Supplemental Explanation to the Interim Proposal concerning Revision of Companies Act (related to Corporate Governance, etc.)

Supplemental Explanation to the Interim Proposal concerning Revision of Companies Act (related to Corporate Governance, etc.) February 2018 Counselor s Office, Civil Affairs Bureau, Ministry of Justice

Table of Contents Introduction... 1 Part 1 Revision of Rules concerning Shareholders Meeting... 3 Section 1 Notice & Access of Shareholders Meeting Material... 3 1 Provisions of Articles of Incorporation... 4 2 Electronically Accessible Method... 5 (1) Cases where Adoption of Electronically Accessible Method is Required... 5 (2) Matters to be made accessible by an Electronically Accessible Method... 6 (3) Period of an Electronically Accessible Method... 9 3 Notice of Calling of Shareholders Meeting...11 (1) Due Date of Dispatch...11 (2) Matters to Be Stated... 12 4 Delivery or Provision of Reference Documents for Shareholders Meeting, etc.... 13 (1) Special Provisions, etc. of Article 301, Paragraph 1 of Companies Act... 13 (2) Request for a Paper Copy... 13 5 Interruption of Electronically Accessible Method... 17 6 Investigation of Electronically Accessible Method... 18 7 Notes after Section 1, etc. of the Interim Proposal... 19 (1) Note 1 after Section 1 of the Interim Proposal... 19 (2) Note 2 after Section 1 of the Interim Proposal... 19 (3) Note 3 after Section 1 of the Interim Proposal... 19 (4) Note 4 after Section 1 of the Interim Proposal... 20 (5) Other Related Issues Discussed in the Sub-Committee... 21 Section 2 Shareholders Right to Propose... 22 1 Number of Proposals which may be Proposed... 23 (1) Nature of Limitation of Number of Proposals which may be Proposed... 24 (2) Specific Maximum Number of Proposals... 25 (3) Counting Method of Proposals concerning Appointment or Dismissal of Officers, etc.... 25 (4) Counting Method of Number of Proposals concerning Amendment of Articles of Incorporation26 (5) Handling in Case of Collective Exercise by Multiple Shareholders... 27 2 Limitation of Proposal based on Subject Matter... 28 (1) From (i) to (iii) of Section 2-2 of the Interim Proposal... 28 (2) Section 2-2(iv) of the Interim Proposal... 29 i

(3) Other Related Issues Discussed in the Sub-Committee... 31 3 Note 2 after Section 1 of the Interim Proposal... 31 (1) Revision of Shareholding Condition... 31 (2) Revision of Due Date for Exercise... 34 Part 2 Revision of Rules concerning Director, etc... 35 Section 1 Granting of Appropriate Incentive to Director, etc.... 35 1 Remunerations of Director... 35 (1) Policy on decisions on the content of the Remunerations for Directors... 35 (2) Determination related to Remunerations other than Money by Resolution of Shareholders Meeting... 36 (3) Re-delegation of Decisions on the content of Remunerations for Individual Director... 40 (4) Stock Remunerations... 40 (5) Enhancement of Disclosure of Information... 42 2 Company Indemnification... 46 (1) Section 1-2(1) of the Interim Proposal... 47 (2) Section 1-2(ii)(iii) of the Interim Proposal... 51 (3) Section 1-2(iv) of the Interim Proposal... 52 (4) Section 1-2(v) of the Interim Proposal... 53 3 Directors and Officers Liability Insurance... 54 (1) Section 1-3(i) of the Interim Proposal... 55 (2) Section 1-3(ii)(iii) of the Interim Proposal... 56 (3) Section 1-3(iv) of the Interim Proposal... 56 (4) Section 1-3(v) of the Interim Proposal... 57 Section 2 Utilization, etc. of Outside Director... 59 1 Delegation of Execution of Operations to Outside Director... 59 2 Delegation of Decision on Execution of Material Operations by Board of Directors of Companywith Auditors... 62 3 Obligation to Appoint Outside Director... 66 Part 3 Others... 68 Section 1 Administration of Bonds... 68 1 Bond Administrative Assistant... 68 (1) Establishment of Bond Administrative Assistant... 69 (2) Qualification of Bond Administrative Assistant... 69 (3) Obligations of Bond Administrative Assistant... 70 ii

