Companies Act

Notwithstanding the provisions of Article 424, companies with company auditor (limited to cases where there are two or more directors), companies with audit and supervisory committee, or companies with nominating committee, etc. may provide in the articles of incorporation that, if the relevant officers, etc. have acted in good faith and without gross negligence in performing their duties, and it is found particularly necessary taking into account the relevant circumstances including, but not limited to, the details of the facts that caused the liability and the status of execution of duties by relevant officers, etc., exemption may be given with respect to the liability under Article 423, paragraph (1) by the consent of a majority of the directors (excluding the directors subject to relevant liability) (or, for companies with board of directors, by a resolution at the board of directors meeting) to the extent of the amount which exemption may be given pursuant to the provisions of paragraph (1) of the preceding Article.

The provisions of paragraph (3) of the preceding Article apply mutatis mutandis to cases where a proposal to amend the articles of incorporation to create provisions of the articles of incorporation pursuant to the provisions of the preceding paragraph (limited to provisions of the articles of incorporation to the effect that directors (excluding those who are audit and supervisory committee members or audit committee members) and executive officers may be exempted from the liability) is submitted to a shareholders meeting, to cases where the consent of directors with respect to exemption from liability under the provisions of the articles of incorporation pursuant to the provisions of that paragraph (limited to exemption from liability of directors (excluding those who are audit and supervisory committee members or audit committee members) and executive officers) is to be obtained, and to the cases where a proposal regarding the exemption from liability is submitted to the board of directors. In this case, the phrase "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.)" in paragraph (3) of the same Article is deemed to be replaced with "directors".

If consent (or, for a company with board of directors, a resolution at the board of directors meeting) to the effect that officers, etc. are exempted from the liability under the provisions of the articles of incorporation pursuant to the provisions of paragraph (1) has been given, the directors must, without delay, give public notice, or give notice to shareholders, to the effect that any objections to the matters set forth in each item of paragraph (2) of the preceding Article or to the exemption from liability ought to be stated within a specified period of time; provided, however, that that period may not be shorter than one month.

For the purpose of the application of the provisions of the preceding paragraph to a stock company that is not a public company, "give public notice, or give notice to shareholders" in that paragraph is deemed to be replaced with "give notice to shareholders".

If a stock company has an ultimate, wholly owning parent company, etc., when public notice or notice pursuant to the provisions of paragraph (3) (limited to those related to the exemption of specific liabilities) is made, the directors of the ultimate, wholly owning parent company, etc. must make public notice or notify shareholders without delay of the matters set forth in the items of paragraph (2) of the preceding Article and to the effect that any objections to exempt liabilities should be stated within the specified period; provided, however, that that period may not be shorter than one month.

For the purpose of the application of the provisions of the preceding paragraph to an ultimate, wholly owning parent company, etc. that is not a public company, the phrase "make public notice or notify shareholders" in the same paragraph is deemed to be replaced with "notify shareholders".

If shareholders having not less than three hundredths (or, if lesser proportion is prescribed in the articles of incorporation, the proportion) of the votes of all shareholders (excluding shareholders who are officers, etc. subject to the liability referred to in paragraph (3)) state objections during the period provided for in that paragraph (if a stock company has an ultimate, wholly owning parent company, etc., when the liabilities to be exempted according to the provisions of the articles of incorporation pursuant to the provisions of paragraph (1), if shareholders having not less than three-hundredths (or, if a lesser proportion is prescribed in the articles of incorporation, the proportion) of voting rights of all shareholders (excluding shareholders who are officers, etc. subject to the liability referred to in paragraph (3)) of the stock company or shareholders having not less than three-hundredths (or, if lesser proportion is prescribed in the articles of incorporation, the proportion) of voting rights of all shareholders (excluding shareholders who are officers, etc. subject to the liability referred to in paragraph (3)) of the ultimate, wholly owning parent company, etc. state objections set forth in paragraph (3) or (5) during the period set forth in the same paragraph respectively), the stock company may not effect the exemption pursuant to the provisions of the articles of incorporation under the provisions of paragraph (1).

