Companies Act

To call an audit and supervisory committee meeting, an audit and supervisory committee member must dispatch the notice thereof to each audit and supervisory committee member no later than one week (or if a shorter period of time is prescribed by the articles of incorporation, the shorter period of time) prior to the day of the committee meeting.

Notwithstanding the provisions of the preceding paragraph, the audit and supervisory committee meeting may be held without the procedures for calling it if the consent of all audit and supervisory committee members is obtained.

If requested by the audit and supervisory committee, directors (in cases of a company with accounting advisor, directors and accounting advisors) must attend the audit and supervisory committee meeting and provide explanations on the matters requested by the audit and supervisory committee.

The resolution at an audit and supervisory committee meeting is passed by a majority of the audit and supervisory committee members present at the meeting where the majority of the audit and supervisory committee members entitled to participate in the vote are present.

Audit and supervisory committee members with a special interest in the resolution under the preceding paragraph may not participate in the vote.

With respect to the proceedings of the audit and supervisory committee meeting, minutes must be prepared pursuant to the provisions of Ministry of Justice Order, and if the minutes are prepared in writing, the audit and supervisory committee members present at the meeting must sign or affix the names and seals to them.

With respect to the matters recorded in an electronic or magnetic record if the minutes under the preceding paragraph are prepared in that electronic or magnetic record, an action in lieu of the signing or the affixing of names and seals prescribed by Ministry of Justice Order must be taken.

Audit and supervisory committee members who participate in resolutions at the audit and supervisory committee meeting and do not have their objections recorded in the minutes under paragraph (3) are presumed to have agreed to the resolutions.

A company with audit and supervisory committee must keep the minutes referred to in paragraph (3) of the preceding Article at its head office for a period of ten years from the day of the audit and supervisory committee meeting.

If it is necessary for the purpose of exercising the rights of a shareholder of a company with audit and supervisory committees, the relevant shareholder may, with the permission of the court, make the following requests:

if the minutes under the preceding paragraph are prepared in writing, requests for inspection or copying of those documents; and

if the minutes under the preceding paragraph have been prepared as an electronic or magnetic record, a request to inspect or copy anything that is used in a manner prescribed by Ministry of Justice Order to display the information recorded in that electronic or magnetic record.

The provisions of the preceding paragraph apply mutatis mutandis to those cases where it is necessary for the purpose of enforcing the liability of directors or accounting advisors by a creditor of a company with audit and supervisory committee and to the cases where it is necessary for the purpose of exercising the rights of a member of the parent company.

If the court finds that the inspection or copying relating to the requests under paragraph (2) (including the case of the mutatis mutandis application pursuant to the preceding paragraph; hereinafter the same applies in this paragraph) is likely to cause substantial detriment to the company with audit and supervisory committee or its parent company or subsidiary company, the court may not grant the permission under paragraph (2).

If the directors, accounting advisors, financial auditors have notified all audit and supervisory committee members of matters that are to be reported to the audit and supervisory committee meeting, it is unnecessary to report relevant matters to the audit and supervisory committee meeting.

The board of directors of a company with audit and supervisory committee performs the following duties notwithstanding of provisions of Article 362:

deciding the following matters and execution of the operations of the company with audit and supervisory committee:

basic management policy;

the matters prescribed by Ministry of Justice Order as those necessary for the execution of the duties of the audit and supervisory committee;

the development of systems necessary to ensure that the execution of the duties by the directors complies with the laws and regulations and the articles of incorporation, and other systems prescribed by Ministry of Justice Order as systems necessary to ensure the properness of operations of a stock company and of operations of a group of enterprises consisting of the stock company and its subsidiary companies;

supervising the execution of duties by directors; and

appointing and removing representative directors.

The board of directors of a company with audit and supervisory committee must determine matters set forth in item (i), (a) through (c) of the preceding paragraph.

The board of directors of a company with audit and supervisory committee must appoint representative directors from among the directors (excluding directors who are audit and supervisory committee members).

The board of directors of a company with audit and supervisory committee may not delegate the decision on the execution of the following matters and other important operations to directors:

the disposal of and acceptance of transfer of important assets;

borrowing in a significant amount;

the appointment and dismissal of an important employee including managers;

the establishment, changes or abolition of important structures including branch offices;

matters set forth in Article 676, item (i) and other matters prescribed by Ministry of Justice Order as important matters regarding the solicitation of persons who subscribe bonds; and

exemption from liability under Article 423, paragraph (1) pursuant to provisions of the articles of incorporation under the provisions of Article 426, paragraph (1).

Notwithstanding the provisions of the preceding paragraph, if a majority of directors of a company with audit and supervisory committee are outside directors, the board of directors of the company with audit and supervisory committee may delegate the decision on execution of important operations to directors by its resolution; provided, however, that this does not apply to the following matters:

decisions under Article 136 or Article 137, paragraph (1), and the designation under the provisions of Article 140, paragraph (4);

decisions on the matters set forth in each item of Article 156, paragraph (1) applied pursuant to Article 165, paragraph (3) following the deemed replacement of terms;

decisions under Article 262 or Article 263, paragraph (1);

decisions on the matters set forth in each item of Article 298, paragraph (1);

decisions on the content of proposals to be submitted to a shareholders meeting (excluding those regarding the election and dismissal of financial auditors and the refusal to reelect financial auditors);

delegation pursuant to the provisions of Article 348-2, paragraph (1);

determination of matters specified in Article 361, paragraph (7) pursuant to that paragraph;

approval under Article 356, paragraph (1) applied pursuant to Article 365, paragraph (1) following the deemed replacement of terms;

designation of the directors to call the board of directors meeting pursuant to the provisions of the proviso to Article 366, paragraph (1);

designation of a person to represent the company with audit and supervisory committee pursuant to the provisions of Article 399-7, paragraph (1), item (i);

matters set forth in item (vi) of the preceding paragraph;

decisions on the contents of indemnity agreements (meaning indemnity agreements provided in Article 430-2, paragraph (1); the same applies in Article 416, paragraph 4, item (xiv));

decisions on the contents of officer indemnification insurance policies (meaning officer indemnification insurance policies provided in Article 430-3, paragraph (1); the same applies in Article 416, paragraph (4), item (xv));

approvals under Article 436, paragraph (3), Article 441, paragraph (3) and Article 444, paragraph (5);

decisions on the matters to be decided pursuant to the provisions of Article 454, paragraph (1) applied pursuant to paragraph (5) of the same Article following the deemed replacement of terms;

decisions on the contents of contracts relating to the acts set forth in each item of Article 467, paragraph (1) (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee);

decisions on the content of merger agreements (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee);

decisions on the content of absorption-type company split agreements (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee);

decisions on the content of incorporation-type company split plans (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee);

decisions on the content of share exchange agreements (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee);

decisions on the contents of share transfer plans; and

decisions on the content of partial share exchange plans (excluding those which do not require approval by a resolution at a shareholders meeting of the company with audit and supervisory committee).

Notwithstanding the provisions of the preceding two paragraphs, a company with audit and supervisory committee may stipulate in the articles of incorporation that all or part of decisions of execution of important operations (excluding matters set forth in items of the preceding paragraph) to delegate directors by the resolution of the board of directors meeting.

At a company with audit and supervisory committee, even if there are provisions for a convenor, the audit and supervisory committee members appointed by the audit and supervisory committee may call the board of directors meeting.