(4) Bond Administrative Assistant s Power of Representation... 71 (5) Appointment of Special Agent... 74 (6) Method of act of Bond Administrative Assistant... 74 (7) Cases where two or more Bond Administrative Assistants exist... 75 (8) Liability of Bond Administrative Assistant... 75 (9) Resignation, etc. of Bond Administrative Assistant... 76 (10) Convocation, etc. of Bondholders Meeting... 77 (11) Subscription Requirements, etc... 78 2 Bondholders Meeting... 80 (1) Reduction and Release of Principal and Interest... 80 (2) Omission of Resolution of Bondholders Meeting... 81 Section 2 Share Delivery (Kabushiki Kofu)... 82 1 Definition, etc.... 84 2 Share Delivery Plan... 86 (1) Minimum Number of Shares of Subsidiary Company Resulting from the Share Delivery to be Accepted upon Share Delivery... 86 (2) Prescription concerning Consideration of Share Delivery... 87 (3) Date of Application of Transfer... 88 (4) Provisions concerning the Share Options, etc. to be acquired together with the Shares of the Subsidiary Company Resulting from the Share Delivery... 88 3 Applications for Transfer of Shares of the Subsidiary Company Resulting from the Share Delivery, etc... 89 4 Effectuation of Share Delivery... 90 5 Procedures to be followed by Parent Company Resulting from the Share Delivery... 91 (1) Advance Disclosure Procedure... 91 (2) Approval of Shareholders Meeting... 91 (3) Demand to Terminate Share Delivery... 92 (4) Claim for Purchase of Shares by Dissenting Shareholders... 92 (5) Creditors Objection Procedure... 92 (6) Ex Post Facto Disclosure Procedure... 93 (7) Action Seeking Invalidation of Share Delivery... 93 6 Procedures to be followed by Subsidiary Company Resulting from the Share Delivery... 94 Section 3 Others... 95 1 Settlement in a Lawsuit pertaining to an Action for Pursuing Liability, etc.... 95 (1) Consent of Company Auditor, etc. concerning Settlement... 95 (2) Representative... 96 iii

(3) Other Related Issues Discussed in the Sub-Committee... 97 2 Inspection, etc. of Voting Form... 98 (1) Response to Abusive Exercise of Right to Request Inspection, etc. of Voting Form... 98 (2) Refusal Grounds... 100 (3) Refusal Grounds for Request for Inspection and Copying of Documents Evidencing the Authority of Proxy, etc... 102 3 Matters for Advance Disclosure concerning Consolidation of Shares, etc.... 102 4 Registration concerning Share Option... 104 5 Certificate of Registered Matters stating Address of Representative of Stock Company... 105 6 Registration at the Location of Branch of Company... 106 Note from Tokyo Stock Exchange: Capitalized terms used but not defined in this Supplemental Explanation have the meanings assigned to them in the Interim Proposal, or the Companies Act or the Financial Instruments and Exchange Act of Japan. For Example, a Public Company is not limited to a listed company but include any Stock Company the Articles of Incorporation of which does not require, as a feature of all or part of its shares, the approval of the Stock Company for the acquisition of such shares by transfer. iv

