Companies Act

If a director, accounting advisor, company auditor, executive officer or financial auditor (hereinafter in this Chapter referred to as "officers, etc.") neglects their duties, they are liable to the stock company for damages arising as a result thereof.

If a director or executive officer engages in a transaction set forth in Article 356, paragraph (1), item (i) in violation of the provisions of Article 356, paragraph (1) (including cases where applied mutatis mutandis under Article 419, paragraph (2); hereinafter the same applies in this paragraph), the amount of the profits obtained by the director, executive officer or a third party as a result of the transaction is presumed to be the amount of the damages under the preceding paragraph.

If a stock company incurs damages as a result of the transaction provided for in Article 356, paragraph (1), item (ii) or item (iii) of (including cases where these provisions are applied mutatis mutandis under Article 419, paragraph (2)), the following directors or executive officers are presumed to have neglected their duties:

directors and executive officers provided for in Article 356, paragraph (1) (including cases where applied mutatis mutandis under Article 419, paragraph (2));

directors and executive officers who decided that the stock company would undertake relevant transaction; or

directors who agreed to the board of directors' resolution approving that transaction (for a company with nominating committee, etc., limited to cases where relevant transaction is a transaction between the company with nominating committee, etc. and the directors or is a transaction that gives rise to a conflict of interests between the company with nominating committee, etc. and the directors).

In the cases set forth in Article 356, paragraph (1), item (ii) or (iii) of, the provisions of the preceding paragraph do not apply when directors (excluding those who are audit and supervisory committee members) under the same paragraph receive approval of the audit and supervisory committee for the transactions.

An exemption from liability under paragraph (1) of the preceding Article may not be given without the consent of all shareholders.

Notwithstanding the provisions of the preceding paragraph, if the relevant officers, etc. have acted in good faith and without gross negligence in performing their duties, exemption from liability under Article 423, paragraph (1) may be given by a resolution at a shareholders meeting (if a stock company has an ultimate, wholly owning parent company, etc. (meaning an ultimate, wholly owning parent company, etc. as prescribed in Article 847-3, paragraph (1); hereinafter the same applies in this Section), and the liability is specific liability (meaning specific liabilities as prescribed in Article 847-3, paragraph (4); hereinafter the same applies in this Section), the shareholders meeting of the stock company and the ultimate, wholly owning parent company, etc.; hereinafter the same applies in this Article), to the extent of the amount obtained by subtracting the sum of the following amounts (in Article 427, paragraph (1) referred to as "minimum liability amount") from the amount for which they are liable:

the amount obtained by multiplying the amount calculated by the method prescribed by Ministry of Justice Order as the amount equivalent to the annual amount of property benefits which relevant officers, etc. have received, or are to receive, from the stock company as consideration for the execution of their duties while they are in the office by the numbers provided for in (a) through (c) for the categories of officers, etc. set forth in the (a) through (c):

representative directors or representative executive officers:6;

directors (limited to those who are executive directors, etc.) other than representative directors or executive officers other than representative executive officers:4;

directors (excluding those set forth in (a) and (b)), accounting advisors, company auditors or financial auditors:2.

if relevant officers, etc. have subscribed for share options of relevant stock company (limited to cases set forth in each item of Article 238, paragraph (3)), the amount calculated by the method prescribed by Ministry of Justice Order as the amount equivalent to the amount of the property benefits regarding the share options.

In cases under the preceding paragraph, the directors (if a stock company has an ultimate, wholly owning parent company, etc., and the liabilities to be exempted pursuant to the provisions of the same paragraph are specific liabilities, the directors of the stock company and the ultimate, wholly owning parent company, etc.) must disclose the following matters to the shareholders meeting under that paragraph:

the facts that cause the liability and the amount of the liability for damages;

the maximum amount for which exemption may be given pursuant to the provisions of the preceding paragraph and the grounds supporting the calculation; and

the reasons for which exemption from the liability is to be given and the amount for which exemption is to be given.

At a company with company auditor, company with audit and supervisory committee, or company with nominating committee, etc. in order to submit proposals regarding the exemption from liability under Article 423, paragraph (1) (limited to the exemption from liability of directors (excluding those who are audit and supervisory committee members or audit committee members) and executive officers) to a shareholders meeting, directors (if such a company has an ultimate, wholly owning parent company, etc., and the liabilities to be exempted pursuant to the provisions of paragraph (1) are specific liabilities, the directors of those companies and the ultimate, wholly owning parent company, etc.) must obtain the consent of the persons specified in each of those items for the stock company categories set forth in following each items:

company with company auditor:the company auditor (each company auditors if there are two or more company auditors); and

company with audit and supervisory committee:each audit and supervisory committee;

company with nominating committee, etc.:each audit committee members.

If a resolution under paragraph (1) is passed, and the stock company gives any property benefits prescribed by Ministry of Justice Order including, but not limited to, retirement allowance to the officers, etc. in that paragraph after relevant resolution, the stock company must obtain the approval of a shareholders meeting. The same applies if relevant officers, etc. exercise or transfer the share options under item (ii) of the same paragraph after the resolution.

If a resolution under paragraph (1) is passed, and the officers, etc. possess share option certificates that certify the share options under the preceding paragraph, the officers, etc. must deposit relevant share option certificates with the stock company without delay. In these cases, relevant officers, etc. may not demand the return of relevant share option certificates until after the approval under that paragraph is obtained with respect to the transfer under that paragraph.