Nintendo just announced they are updating their Articles of Incorporation. Some fans are speculating what this means over social media, so we’ll give you the low down of what this means.
First, I should note what Articles of Incorporation actually are. According to Investopedia, articles of incorporation are a set of formal documents filed with a government body to legally document the creation of a corporation. Corporations, and other entities, are given authority by another governing body. When corporations were first created, this was the crown. In the US, each state gives authority to its corporations. This includes filing documents with the governing body which includes the Articles of Incorporation. The Articles of Incorporation are the basis of a corporation. They often do not provide a great deal about the business, and usually detail the organizer, shares and what business the company can engage in (and in the US, this is typically “any and all lawful business”).
Nintendo laid out four reasons why they are amending their articles
- The company is switching to a company with an Audit and Supervisory Committee and establishing in an executive office system
- Add and change the purpose of the company in preparation for diversification
- Limit the executive directors which its Board of Directors may appoint to President and Director, Chairman and Director, and Executive Vice Presidents and Directors.
- Other revisions (numbering and modifying words)
The primary reason for the change was the first part. On April 27, 2016, Nintendo issued a “Notice Regarding Transition to a Company with Audit and Supervisory Committee and Introduction of Executive Officer System.” The notice stated that the change was made to strengthen the audit and supervisory functions of the Board of Director and to separate management decision making and supervision from the execution of operations. Article 4 removes the Board of Auditors and Auditors for simply an Audit and Supervisory Committee. The majority of the changes were in Chapter 4: Directors and Board of Directors with all of the changes related to the addition of an Audit and Supervisory Committee.
The change most fans are interested in is the second section. Former President Iwata, along with President Kimishima, have discussed diversifying the company, namely through the licensing of their IPs. All of the changes related to this are present in Article 2 which establishes the purpose of the Company. This section only received a few changes. The articles added, as business Nintendo may engage in, manufacturing the sale of medical devices (9) and development and manufacturing of computer software (10). The articles also changed “Licensing use of trademarks” to “Licensing of intellectual property rights.” which was likely changed to better allow the company to license their properties to other mediums as often indicated by President Kimishima. Nintendo also changed the “management of and investment in restaurants, dining halls and cafes,” to “eating establishments.”
The changes to the above are not as significant as it first may seem. Nintendo may not materially engage in any of these businesses, and the Board of Directors may only be considering it. For instance, Nintendo has not had a major interest in restaurants and dining halls previously, even if their articles of incorporation allowed them to. Nintendo has at least expressed passing interest in medical devices as they unveiled the Wii Vitality Sensor at E3 2009, a product that never saw commercial release. TIme will only tell what business ventures Nintendo will engage in. It’s clear that this change is about gearing up for the future of their business rather than any immediate change.
After reading this, I’m really disappointed in those who were jumping to conclusions. The fact that Nintendo was already cleared to open restaurants before this says a lot. Thanks for elevating the discussion!