Introduction On February 14, 2018, the Interim Proposal concerning Revision of Companies Act (related to Corporate Governance, etc.) (hereinafter, the Interim Proposal ) was prepared by the Companies Act (related to Corporate Governance, etc.) Sub-Committee (Chairman: Hideki Kanda, Professor of Gakushuin University Law School) (hereinafter, the Sub-Committee ) of the Legislative Council which is the advisory body of the Minister of Justice. While, the Companies Act enacted in 2005 was amended by the Act Partially Amending the Companies Act (Act No. 90 of 2014; hereinafter, the Amendment Act ) enacted in June 2014, Article 25 of the Supplementary Provisions of the Amendment Act (the Review Provision ) stipulates that the government shall, when two years have passed after the enforcement of this Act, review corporate governance systems in light of the status of the appointment of an Outside Director and other factors including changes in socioeconomic circumstances, and when it finds it necessary, shall take necessary measures, including imposing an obligation to appoint an Outside Director, based on the findings of the review. According to the purpose of this Review Provision, Katsutoshi Kaneda, the Minister of Justice at that time, consulted with the Legislative Council at the 178th meeting of the Legislative Council held on February 9, 2017 that in light of recent changes of socioeconomic circumstances and other factors, please consider the necessity of revision of rules concerning corporate governance, etc. such as rationalization of procedures concerning shareholders meetings, establishment of rules to provide proper incentive to officers, review of how corporate bonds should be managed, imposition of obligation to appoint an Outside Director, etc. and if revisions of such rules are necessary indicate the outline thereof (Consultation No. 104). Based on the above, the Sub-Committee was established in the Legislative Council and investigation and discussion were started at the Sub-Committee from April 2017. At the 10th meeting held on February 14, 2018, the Interim Proposal was compiled and it was approved that the administrative office would implement the procedure to publicly solicit comments with respect to the Interim Proposal. Given this, the Counselor s Office, Civil Affairs Bureau, Ministry of Justice as the administrative office implements the procedure to publicly solicit comments with respect to the Interim Proposal. It is expected that investigation and discussion will continue in the Sub-Committee in the future towards the preparation of draft of the outline with respect to the revision of rules concerning corporate governance, etc. based on the comments given to the Interim Proposal. This supplemental explanation was prepared at the responsibility of the Counselor s Office, Civil Affairs Bureau, Ministry of Justice as the administrative office to supplementally explain the purpose, etc. of each item stated in the Interim Proposal based on the investigation and discussion at the Sub-Committee so as to facilitate understanding of the content of the Interim Proposal upon the implementation of the procedure to 1

publicly solicit comment with respect to the Interim Proposal. The terms defined in the Interim Proposal are used in this Supplemental Explanation as having the same meaning unless stated otherwise. 2

Part 1 Revision of Rules concerning Shareholders Meeting Section 1 Notice & Access of Shareholders Meeting Material Section 1 of the Interim Proposal establishes a new system to facilitate the provision of materials (hereinafter, the Shareholders Meeting Material ) that a director is required to provide to shareholders together with the notice of calling of a shareholders meeting, such as Reference Documents for Shareholders Meeting, Financial Statements and Business Reports, through a method using the internet. Under the current law, the basic rule is that the Shareholders Meeting Materials are provided in writing, and it is provided that individual consent of shareholders is required to be obtained in order to use a method using the internet (Article 299, Paragraph 2 and Paragraph 3, Article 301, Paragraph 1, Paragraph 2, Article 302, Paragraph 1, Paragraph 2, Article 437 of the Companies Act, Article 133, Paragraph 2 of the Ordinance for Enforcement of the Companies Act, Article 133, Paragraph 2 of the Rules of Corporate Accounting). Also, although the Deemed Delivery is virtually a system by which a delivery is made by a method using the internet, it is provided that this method cannot be adopted with respect to matters which are typically considered to be of high interest to shareholders or matters that are considered as those usually explained orally at the actual shareholders meeting (Article 94, Paragraph 1, Article 133, Paragraph 3 of the Ordinance for Enforcement of the Companies Act, Article 133, Paragraph 4 of the Rules of Corporate Accounting). It is pointed out that if provision of the Shareholders Meeting Materials by a method using the internet becomes possible, it is expected that a Stock Company will become able to save the costs incurred for printing and mailing, and if printing and mailing become unnecessary, it will become able to provide Shareholders Meeting Materials that are rich in content earlier than before to the shareholders. Especially, at the Sub-Committee, it is pointed out that the problem with respect to the current practice is that the period between the provision of the Shareholders Meeting Materials and the date of the shareholders meeting is short, meaning that the shareholders only have a short time to fully consider the content of the Shareholders Meeting Materials, and that the internet should be used to provide the Shareholders Meeting Materials in order to improve such problem. Given the above, Section 1 of the Interim Proposal provides that in order to facilitate the provision of the Shareholders Meeting Materials by a method using the internet, a system (hereinafter, Notice & Access ) is newly established where, if a director posts the Shareholders Meeting Materials on a website such as homepage of his/her company and notifies shareholders of the address of such website, etc. in writing, the director is deemed to have legally delivered the Shareholders Meeting Materials to the shareholders even if individual consent of the shareholders is not obtained. 3

