies

Explanation

The board of directors generally cannot transact business unless a majority of the directors are present, and decisions are made by a majority of those present. The articles may set a higher threshold but not a lower one. This quorum rule ensures collective deliberation.

Question 8JCE Administration

A director has a conflict of interest on a transaction. What must the director do when the board discusses and votes on that transaction?

  1. Delegate the vote to the statutory auditor
  2. Resign from the board immediately
  3. Vote twice to break a tie
  4. Abstain from voting and disclose the conflict Correct answer.

Explanation

A director with a special interest in a transaction must disclose the material facts and abstain from voting on that resolution. This prevents self-dealing and ensures the board's decision reflects independent judgment. The transaction may still be approved by disinterested directors.

Question 9JCE Administration

Which of the following is a primary duty of a director under Japanese company law?

  1. Duty to audit the statutory auditors
  2. Duty of loyalty to the company Correct answer.
  3. Duty to maximize personal profit
  4. Duty to prepare tax returns personally

Explanation

Directors owe a duty of loyalty to the company, meaning they must act in the company's best interests and subordinate personal interests. This duty complements the duty of care and is enforced through liability provisions. It is a foundational governance obligation.

Question 10JCE Administration

A company wishes to pay a bonus to its directors for the fiscal year. What is required before the payment can be made?

  1. Approval by the tax authority
  2. Unanimous consent of all employees
  3. A resolution of the shareholders' meeting setting the total amount Correct answer.
  4. Approval by the statutory auditor only

Explanation

Remuneration and bonuses for directors must be approved by the shareholders' meeting, typically by setting the total amount and leaving allocation to the board. This rule prevents directors from setting their own pay. Without shareholder approval, the payment may be treated as unlawful.

Question 11JCE Administration

Which body is responsible for appointing and dismissing the statutory auditors of a company?

  1. The shareholders' meeting Correct answer.
  2. The accounting auditor
  3. The board of directors
  4. The representative director

Explanation

Statutory auditors are elected and dismissed by resolution of the shareholders' meeting, reflecting their role as independent overseers of management. The board cannot unilaterally remove them. This structure protects auditor independence from the directors they monitor.

Question 12JCE Administration

A company is preparing its business report. Which of the following should the business report contain?

  1. The personal tax returns of each director
  2. The company's bank account passwords
  3. Information on the company's situation and governance Correct answer.
  4. The company's detailed product recipes

Explanation

The business report must describe the company's situation, including its business performance, capital structure, governance and key policies. It complements the financial statements with qualitative information. Confidential operational secrets and personal data are not appropriate contents.

Question 13JCE Administration

A company wants to hold its shareholders' meeting in a city far from its head office. What consideration under company law is most relevant?

  1. The location must be a foreign country
  2. The location must be approved by the tax authority
  3. The location should not make it unreasonably difficult for shareholders to attend Correct answer.
  4. The location must be the registered address of the company

Explanation

The company must choose a meeting place that does not unreasonably burden shareholders' ability to attend and exercise voting rights. Courts have viewed distant venues as problematic because they hinder shareholder participation. The registered address is common but not mandatory.

Question 14JCE Administration

A shareholder wants to exercise a voting right by proxy at the shareholders' meeting. What is generally required?

  1. The proxy must be a director
  2. The proxy must be a lawyer
  3. The proxy must be another shareholder and written authorization must be submitted Correct answer.
  4. The proxy must be approved by the statutory auditor

Explanation

Shareholders may vote by proxy, but the proxy holder is generally required to be another shareholder and the shareholder must submit a written document authorizing the proxy. This ensures the vote reflects the shareholder's intent. The company may set additional formalities in its articles.

Question 15JCE Administration

Which of the following statements about a company's fiscal year is correct?

  1. It is determined by the tax authority
  2. It can never be changed once set
  3. It must always be the calendar year
  4. It may be set in the articles of incorporation Correct answer.

Explanation

A company may choose its fiscal year, provided it is specified in the articles of incorporation. It is not required to match the calendar year and can be changed by amending the articles. The fiscal year defines the accounting and reporting cycle.

Question 16JCE Administration

A company with a board of directors must establish which of the following internal organs?

