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Relevant Laws

Title：Securities and Exchange Act (2023.06.28)
Article 14-2 (Appointment and Qualifications of Independent Directors)
    A company that has issued stock in accordance with this Act may appoint independent directors in accordance with its articles of incorporation. The Competent Authority, however, shall as necessary in view of the company's scale, shareholder structure, type of operations, and other essential factors, require it to appoint independent directors, not less than two in number and not less than one-fifth of the total number of directors.
    Independent directors shall possess professional knowledge and there shall be restrictions on their shareholdings and the positions they may concurrently hold. They shall maintain independence within the scope of their directorial duties, and may not have any direct or indirect interest in the company. Regulations governing the professional qualifications, restrictions on shareholdings and concurrent positions held, assessment of independence, method of nomination, and other matters for compliance with respect to independent directors shall be prescribed by the Competent Authority.
    The company may not impede, refuse, or evade the actions of the independent directors in the performance of their duties. As the independent directors deem necessary to the performance of their duties, they may request the board of directors to appoint relevant personnel, or may at their own discretion hire professionals to provide assistance. The related expenses will be borne by the company.
    Given any of the following circumstances, a person may not act as an independent director, or if already acting in such capacity, shall be dismissed:
  1. Any circumstance set out in a subparagraph of Article 30 of the Company Act.
  2. The director is a government agency, juristic person, or representative thereof, and was elected in accordance with Article 27 of the Company Act.
  3. The person fails to meet the qualifications for independent director set forth in paragraph 2.
    Transfer of an independent director's shareholdings is not subject to the provisions of the latter part of paragraph 1 or of paragraph 3, Article 197, of the Company Act.
    When an independent director is dismissed for any reason, resulting in a number of directors lower than that required under paragraph 1 or the company's articles of incorporation, a by-election for independent director shall be held at the next following shareholders meeting. When all independent directors have been dismissed, the company shall convene a special shareholders meeting to hold a by-election within 60 days from the date on which the situation arose.
Article 14-3 (Matters Required to Be Submitted for Approval by Resolution of the Board of Directors)
    When a company has selected independent directors as set forth in paragraph 1 of the preceding article, then the following matters shall be submitted to the board of directors for approval by resolution unless approval has been obtained from the Competent Authority; when an independent director has a dissenting opinion or qualified opinion, it shall be noted in the minutes of the directors meeting:
  1. Adoption or amendment of an internal control system pursuant to Article 14-1.
  2. Adoption or amendment, pursuant to Article 36-1, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.
  3. A matter bearing on the personal interest of a director or supervisor.
  4. A material asset or derivatives transaction.
  5. A material monetary loan, endorsement, or provision of guarantee.
  6. The offering, issuance, or private placement of any equity-type securities.
  7. The hiring or dismissal of an attesting CPA, or the compensation given thereto.
  8. The appointment or discharge of a financial, accounting, or internal auditing officer.
  9. Any other material matter so required by the Competent Authority.
Article 14-4 (Appointment of Audit Committee or Supervisors)
    A company that has issued stock in accordance with this Act shall establish either an audit committee or a supervisor. However, a company that falls within the conditions set by the Competent Authority based on company scale, type of operations, or other essential considerations shall establish an audit committee in lieu of a supervisor.
    The audit committee shall be composed of the entire number of independent directors. It shall not be fewer than three persons in number, one of whom shall be convener, and at least one of whom shall have accounting or financial expertise.
    For a company that has established an audit committee, the provisions regarding supervisors in this Act, the Company Act, and other laws and regulations shall apply mutatis mutandis to the audit committee.
    The following provisions of the Company Act shall apply mutatis mutandis with regard to independent directors who are members of the audit committee: Article 200; Article 216, paragraphs 1, 3, and 4; Article 218, paragraphs 1 and 2; Article 218-1; Article 218-2, paragraph 2; Articles 224 - 226; and Article 245, paragraph 2. The provisions of Article 214, Article 215, and the proviso of Article 227 of the Company Act shall apply mutatis mutandis with regard to litigation brought against independent directors.
    Regulations governing the exercise by the audit committee and its independent director members of the powers set out in the preceding two paragraphs, and the operation procedures, matters to be recorded in the meeting minutes, and other matters related thereto, shall be prescribed by the Competent Authority.
    A resolution of the audit committee shall have the concurrence of one-half or more of all members.