The provisions of paragraph (4) and paragraph (5) of the preceding Article apply mutatis mutandis to cases where exemption from liability is given pursuant to the provisions of the articles of incorporation under the provisions of paragraph (1).

Notwithstanding the provisions of Article 424, a stock company may provide in the articles of incorporation that the stock company may enter into agreements with directors (excluding those are executive directors, etc.), accounting advisors, company auditors or financial auditors (hereinafter in this Article and Article 911, paragraph (3), item (xxv) referred to as "non-executive directors, etc.") to the effect that, if relevant non-executive directors, etc. have acted in good faith and without gross negligence in performing their duties, the liability of the non-executive directors, etc. under Article 423, paragraph (1) is limited to either an amount specified by the stock company in advance within the limit of the amount provided for in the articles of incorporation, or the minimum liability amount, whichever is higher.

If non-executive directors, etc. who have entered into agreements under the preceding paragraph assume the office of executive directors, etc. of the stock company, relevant agreements become ineffective from then on.

The provisions of Article 425, paragraph (3) apply mutatis mutandis to cases where a proposal to amend the articles of incorporation to create provisions of the articles of incorporation under the provisions of paragraph (1) (limited to the provisions of the articles of incorporation to the effect that agreements may be entered into with directors (excluding those who are audit and supervisory committee members or audit committee members) prescribed in that paragraph) is submitted to a shareholders meeting. In this case, the phrase "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.)" in paragraph (3) of that Article is deemed to be replaced with "directors".

If a stock company that entered into agreements under paragraph (1) has come to know that it has suffered damages as a result of non-executive directors, etc. who were the counterparties to relevant agreements neglecting their duties, the stock company must disclose the following matters at the first shareholders meeting (if the stock company has an ultimate, wholly owning parent company, etc., and the damages are related to specific liabilities, shareholders meeting of the stock company and the ultimate, wholly owning parent company, etc.) called thereafter:

matters set forth in Article 425, paragraph (2), items (i) and (ii);

the contents of relevant agreements and reasons for entering into relevant agreements; and

the amount for which it was arranged that relevant non-executive directors, etc. would be exempted from liability for damages in Article 423, paragraph (1).

The provisions of Article 425, paragraphs (4) and (5) apply mutatis mutandis to cases where it has been arranged pursuant to agreements under paragraph (1) that non-executive directors, etc. are not liable for damages in excess of the limit provided for in that paragraph.

A director or executive officer who has carried out transactions under Article 356, paragraph (1), item (ii) (including cases of mutatis mutandis application under Article 419, paragraph (2)) (limited to transactions carried out for themselves) may not be exempted from the liability under Article 423, paragraph (1) for the reason that the neglect of their duties was due to grounds not attributable to relevant directors or executive officers.

The provisions of the preceding three Articles do not apply to the liability in the preceding paragraph.

If officers, etc. have acted in bad faith or with gross negligence in performing their duties, relevant officers, etc. are liable to a third party for damages arising as a result thereof.

The provisions of the preceding paragraph also apply if the persons set forth in the following items carry out the acts provided for in each item; provided, however, that this does not apply if those persons prove that they did not fail to exercise due care with respect to the performance of their duties:

directors and executive officers: the following acts:

the giving of false notice with respect to important matters, notice of which must be given when soliciting persons to subscribe for shares, share options, bonds or bonds with share option, or the making of false statements or records with respect to materials used for explanations regarding the business of the relevant stock company and other matters for the purpose of that solicitation;

the making of false statements or records with respect to important matters to be specified or recorded in financial statements and business reports as well as the annexed detailed statements thereof and provisional financial statements;

the false registration; and

the false public notice (including the measures provided for in Article 440, paragraph (3));

accounting advisors:the making of false statements or records with respect to important matters to be specified or recorded in financial statements or in the annexed detailed statements accompanying them, provisional financial statements and accounting advisor's reports;

company auditors, audit and supervisory committee members, and audit committee members:the making of false statements or records with respect to important matters to be specified or recorded in audit reports;

financial auditor:the making of false statements or records with respect to important matters to be specified or recorded in financial audit reports.

If officers, etc. are liable for damages arising in the stock company or a third party, if other officers, etc. are also liable, those persons will be joint and several obligors.