  1. A shareholder council
  2. A statutory auditor or an audit committee Correct answer.
  3. A product development committee
  4. A labor union

Explanation

A company with a board of directors must have an audit function, either statutory auditors or an audit committee, depending on its governance structure. This ensures independent oversight of directors. Labor unions and internal committees are not statutory corporate organs.

Question 17JCE Administration

A director wishes to compete with the company by starting a similar business. What must the director generally do?

  1. Nothing, because directors may freely compete
  2. Obtain prior approval of the board of directors Correct answer.
  3. Notify the tax office
  4. Obtain approval from the accounting auditor

Explanation

A director who intends to conduct a transaction competing with the company must obtain approval of the board of directors in advance. This rule addresses conflicts of interest and protects the company's business opportunities. Failure can create liability for the director.

Question 18JCE Administration

What is the purpose of the reference documents (sansho shorui) attached to the notice of convocation?

  1. To list the company's suppliers
  2. To give shareholders the information needed to vote on agenda items Correct answer.
  3. To record employees' working hours
  4. To advertise the company's products

Explanation

Reference documents provide shareholders with the background, financial information and explanations necessary to make informed voting decisions. They must accompany the convocation notice under company law. Their purpose is informed shareholder participation, not marketing.

Question 19JCE Administration

A company's board of directors is considering a transaction that would benefit a director's family business. The director discloses the interest but remains in the room. What is the most appropriate procedural step?

  1. Allow the director to vote because disclosure was made
  2. Refer the decision to the statutory auditor
  3. Exclude the director from voting on that resolution Correct answer.
  4. Cancel the board meeting entirely

Explanation

Even after disclosure, a director with a special interest must abstain from voting on the resolution. Disclosure alone does not cure the conflict. The remaining disinterested directors decide the matter, preserving the integrity of the board's decision.

Question 20JCE Administration

A company discovers that one director failed to disclose a conflict of interest and voted on a related transaction. What is the most likely legal consequence?

  1. The shareholders' meeting is dissolved
  2. The resolution is automatically valid and no liability arises
  3. The director may face liability and the resolution's validity may be challenged Correct answer.
  4. The statutory auditor is personally liable

Explanation

A director who votes despite a conflict may be liable for damages, and the validity of the resolution may be challenged because the decision process was flawed. Liability and resolution validity are separate but related consequences. The company may also pursue the director for losses.

Question 21JCE Administration

A company wants to reduce its stated capital. Which resolution is required?

  1. A resolution of the accounting auditor
  2. A special resolution of the shareholders' meeting Correct answer.
  3. An ordinary resolution of the board
  4. A resolution of the statutory auditor

Explanation

A reduction of stated capital is a fundamental change requiring a special resolution of the shareholders' meeting, and creditors must be protected through the statutory procedures. The board cannot decide this alone. Creditor protection procedures are also mandatory.

Question 22JCE Administration

Which of the following is a characteristic of a company with a board of directors and statutory auditors regarding the audit of the business report?

  1. No review of the business report is required
  2. The accounting auditor prepares the business report
  3. The statutory auditor reviews the business report Correct answer.
  4. The representative director audits the business report

Explanation

The statutory auditor reviews the business report to confirm its accuracy and legality, and reports to the shareholders. The accounting auditor focuses on the financial statements, not the business report. This division of review responsibilities is a key governance feature.

Question 23JCE Administration

A company holds a shareholders' meeting where a resolution is passed by a narrow majority, but a shareholder alleges that the notice was sent only three days before the meeting. What is the most relevant legal issue?

  1. Whether the company's products were profitable
  2. Whether the company paid enough dividends
  3. Whether the convocation period complied with the statutory two-week minimum Correct answer.
  4. Whether the directors' salaries were too high

Explanation

The convocation notice must generally be sent at least two weeks before the shareholders' meeting, so a three-day notice raises a defect in the convocation procedure. Procedural defects can affect the validity of resolutions. Dividend levels and product profitability are unrelated to notice timing.

Question 24JCE Administration

A company's articles of incorporation set the board quorum at two-thirds of directors, which is stricter than the statutory default. Is this permissible?

  1. No, only the tax authority can set the quorum
  2. Yes, but only if all directors agree each time
  3. No, the articles can never change the quorum
  4. Yes, the articles may set a stricter quorum than the statutory default Correct answer.

