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Article 14-2
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(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:
- Any circumstance set out in a subparagraph of Article 30 of the Company Act.
- The director is a government agency, juristic person, or representative thereof, and was elected in accordance with Article 27 of the Company Act.
- 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.
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Article 14-4
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(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.
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Article 26-3
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(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:
- A spousal relationship.
- 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:
- 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.
- When there are some among the supervisors who do not meet the conditions, the provisions of the preceding subparagraph shall apply mutatis mutandis.
- 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.
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