Article 14-5 (Company Matters Requiring Consent of the Audit Committee)
    For a company that has issued stock in accordance with this Act and established an audit committee, the provisions of Article 14-3 shall not apply to the following matters, which shall be subject to the consent of one-half or more of all audit committee members and be submitted to the board of directors for a resolution:
  1. Adoption or amendment of an internal control system pursuant to Article 14-1.
  2. Assessment of the effectiveness of the internal control system.
  3. Adoption or amendment, pursuant to Article 36-1, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.
  4. A matter bearing on the personal interest of a director.
  5. A material asset or derivatives transaction.
  6. A material monetary loan, endorsement, or provision of guarantee.
  7. The offering, issuance, or private placement of any equity-type securities.
  8. The hiring or dismissal of an attesting CPA, or the compensation given thereto.
  9. The appointment or discharge of a financial, accounting, or internal auditing officer.
  10. Annual financial reports and second quarter financial reports that must be audited and attested by a CPA, which are signed or sealed by the chairperson, managerial officer, and accounting officer.
  11. Any other material matter so required by the company or the Competent Authority.
    With the exception of subparagraph 10, any matter under a subparagraph of the preceding paragraph that has not been approved with the consent of one-half or more of all audit committee members may be undertaken upon the consent of two-thirds or more of all directors, without regard to the restrictions of the preceding paragraph, and the resolution of the audit committee shall be recorded in the minutes of the directors meeting.
    If for good cause it is impossible to hold a meeting of the audit committee, the matters in the subparagraphs of paragraph 1 shall be adopted with the consent of two-thirds or more of all directors. However, the matters in paragraph 1, subparagraph 10 shall still require the opinion of the independent directors indicating their consent.
    A company that has established an audit committee is not subject to the provisions of Article 36-1 requiring that its financial reports be recognized by a supervisor.
    "All audit committee members" and "all directors" as used in paragraph 1 to paragraph 3 and the preceding article shall mean the actual number of persons currently holding those positions.
Article 26-3 (Directors and Supervisors)
    The board of directors of a company that has issued stock in accordance with the Act may not number less than five persons.
    When the government or a juristic person is a shareholder of a public company, then except with the approval of the Competent Authority, the provisions of Article 27, paragraph 2 of the Company Act shall not apply, and a representative of the government or juristic person may not concurrently be selected or serve as the director or supervisor of the company.
    Except where the Competent Authority has granted approval, the following relationships may not exist among more than half of a company's directors:
  1. A spousal relationship.
  2. A familial relationship within the second degree of kinship.
    Except where the Competent Authority has granted approval, a company shall have at least one or more supervisors, or one or more supervisors and directors, among whom no relationship under the preceding subparagraphs exists.
    When a company convenes a shareholders meeting for the election of supervisors or directors and the original selectees do not meet the conditions of the two preceding paragraphs, determination of which directors or supervisors are elected shall be made according to the following provisions:
  1. When there are some among the directors who do not meet the conditions, the election of the director receiving the lowest number of votes among those not meeting the conditions shall be deemed invalid.
  2. When there are some among the supervisors who do not meet the conditions, the provisions of the preceding subparagraph shall apply mutatis mutandis.
  3. When there are some among the directors and supervisors who do not meet the conditions, the election of the supervisor receiving the lowest number of votes among those not meeting the conditions shall be deemed invalid.
    When a person serving as director or supervisor is in violation of the provisions of paragraph 3 or paragraph 4, that person shall be subject to ipso facto dismissal through the mutatis mutandis application of the provisions of the preceding paragraph.
    When the number of directors falls below five due to the dismissal of a director for any reason, the company shall hold a by-election for director at the next following shareholders meeting. When the number of directors falls short by one-third of the total number prescribed by the articles of incorporation, the company shall convene a special shareholders meeting within 60 days of the occurrence of that fact to hold a by-election for directors.
    A company shall formulate rules for the conduct of directors meetings; regulations governing the content of deliberations, procedures, matters to be recorded in the meeting minutes, public announcement, and other matters for compliance shall be prescribed by the Competent Authority.
Article 36 (Financial Report Publication and Filing Deadlines)
    Unless under special circumstances as otherwise provided by the Competent Authority, an issuer under this Act shall perform public announcement and registration with the Competent Authority as follows:
  1. within three months after the close of each fiscal year, publicly announce and register with the Competent Authority financial reports duly signed or sealed by the chairperson, managerial officer, and accounting officer, and audited and attested by a certified public accountant, approved by the board of directors, and recognized by the supervisors.