Explanation

The articles of incorporation may impose a higher quorum than the statutory default, because stricter governance requirements are permitted. The statutory rule sets a minimum floor, not a ceiling. Companies often adopt stricter quorums to strengthen deliberation.

Question 25JCE Administration

Which of the following best explains why statutory auditors must be independent of the directors?

  1. To allow directors to avoid liability
  2. To increase the company's sales revenue
  3. To reduce the number of board meetings
  4. To ensure objective oversight of management's performance Correct answer.

Explanation

Independence allows statutory auditors to evaluate directors' conduct objectively and report honestly to shareholders. If auditors were beholden to management, oversight would be ineffective. Independence is therefore central to the audit system's credibility.

Question 26JCE Administration

Under the Companies Act, within what period after the shareholders' meeting must the directors of a company with a board of directors usually keep the minutes of the meeting at its head office?

  1. Ten years Correct answer.
  2. Three years
  3. One year
  4. Five years

Explanation

Minutes of the shareholders' meeting must be kept at the head office for ten years and at branch offices for five years, so that shareholders and creditors can inspect them. The ten-year period at the head office is the statutory default under the Companies Act.

Question 27JCE Administration

A company with a board of directors wants to appoint an accounting auditor. Which body selects the candidate that is put to the shareholders' meeting for approval?

  1. The board of directors, with the consent of the statutory auditors Correct answer.
  2. The representative director acting alone
  3. The general meeting of employees
  4. The statutory auditors acting alone

Explanation

The board of directors proposes the accounting auditor candidate, but the proposal requires the consent of the statutory auditors, who monitor the auditor's independence. This division ensures that the auditors have a voice before the shareholders vote.

Question 28JCE Administration

A company with a board of directors must have at least how many statutory auditors?

  1. Two
  2. Four
  3. Three
  4. One Correct answer.

Explanation

A company with a board of directors must have at least one statutory auditor, and a company with a supervisory committee must have at least three directors on that committee. A single auditor satisfies the minimum statutory requirement.

Question 29JCE Administration

Which of the following is a duty of a statutory auditor (kansayaku) with respect to the directors' execution of duties?

  1. Managing the company's day-to-day operations
  2. Preparing the company's financial statements
  3. Setting the compensation of the representative director alone
  4. Auditing the directors' performance of their duties and reporting findings to the shareholders Correct answer.

Explanation

Statutory auditors audit how directors perform their duties and report the results, for example in the audit report and at the shareholders' meeting. They do not execute business operations themselves.

Question 30JCE Administration

A company has a board of directors and also has statutory auditors. Which statement correctly describes the auditors' authority to attend board meetings?

  1. Auditors may attend board meetings and state their opinions when necessary Correct answer.
  2. Auditors may attend but must remain silent
  3. Auditors may attend only if the board unanimously invites them
  4. Auditors are barred from attending board meetings

Explanation

Statutory auditors have a statutory right and duty to attend board meetings and express opinions when they consider it necessary. This supports their monitoring role over the directors.

Question 31JCE Administration

A shareholder of a company listed on a stock exchange wishes to exercise a voting right at the shareholders' meeting. Which method is generally available under the Companies Act?

  1. Voting by asking a director to cast the vote
  2. Voting by email sent to the representative director
  3. Voting by telephone during the meeting only
  4. Attending in person or voting in writing as provided by the articles Correct answer.

Explanation

Shareholders may exercise voting rights by attending the meeting in person or, where the articles provide, by written ballot. Listed companies commonly adopt written voting to accommodate shareholders who cannot attend.

Question 32JCE Administration

A company wants to convene an extraordinary shareholders' meeting. Who is generally authorized to determine the matters necessary for the meeting, such as the date, place, and agenda, in a company with a board of directors?

  1. The statutory auditors
  2. The board of directors Correct answer.
  3. Any single shareholder
  4. The accounting auditor

Explanation

In a company with a board of directors, the board decides the convocation of shareholders' meetings and the matters necessary for them. The representative director then carries out the convocation based on that decision.

Question 33JCE Administration

A shareholder holding what percentage or more of the voting rights for six months may demand that the directors convene a shareholders' meeting?

  1. Three percent Correct answer.
  2. One percent
  3. Ten percent
  4. Five percent

Explanation

A shareholder who has held at least three percent of the voting rights for the preceding six months may demand convocation of a shareholders' meeting. If the directors do not act, the shareholder may obtain court permission to convene it.