1 Provisions of Articles of Incorporation Section 1-1 of the Interim Proposal relates to the provisions of the Articles of Incorporation necessary to use the Notice & Access. (1) The Interim Proposal provides that, with respect to the Request for a Paper Copy, if a Record Date is determined in order to identify the persons who are entitled to exercise voting right at the shareholders meeting, it is sufficient that the Stock Company delivers documents stating the Matters to be made accessible by an Electronically Accessible Method only to the persons who have made the Request for a Paper Copy by such Record Date and who are the shareholders as of the Record Date (Section 1-4(2)(ii) of the Interim Proposal), and it is expected that a shareholder who wishes to have documents delivered is required to make a Request for a Paper Copy before he/she receives the notice of calling of a shareholders meeting. Therefore, it is considered that it is necessary to clarify in advance whether the Stock Company uses the Notice & Access before the Record Date. Also, taking into consideration the balance between the fact that the provisions in the Articles of Incorporation are required in order to elect the Electronic Public Notice as the method of public notice under the current law (Article 939, Paragraph 1, Item 3 of the Companies Act), Section 1-1(i) of the Interim Proposal provides that the provisions in the Articles of Incorporation are required to use the Notice & Access in order to protect the interest of shareholders and to bind persons who are to become shareholders in the future. As to the specific method of the Electronically Accessible Method, it is provided that the Electronic Public Notice under the current law shall be referred to as stated in (Note) to Section 1-1(i) of the Interim Proposal. Therefore, the Electronically Accessible Method is expected to be a method which enables the shareholder to review the content of information posted on the website, to print the content of such information and to save such information on a personal computer, etc. used by him/her (refer to Article 223, Article 222, Paragraph 1, Item 1 (ii) and Paragraph 2 of the Ordinance for Enforcement of the Companies Act). However, although in the Electronic Public Notice it is required to make information available for receipt for many and unspecified persons, it is provided that it is sufficient, in the case of an Electronically Accessible Method, that information is made available for the shareholders to receive. Accordingly, it may be considered that in contrast to the Electronic Public Notice, in the Electronically Accessible Method, information is made available for shareholders to receive only through means such as requiring a password. (2) It is pointed out in the Sub-Committee that certain Stock Companies such as listed companies should be obliged to use of Notice & Access from the viewpoint of simplicity for the shareholders and for facilitating provision of the Shareholders Meeting Materials to the shareholders using the 4

internet. Based on the facts that such point is raised and that it is provided that shareholders of Book-Entry Transfer Shares are required to make a Request for a Paper Copy through the Book-Entry Transfer Institution, etc. in order to make such request ((Note 1) to Section 1-4(2)(i) of the Interim Proposal), Section 1-1(ii) of the Interim Proposal provides that the Book-Entry Transfer Institution may only handle shares of a Stock Company which has the provisions of the Articles of Incorporation under Section 1-1(i) of the Interim Proposal. Since shares of listed companies are required to be Book-Entry Transfer Shares, according to the above, listed companies are obliged to use Notice & Access. However, where Stock Companies which issue Book-Entry Transfer Shares are obliged to use Notice & Access as explained above, it is considered that such obligation is not appropriate because an excessive burden is imposed on such Stock Companies if they are obliged to pass a resolution of amendment of the Articles of Incorporation to establish the provisions of the Articles of Incorporation under Section 1-1(i) of the Interim Proposal. Given that, Section 1-1(iii) of the Interim Proposal provides that a Stock Company which issues Book-Entry Transfer Shares as of the implementation date of the amended act pursuant to this Interim Proposal is deemed to have passed a resolution of amendment of the Articles of Incorporation to establish the provisions of the Articles of Incorporation under Section 1-1(i) of the Interim Proposal with the implementation date being the effective date. In the Sub-Committee, some members pointed out a concern that merits of listing may be diminished by obliging listed companies to use Notice & Access, and other members proposed that Notice & Access should be adopted at each company s discretion. Against such concern, it is pointed out that because listed companies utilize the capital market, such companies should actively make efforts to have more sophisticated provision of information to shareholders, and use of Notice & Access by listed companies should be considered to be an obligation. (3) While Section 1 of the Interim Proposal provides that a Stock Company which is not a Public Company may use Notice & Access, it is expected that a Public Company which typically has many and unspecified shareholders is mainly expected to use Notice & Access. The Interim Proposal does not provide that different rules apply with respect to a due date of dispatch of a notice of calling of a shareholders meeting, etc. depending on whether the Stock Company is a Public Company or not in order to avoid complication of the rules. 2 Electronically Accessible Method (1) Cases where Adoption of Electronically Accessible Method is Required Under the current law, a director is not required to deliver or provide Reference Documents for 5