  2. within 45 days after the end of the first, second, and third quarters of each fiscal year publicly announce and register with the Competent Authority financial reports duly signed or sealed by the chairperson, managerial officer, and accounting officer, and reviewed by a certified public accountant and reported to the board of directors.
  3. within the first ten days of each calendar month publicly announce and register with the Competent Authority the operating status for the preceding month.
    Regulations governing the applicable scope of the special circumstances as referred to in the preceding paragraph, deadlines for public announcement and registration under such special circumstances, and other matters for compliance in connection therewith, shall be prescribed by the Competent Authority.
    Within two days from the date of occurrence of any of the following events, any company referred to in paragraph 1 of this Article shall publicly announce and register with the Competent Authority:
  1. the annual financial reports approved by the regular meeting of shareholders if such reports are inconsistent with the annual financial reports which have been announced to the public and filed with the Competent Authority.
  2. any event which has a material impact on shareholders' rights and interests or securities prices.
    The companies referred to in paragraph 1 shall prepare an annual report and distribute it to all shareholders prior to or at the regular meeting of shareholders. The particulars to be covered in the annual report, principles for its preparation, and other matters for compliance shall be prescribed by the Competent Authority.
    Copies of the reports publicly announced and registered with the Competent Authority referred to in paragraphs 1 to 3, and the annual report referred to in the preceding paragraph shall, in case such securities are listed on the stock exchange, be sent to the stock exchange, or in the case of securities traded over-the-counter, sent to the agency (institution) designated by the Competent Authority, for review by the public.
    During the reorganization procedure of an issuer, matters to be ratified by the board of directors and the supervisors under paragraph 1 shall be ratified by the reorganizers or the reorganization supervisors of the issuer.
    The regular meeting of shareholders of a company whose stock is listed on the stock exchange or traded over-the-counter shall be held within six months after the close of each fiscal year, and the proviso of Article 170, paragraph 2 of the Company Act shall not apply.
    In a year in which expires the term of the directors and supervisors of a company whose stock is listed on the stock exchange or traded over-the-counter, if the board of directors does not convene the regular meeting of shareholders to elect directors and supervisors for the new term in accordance with the preceding paragraph, the Competent Authority may ex officio set a deadline for the meeting to be held. If the meeting is not held by the deadline, the entire body of directors and supervisors shall ipso facto be dismissed from the time of expiration of the deadline.
Article 36 (Financial Report Publication and Filing Deadlines)
    Unless under special circumstances as otherwise provided by the Competent Authority, an issuer under this Act shall perform public announcement and registration with the Competent Authority as follows:
  1. within three months after the close of each fiscal year, publicly announce and register with the Competent Authority financial reports duly signed or sealed by the chairperson, managerial officer, and accounting officer, and audited and attested by a certified public accountant, approved by the board of directors, and recognized by the supervisors.
  2. within 45 days after the end of the first, second, and third quarters of each fiscal year publicly announce and register with the Competent Authority financial reports duly signed or sealed by the chairperson, managerial officer, and accounting officer, and reviewed by a certified public accountant and reported to the board of directors.
  3. within the first ten days of each calendar month publicly announce and register with the Competent Authority the operating status for the preceding month.
    Regulations governing the applicable scope of the special circumstances as referred to in the preceding paragraph, deadlines for public announcement and registration under such special circumstances, and other matters for compliance in connection therewith, shall be prescribed by the Competent Authority.
    Within two days from the date of occurrence of any of the following events, any company referred to in paragraph 1 of this Article shall publicly announce and register with the Competent Authority:
  1. the annual financial reports approved by the regular meeting of shareholders if such reports are inconsistent with the annual financial reports which have been announced to the public and filed with the Competent Authority.
  2. any event which has a material impact on shareholders' rights and interests or securities prices.
    The companies referred to in paragraph 1 shall prepare an annual report and distribute it to all shareholders prior to or at the regular meeting of shareholders. The particulars to be covered in the annual report, principles for its preparation, and other matters for compliance shall be prescribed by the Competent Authority.
    Copies of the reports publicly announced and registered with the Competent Authority referred to in paragraphs 1 to 3, and the annual report referred to in the preceding paragraph shall, in case such securities are listed on the stock exchange, be sent to the stock exchange, or in the case of securities traded over-the-counter, sent to the agency (institution) designated by the Competent Authority, for review by the public.
    During the reorganization procedure of an issuer, matters to be ratified by the board of directors and the supervisors under paragraph 1 shall be ratified by the reorganizers or the reorganization supervisors of the issuer.