Question 34JCE Administration

A company's articles of incorporation provide that shareholders may exercise voting rights in writing. What must the company do to make written voting effective?

  1. Count written votes only if a majority of shareholders attend
  2. Notify shareholders of the written voting form and the deadline in the notice of convocation Correct answer.
  3. Obtain the consent of the statutory auditors for each written vote
  4. Require shareholders to appear in person to confirm the vote

Explanation

When written voting is adopted, the company must specify the written voting form and submission deadline in the notice of convocation so that shareholders can vote validly by mail. The votes are then counted as if cast at the meeting.

Question 35JCE Administration

A director of a company with a board of directors wants the company to guarantee a loan for a friend's business. Which procedure generally applies?

  1. The shareholders' meeting must always approve the transaction
  2. Only the statutory auditors must approve the transaction
  3. The director may decide alone because the amount is small
  4. The board of directors must approve the transaction, and the director must disclose the conflict Correct answer.

Explanation

Transactions between a director and the company, including guarantees, require board approval, and the interested director must disclose the material facts. This protects the company from self-dealing.

Question 36JCE Administration

A company's board of directors has resolved to issue new shares. Which statement about the statutory auditors' role in this decision is correct?

  1. Auditors must approve the issuance before it is valid
  2. Auditors may state their opinion on the legality and fairness of the issuance Correct answer.
  3. Auditors have no involvement of any kind
  4. Auditors set the issue price

Explanation

Statutory auditors audit the directors' execution of duties, so they may express views on significant transactions such as new share issuances. Their opinion supports informed board decision-making but is not a formal approval requirement.

Question 37JCE Administration

A company with a board of directors wants to change its articles of incorporation to add a new business purpose. Which procedure is generally required?

  1. A resolution of the accounting auditor
  2. Approval by the statutory auditors alone
  3. A resolution of the board of directors alone
  4. A special resolution of the shareholders' meeting and a subsequent amendment registration Correct answer.

Explanation

Amending the articles of incorporation requires a special resolution of the shareholders' meeting, and the change must then be registered. The board cannot amend the articles on its own.

Question 38JCE Administration

A company's board of directors has three directors. The articles require a quorum of a majority of directors. How many directors must be present for the board to validly deliberate?

  1. Three
  2. One
  3. None, if written consent is obtained
  4. Two Correct answer.

Explanation

A majority of three directors is two, so at least two directors must attend for the board meeting to be valid. Written consent outside a meeting is not a substitute for board deliberation in this context.

Question 39JCE Administration

A company's board of directors wants to delegate a specific business decision to a representative director. Which statement is correct?

  1. The board may delegate any matter, including appointment of auditors
  2. The board may never delegate any decision
  3. The board may delegate only with shareholder approval
  4. The board may delegate only matters that are not reserved for the board itself Correct answer.

Explanation

The board may delegate execution of specific business matters to directors, but it cannot delegate matters that the Companies Act reserves for the board, such as approving conflicted transactions or deciding convocation.

Question 40JCE Administration

A company's financial statements show a material error that the accounting auditor failed to detect. What is the statutory auditors' role regarding this issue?

  1. They must resign immediately
  2. They have no role because accounting is the auditor's exclusive domain
  3. They must correct the financial statements themselves
  4. They audit the accounting auditor's work and may report problems to the board and shareholders Correct answer.

Explanation

Statutory auditors oversee the accounting auditor's methods and results and may report any problems to the board and the shareholders' meeting. They do not prepare or correct the statements themselves.

Question 41JCE Administration

A shareholder has filed a lawsuit against a director for breach of duty. Which body of the company generally represents the company in such litigation?

  1. The statutory auditors, when the company sues a director Correct answer.
  2. The general meeting of employees
  3. The board of directors as a whole
  4. The accounting auditor

Explanation

When a company brings an action against a director, the statutory auditors generally represent the company because the directors are conflicted. This ensures the claim is pursued independently of the defendant directors.

Question 42JCE Administration

A company wants to pay retirement benefits to a retiring director. What is generally required?