Shareholders Meeting, etc. to shareholders at the time of notice of calling of a shareholders meeting other than the cases provided under each Item of Article 299, Paragraph 2 of the Companies Act (refer to Article 301, Paragraph 1, Article 302, Paragraph 1, Article 437, Article 444, Paragraph 6 of the said Act), and notice of calling of a shareholders meeting is not required to be made in writing. Therefore, in this case, it is considered that there is no need to provide that the Electronically Accessible Method must be taken. On the other hand, under the current law, there are cases where delivery or provision of the Reference Documents for Shareholders Meeting, etc. is required if any Item of Article 299, Paragraph 2 of the Companies Act applies, and even in other cases, notice of calling of shareholders meeting must be sent in writing or by an electronic or magnetic means. As stated in (2)a below, because it is reasonable that the matters to be stated or recorded in such document or electronic or magnetic means are made as the Matters to be made accessible by Electronically Accessible Method (refer to Section 1-2(i)a of the Interim Proposal), with respect to the cases where notice of calling of shareholders meeting must be sent in writing or via electronic or magnetic means, even if the Reference Documents for Shareholders Meeting, etc. are not required to be delivered or provided under the current law, it is reasonable to provided that the Electronically Accessible Method must be taken. Given the above, Section 1-2(i) of the Interim Proposal provides that the director of a Stock Company which has the provisions of the Articles of Incorporation under Section 1-1(i) of the Interim Proposal must take the Electronically Accessible Method if it falls under any Item of Article 299, Paragraph 2 of the Companies Act. (2) Matters to be made accessible by an Electronically Accessible Method a Section 1-2(i) of the Interim Proposal provides the matters which are the subject of the Electronically Accessible Method as the Matters to be made accessible by an Electronically Accessible Method. Because there are cases where the matters to be stated in a notice of calling of shareholders meeting in writing or via electronic or magnetic means are broad under the current law (Article 299, Paragraph 4, each Item of Article 298, Paragraph 1, Article 63 of the Ordinance for Enforcement of the Companies Act), it is considered reasonable to provide that the such matters must also be made as the Matters to be made accessible by Electronically Accessible Method in the same way as the Reference Documents for Shareholders Meeting. Given this, Section 1-2(i)a of the Interim Proposal states that the matters specified in each Item of Article 298, Paragraph 1 of the Companies Act which are the matters to be stated or recorded in the notice of calling of shareholders meeting under the current law (Article 299, Paragraph 4 of the said Act) shall be the 6

Matters to be made accessible by Electronically Accessible Method. b If it is determined in the decision of calling of a shareholders meeting that a shareholder who does not attend the shareholders meeting may exercise voting rights in writing (Article 298, Paragraph 1, Item 3 of the Companies Act), under the current law, Reference Documents for Shareholders Meeting and a Voting Form must be delivered to shareholders upon the notice of calling of a shareholders meeting (Article 301, Paragraph 1 of the said Act). Given the above, Section 1-2(i)b of the Interim Proposal provides that, in such case, matters to be stated thereon shall be the Matters to be made accessible by an Electronically Accessible Method. However, with respect to a Voting Form, the name of the shareholder and number of voting rights that may be exercised are made as the matters to be stated in a Voting Form (Article 66, Paragraph 1, Item 5 of the Ordinance for Enforcement of the Companies Act), and if all of the matters to be stated in a Voting Form under the current law are made as the Matters to be made accessible by an Electronically Accessible Method, a Stock Company would be required to post on a website the matters to be stated in a Voting Form including name of the shareholder and number of voting rights that may be exercised separately for all the shareholders. Given the above, (Note) to Section 1-2(i)b of the Interim Proposal states that, when a Voting Form is delivered to shareholders upon the notice under Article 299, Paragraph 1 of the Companies Act, an Electronically Accessible Method is not required to be adopted with respect to the matter to be stated in a Voting Form. Even if a Voting Form is delivered, it is considered that, for example, a Stock Company may at the same time adopt the Electronically Accessible Method with respect to information related to the matters to be stated in a Voting Form without omission by taking appropriate systematic measures, etc., such as requiring a password. c If it is determined in the decision of calling of a shareholders meeting that a shareholder who d does not attend the shareholders meeting may exercise voting rights by an electronic or magnetic means (Article 298, Paragraph 1, Item 4 of the Companies Act), under the current law, the Reference Documents for Shareholders Meeting must be delivered to shareholders upon the notice of calling of a shareholders meeting (Article 302, Paragraph 1 of the said Act). Given the above, Section 1-2(i)c of the Interim Proposal provides that, in such case, matters to be stated thereon shall be the Matters to be made accessible by an Electronically Accessible Method. Where a shareholder exercises the right to demand a notice of a summary of proposals (Article 305 of the Companies Act), if a director issues the notice of calling of a shareholders meeting in writing, under the current law, a summary of proposals which such shareholder intends to propose shall be stated in such notice (Article 305, Paragraph 1 of the said Act). Given the above, Section 1-2(i)d of the Interim Proposal states that, in the same way as the matters to be stated or recorded in a notice of calling of a shareholders meeting under the current law (Section 1-2(i)a of 7

