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Article 56
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An issuer reporting issuance of employee stock option warrants shall obtain approval by the majority votes in a meeting of the board of directors at which two-thirds or more directors are present. The following matters shall be provided in the terms and conditions regarding the issue and exercise of stock option warrants:
- Issue period.
- Qualifications and conditions for eligible employees for stock option warrants and distribution review and approval procedures.
- Number of total issued units of the employee stock option warrants, number of shares each unit represents, total number of new shares to be issued in connection with exercise of stock option warrants, or the number of shares for shares buy-back as required per Article 28-2 of the Act.
- Criteria for setting the terms and conditions for exercising stock option warrants (including exercise price, exercise period, class of shares with which to exercise stock option warrants, measures to be taken in the event of inheritance/employee resignation, etc.).
- Performance of contract: by either issuance of new shares or delivery of already issued shares by an exchange-listed or OTC-listed company. However, for emerging stocks or stocks that are neither listed on an exchange nor traded in the business places of securities firms, performance of contract shall be by issuance of new shares.
- Adjustment of exercise price.
- Upon capitalization of retained earnings or capitalization of capital reserves, additional employee stock option warrants may be issued or the number of shares subscribable may be adjusted; however, this shall apply only where the articles of incorporation at the time of subscription expressly provide that there is a sufficient number of shares to be made available for subscription.
- Procedure for exercising stock option warrants.
- Rights and obligations after exercising stock option warrants.
- Other important stipulations.
The issue period as referred to in subparagraph 1 of the preceding paragraph shall be not more than 2 year starting from the date of receipt of the notice of effective registration. In case where there are remaining units to be issued after the issue period expires, the issuer shall submit a new registration filing.
The qualifications and conditions for eligible employees under paragraph 1, subparagraph 2 shall include at least such matters as individual performance and results; the distribution review and approval procedures shall include at least submission to and approval by the remuneration committee or audit committee, followed by submission to and approval by the board of directors.
Any change in any subparagraph of paragraph 1 shall be made only after being approved by the majority votes in a meeting of the board of directors at which two-thirds or more of the directors are present.
In case of any change in any subparagraph under paragraph 1, the issuer shall submit as supplementary documents the minutes of the meeting of the board of directors as well as relevant materials after the amendment, and paragraph 2 of Article 12 shall apply mutatis mutandis.
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Article 56-1
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To issue employee stock warrants that are not subject to the exercise price restriction set out in Article 53, an issuer is required to obtain the consent of at least two-thirds of the voting rights represented at a shareholders meeting attended by shareholders representing a majority of the total issued shares. The issuer is allowed to register multiple issues over a period of 1 year from the date of the shareholders resolution [provided that the combined number of subscribable shares does not exceed the number approved by the shareholders].
To conduct the matter under the preceding paragraph, the issuer shall be required to specify the following information in the notice of reasons for convening the shareholders meeting, and may not raise the matter by means of an extraordinary motion:
- The total number of employee stock warrants to be issued, the number of shares subscribable per stock warrant, and the number of new shares that will have to be issued to cover exercise of the warrants or the number of shares that will have to be repurchased in accordance with the provisions of Article 28-2 of the Act.
- The criteria for determination of the exercise price, and the reasonableness of the price.
- Qualification requirements for warrant subscribers, and the number of shares they are allowed to subscribe for.
- The reasons why it is necessary to issue the employee stock warrants.
- Factors affecting shareholders' equity:
- The expensable amount, and dilution of the company's earnings per share.
- Where previously issued shares will be used to cover the warrants, explain what financial burden this will impose on the company.
Matters required by paragraph 1 to be submitted for resolution at a shareholders meeting shall be set out in the company's articles of incorporation.
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Article 60-2
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To file for registration of issuance of new restricted employee shares, an issuer shall be required to have a resolution adopted by a majority of the voting rights of the shareholders present at a meeting of shareholders representing two-thirds or more of the total number of issued shares of the company. The issuer is allowed to register multiple issues over a period of 1 year from the date of the shareholders resolution [provided that the combined number of subscribable shares registered does not exceed the number approved by the shareholders meeting].
If the total number of shares represented by the shareholders present is insufficient to satisfy the requirements of the preceding paragraph, the resolution may be adopted by two-thirds of the voting rights of the shareholders present at a meeting of shareholders representing a majority of the total number of issued shares of the company.
To conduct the matters under the preceding two paragraphs, the issuer shall be required to specify the following information in the notice of reasons for convening the shareholders meeting, and may not raise the matters by means of an extraordinary motion:
- The total number of shares to be issued.
- The terms and conditions of issuance.
- Qualifications and conditions for employees and the numbers of shares distributable or subscribable.
- The reasons why it is necessary to issue the new restricted employee shares.
- The expensable amount, the dilution of the company's earnings per share, and any other impact on shareholders equity.
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