    The regular meeting of shareholders of a company whose stock is listed on the stock exchange or traded over-the-counter shall be held within six months after the close of each fiscal year, and the proviso of Article 170, paragraph 2 of the Company Act shall not apply.
    In a year in which expires the term of the directors and supervisors of a company whose stock is listed on the stock exchange or traded over-the-counter, if the board of directors does not convene the regular meeting of shareholders to elect directors and supervisors for the new term in accordance with the preceding paragraph, the Competent Authority may ex officio set a deadline for the meeting to be held. If the meeting is not held by the deadline, the entire body of directors and supervisors shall ipso facto be dismissed from the time of expiration of the deadline.
Article 43-1 (Regulation of Public Tender Offers for Securities)
    Any person who acquires, either individually or jointly with other persons, more than 5 percent of the total issued shares of a public company shall report such acquisition to the Competent Authority and make a public announcement; the same applies when there is any change in the specifics reported. Regulations governing the reporting of the number of shares acquired, the purpose and the sources of funds for the acquisition of the shares, changes to the specifics reported, public announcement, terms, and any other matters requiring compliance, shall be prescribed by the Competent Authority.
    Any public tender offer to purchase the securities of a public company bypassing the centralized securities exchange market or the over-the-counter market may be conducted only after the offeror has reported to the Competent Authority, providing proof that it has the ability to perform payment of the tender offer consideration, and publicly announced the specific matters, except under the following circumstances:
  1. The number of securities proposed for public tender offer by the offeror plus the total number of securities of the public company already obtained by the offeror and its related parties do not exceed 5 percent of the total number of voting shares issued by the public company.
  2. The securities purchased by the offeror through the public tender offer are securities of a company of which the offeror holds more than 50 percent of the issued voting shares.
  3. Other circumstances in conformity with the regulations prescribed by the Competent Authority.
    Any person who independently or jointly with another person(s) proposes to acquire a certain percentage of the total issued shares of a public company or of the beneficial securities of a real estate investment trust under the Real Estate Securitization Act shall make the acquisition by means of a public tender offer, unless certain conditions are satisfied.
    Regulations governing the scope, conditions, period, related parties, and particulars for filing and public announcement in connection with purchases of securities pursuant to paragraph 2, and the "certain percentage" and "conditions" in connection with the acquisition of a certain percentage of the total issued shares of a public company under the preceding paragraph shall be prescribed by the Competent Authority.
    Any person who will make a public tender offer to purchase the beneficial securities of a real estate investment trust under the Real Estate Securitization Act may conduct the public tender offer only after filing with the Competent Authority and making a public announcement. Regulations governing the scope, conditions, period, related parties, and particulars for filing and public announcement in connection with purchases of real estate securitization beneficial securities, and the "certain percentage" and "conditions" in connection with the acquisition of beneficial securities of a real estate investment trust under paragraph 3 shall be prescribed by the Competent Authority.
Article 54 (Disqualifications of Associated Persons)
    Associated persons employed by securities firms whose duties relate to the securities business shall have reached the age of majority and possess the qualifications required by relevant acts and regulations, and shall not fall within one of the following categories:
  1. Having been adjudged bankrupt and not reinstated, or having been declared by a court to be under guardianship or assistance and that declaration has not been voided.
  2. Concurrently holding a position with another securities firm, provided that this restriction shall not apply when there is an investment relationship and the Competent Authority has granted approval allowing concurrent holding of the position of director or supervisor at the invested securities firm.
  3. Having been sentenced to a criminal penalty of severity equal to or greater than a term of imprisonment for fraud, breach of trust, or violation of laws governing business and industry, and three years have not elapsed since the date of completion of the sentence execution, the expiration of suspension of sentence, or the pardon of such punishment.
  4. Falling under any of the situations specified in either subparagraphs 2 through 4 or subparagraph 6 of the preceding Article.
  5. Having violated orders issued by the competent Authority in accordance with this Act.
    The job title of the associated persons referred to in the preceding paragraph shall be prescribed by the Competent Authority.
Article 95 (Standards for the Establishment of Stock Exchanges)
    The standards for the establishment of stock exchanges shall be prescribed by the Competent Authority.
    Each stock exchange shall be limited to operating one centralized securities exchange market.
Article 128 (Prohibition of Issuance of Bearer Stock)
    A company-type stock exchange shall not issue bearer stocks. Transferees of its shares shall be limited to the securities firms incorporated under this Act.
    The shareholding percentage of each securities firm in the stock exchange shall be prescribed by the Competent Authority.