the Interim Proposal), a summary of such proposal shall be the Matters to be made accessible by an Electronically Accessible Method (also refer to Section 1-4(1)(ii) of the Interim Proposal). e f Where a Stock Company is a Company with a Board of Directors, when a director issues a notice of calling of an annual shareholders meeting, under the current law, a Financial Statement and Business Report (if Paragraph 1 or Paragraph 2 of Article 436 of the Companies Act applies, including an audit report or financial audit report) must be provided to shareholders together with the notice of calling of a shareholders meeting (Article 437 of the said Act). Given the above, Section 1-2(i)e of the Interim Proposal provides that, where a Stock Company is a Company with a Board of Directors, if a director issues a notice of calling of an annual shareholders meeting, matters stated or recorded in such Financial Statement and Business Report shall be the Matters to be made accessible by an Electronically Accessible Method. Where a Stock Company is a Company with Financial Auditor(s) (limited to the case where it is a Company with a Board of Directors), when a director issues a notice of calling of an annual shareholders meeting, under the current law, a consolidated Financial Statement must be provided to shareholders together with the notice of calling of a shareholders meeting (Article 444, Paragraph 6 of the Companies Act). Given the above, Section 1-2(i)f of the Interim Proposal provides that, where a Stock Company is a Company with Financial Auditor(s) (limited to the case where it is a Company with a Board of Directors), if a director issues a notice of calling of an annual shareholders meeting, matters stated or recorded in a consolidated Financial Statement shall be the Matters to be made accessible by an Electronically Accessible Method. g Under the current law, there are provisions that the method of announcing the amended matters to the shareholder may be notified together with the notice of calling of a shareholders meeting where a circumstance arises in which any matters in the Reference Documents for Shareholders Meeting, Business Report, Financial Statement and consolidated Financial Statement should be amended during the period from the date on which the notice of calling of a shareholders meeting is issued to the day preceding the date of a shareholders meeting (Article 65, Paragraph 3, Article 133, Paragraph 6 of the Ordinance for Enforcement of the Companies Act, Article 133, Paragraph 7, Article 134, Paragraph 7 of the Rules of Corporate Accounting). It is pointed out that, in practice, the method of posting on a website is selected as the method of making an announcement to shareholders pursuant to these provisions and notified together with the notice of calling of a shareholders meeting in many cases. Based on the fact that such practice exists, Section 1-2(i)g of the Interim Proposal provides that, if a circumstance arises where matters under a. to f. of Section 1-2(i) of the Interim Proposal should be amended, such fact and the amended matter shall be the Matters to be made accessible 8