  1. A resolution of the shareholders' meeting approving the amount or the basis for it Correct answer.
  2. Unilateral decision by the representative director
  3. A resolution of the statutory auditors alone
  4. Approval by the accounting auditor

Explanation

Retirement benefits for directors are a form of compensation, so they require approval by the shareholders' meeting unless the articles provide otherwise. This prevents directors from setting their own rewards.

Question 43JCE Administration

A company with a board of directors has decided to establish an audit and supervisory committee. Which statement about this committee is correct?

  1. It may consist only of accounting auditors
  2. It must have at least three directors, a majority of whom are outside directors Correct answer.
  3. It must have at least one statutory auditor as a member
  4. It replaces the board of directors entirely

Explanation

An audit and supervisory committee must have at least three directors, and a majority of its members must be outside directors. It is an alternative governance structure to statutory auditors.

Question 44JCE Administration

A company's board of directors has resolved to appoint a new representative director. Which statement about the registration of this change is correct?

  1. Registration is required only if a shareholder requests it
  2. No registration is required for representative directors
  3. The change must be registered within two weeks of the resolution Correct answer.
  4. The change must be registered within one year

Explanation

A change in representative director is a registrable matter, and the company must apply for registration within two weeks of the resolution. Timely registration protects third parties dealing with the company.

Question 45JCE Administration

A shareholder wants to inspect the company's accounting books. Which statement is generally correct?

  1. The shareholder may never inspect accounting books
  2. The shareholder may inspect them only with board approval
  3. The shareholder may inspect them only after the fiscal year ends
  4. The shareholder may inspect them if the request is made in writing and the purpose is proper Correct answer.

Explanation

Shareholders may request inspection of accounting books by stating the purpose in writing, and the company may refuse only on limited statutory grounds. This right supports shareholder oversight.

Question 46JCE Administration

A company discovers that a statutory auditor has a close family relationship with a director. What is the main concern under the governance rules?

  1. The auditor's compensation may be too high
  2. The auditor's term may be too short
  3. The auditor's attendance at board meetings may be excessive
  4. The auditor's independence may be compromised, undermining effective oversight Correct answer.

Explanation

Statutory auditors must be independent of the directors to monitor them effectively, and close family ties can compromise that independence. Companies should consider such relationships when appointing auditors.

Question 47JCE Administration

A company's articles of incorporation provide that the board may decide director compensation within a limit set by the shareholders' meeting. Which statement is correct?

  1. The board may set compensation only after auditor approval
  2. The board may exceed the limit if all directors agree
  3. The board may determine individual amounts only within the approved total limit Correct answer.
  4. The board may not decide compensation even within the limit

Explanation

When the shareholders' meeting sets a total limit and delegates individual allocation to the board, the board must stay within that limit. Exceeding it would require a new shareholder resolution.

Question 48JCE Administration

A company with a board of directors wants to dismiss a statutory auditor before the end of the term. Which statement is correct?

  1. The representative director may dismiss the auditor alone
  2. The board of directors may dismiss the auditor at any time
  3. A special resolution of the shareholders' meeting is generally required Correct answer.
  4. The accounting auditor may dismiss the statutory auditor

Explanation

Removing a statutory auditor generally requires a special resolution of the shareholders' meeting, reflecting the auditor's independent position. The board cannot remove an auditor to avoid scrutiny.

Question 49JCE Administration

A company's board of directors is considering a transaction that would benefit a director's family business. The director abstains from voting, but the remaining directors approve the deal without disclosing the conflict to the auditors. What is the main governance weakness?

  1. The auditors should have voted on the transaction
  2. The transaction required no board approval at all
  3. The director should have voted in favor to show good faith
  4. The auditors were not informed, weakening independent review of the conflicted transaction Correct answer.

Explanation

Conflicted transactions require disclosure of the material facts and proper board review, and auditors should be in a position to scrutinize the deal. Failing to inform the auditors undermines independent oversight.

Question 50JCE Administration

A company's shareholders' meeting has approved the financial statements. What is the role of the statutory auditors' audit report in this process?

  1. It states the auditors' opinion on the legality and fairness of the financial statements and business report Correct answer.
  2. It appoints the representative director
  3. It sets the dividend amount
  4. It replaces the accounting auditor's audit report

Explanation

The statutory auditors' audit report expresses their opinion on the financial statements and business report, helping shareholders make informed decisions. It supplements rather than replaces the accounting auditor's report.