by an Electronically Accessible Method. Under the current law, such provision does not exist with respect to the matters provided under each Item of Article 298, Paragraph 1 of the Companies Act (the matters under Section 1-2(i)a of the Interim Proposal), audit report and financial audit report (part of the matters under Section 1-2(i)e of the Interim Proposal); however, it is considered that, if a matter which is required to be amended is an immaterial misdescription, etc., amendment by the method of posting on a website should be allowed. Given this, the Interim Proposal provides that these matters may be the subject of amendment. However, under the current law, even if the method of announcement to the shareholders of the amended matters is notified pursuant to the provisions of Article 65, Paragraph 3 of the Ordinance for Enforcement of the Companies Act, etc., it is construed that amendment by such method is not unlimitedly allowed and whether such amendment is allowed is determined depending on the materiality of the matter which is required to be amended, the content of amendment and other factors. It is considered that whether the matter under Section 1-2(i)g of the Interim Proposal may be amended by adopting the Electronically Accessible Method should be determined depending on the materiality of the matter which is required to be amended, the content of amendment and other factors in the same way as an amendment under the current law. (3) Period of an Electronically Accessible Method Section 1-2(i) of the Interim Proposal provides, as the Period of an Electronically Accessible Method, that the period during which the Electronically Accessible Method must be adopted shall be from the Start Date for an Electronically Accessible Method to the day on which three months have passed after the date of the shareholders meeting. a The last day of the Period of an Electronically Accessible Method is provided to be the day on which three months have passed after the date of the shareholders meeting because there is a possibility that the Shareholders Meeting Materials will be used as evidence, etc. in a lawsuit relating to an action seeking revocation of a resolution of the shareholders meeting and it is considered reasonable that such materials are required to be posted on the website at least until the day on which the statute of limitations for filing an action (the main paragraph of Article 831, Paragraph 1 of the Companies Act) has passed. b On the other hand, with respect to the Start Date for an Electronically Accessible Method which is the first day of the Period of an Electronically Accessible Method, Section 1-2(ii) of the Interim Proposal proposes: Proposal A under which such date shall be the earlier of the day which is four weeks prior to the date of the shareholders meeting or the date on which the notice of calling of a shareholders meeting is issued; and Proposal B under which such date shall be the earlier of the day which is three weeks prior to the date of the shareholders meeting or the date 9

on which the notice of calling of a shareholders meeting is issued. This is based on the point raised that, if adoption of the Electronically Accessible Method is deemed sufficient in lieu of delivery or provision of the Reference Documents for Shareholders Meeting, etc. by use of Notice & Access, a Stock Company is no longer required to print and mail the Reference Documents for Shareholders Meeting, etc., and therefore in Notice & Access, the Start Date for an Electronically Accessible Method and the due date of dispatch of the notice of calling of a shareholders meeting should be made earlier than the due date for issuing a notice of calling of a shareholders meeting for a Public Company under the current law (i.e. a day that is two weeks prior to the shareholders meeting). Having said that, corporate practitioners express the views against Proposal A in the Sub-Committee that there is a concern that if listed companies are obliged to use Notice & Access, some listed companies may not be able to prepare and adopt Notice & Access by the due date. A point is raised in the Sub-Committee that a proposal should also be made in the Interim Proposal to the effect such date shall be the earlier of the day which is two weeks prior to the date of the shareholders meeting or the date on which the notice of calling of a shareholders meeting is issued. However, because many members pointed out in the Sub-Committee that it is necessary that information is disclosed as early as possible and the time for consideration on the exercise of voting right by shareholders is ensured, such proposal is not stated in the Interim Proposal. Also, it is possible to consider that the Start Date for an Electronically Accessible Method is made as the same date as the date on which the notice of calling of a shareholders meeting is issued. However, taking into consideration that the point was raised in the Sub-Committee that, if it is practically difficult to make both of the Start Date for an Electronically Accessible Method and the due date of dispatch of the notice of calling of a shareholders meeting earlier, the Start Date for an Electronically Accessible Method should be made earlier at least, the proposal in the Interim Proposal is prepared by focusing on the specific timing of the Start Date for an Electronically Accessible Method, and a proposal to the effect that such date shall be the same date as the date on which the notice of calling of a shareholders meeting is issued is not stated. On the other hand, both proposals provide that the Electronically Accessible Method must be started at the latest on the day on which a director actually issues the notice of calling of a shareholders meeting. This is because it is considered necessary from the viewpoint of simplicity for shareholders that the shareholders can review or inspect the Shareholders Meeting Materials posted on the website immediately after they receive the notice of calling of a shareholders meeting. Therefore, for example, if Proposal A is adopted with respect to the Start Date for an Electronically Accessible Method and Proposal A is adopted with respect to a due date of dispatch of the notice of calling of a shareholders meeting (Section 1-3(1) of the Interim 10

Proposal), or if Proposal B is adopted with respect to the Start Date for an Electronically Accessible Method and Proposal B is adopted with respect to a due date for of dispatch of the notice of calling of a shareholders meeting, the Start Date for an Electronically Accessible Method will be the date on which the notice of calling of a shareholders meeting is issued. 3 Notice of Calling of Shareholders Meeting In order to deem that the Shareholders Meeting Materials have been delivered to the shareholders by posting the Shareholders Meeting Materials on a website, it is considered necessary that the shareholders recognize that the Shareholders Meeting Materials are posted on the website. In Section 1-3 of the Interim Proposal, the notice of calling of a shareholders meeting is positioned as the notice to encourage the shareholders to recognize that the Shareholders Meeting Materials are posted on the website and to access the website, and the rules different from the current law are to be applied with respect to the due date of dispatch of the notice of calling of a shareholders meeting, etc. in the case where the Electronically Accessible Method must be adopted. It is considered that, even where the Electronically Accessible Method is adopted, issuance of the notice of calling of a shareholders meeting by email, etc. in lieu of issuing a document is not required to be prohibited if individual consent of shareholders is obtained. Therefore, the Interim Proposal does not exclude the application of the rules under Article 299, Paragraph 3 of the Companies Act with respect to the case where the Electronically Accessible Method must be adopted. (1) Due Date of Dispatch With respect to the due date of dispatch of the notice of calling of a shareholders meeting in the case where the Electronically Accessible Method must be adopted, Section 1-3(1) of the Interim Proposal states Proposal A, under which the due date shall be the day which is four weeks prior to the shareholders meeting, Proposal B, under which the due date shall be the day which is three weeks prior to the shareholders meeting and Proposal C, under which the due date shall be the day which is two weeks prior to the shareholders meeting. Proposal C is a proposal that such due date shall be the same due date for Public Companies under the current law (refer to Article 299, Paragraph 1 of the Companies Act). If we place emphasis on the function of the notice of calling of a shareholders meeting to ensure that shareholders recognize the fact that the Shareholders Meeting Materials are posted on the website, and adopt the opinion that the Start Date for an Electronically Accessible Method (Section 1-2(ii) of the Interim Proposal) and the issue date of the notice of calling of a shareholders meeting should be the same day, it may be considered that Proposal A or Proposal B is adopted with respect to both of the Start Date for an Electronically Accessible Method and the 11

due date of dispatch of the notice of calling of a shareholders meeting. On the other hand, based on the fact that shareholders are able to know that the Shareholders Meeting Materials are posted on the website via a method such as checking the website by themselves even before they receive the notice of calling of a shareholders meeting, and that a certain period of time is required only for printing and mailing even with respect to the notice of calling of a shareholders meeting, it is possible to consider that the Start Date for an Electronically Accessible Method and the due date of dispatch of the notice of calling of a shareholders meeting are not required to be the same day. If we adopt such opinion and consider that it should be ensured that the document stating the Matters to be made accessible by an Electronically Accessible Method may be delivered to the shareholder who has made a Request for a Paper Copy (refer to Section 1-4(2) of the Interim Proposal) at the same time as the issuance of the notice of calling of a shareholders meeting, it may be considered that Proposal C is adopted with respect to the due date of dispatch of the notice of calling of a shareholders meeting together with the due date for delivery of such document. However, with respect to the due date of dispatch of the notice of calling of a shareholders meeting, corporate practitioners express their views regarding Proposal A and Proposal B in the Sub-Committee saying that there is a concern that, if listed companies are obliged to use Notice & Access, some listed companies may not be able to prepare and adopt Notice & Access by the due date, in the same way as the Start Date for an Electronically Accessible Method (Section 1-2(ii) of the Interim Proposal). (2) Matters to Be Stated In the case where the Electronically Accessible Method is adopted, if many matters are required to be stated in the notice of calling of a shareholders meeting, there is a risk that costs required for printing and mailing of the notice of calling will become excessive in the end. Given this, Section 1-3(2) of the Interim Proposal provides that the matters required to be stated or recorded in the notice of calling of a shareholders meeting in such case shall be limited to the matters considered material in order to encourage the shareholders to access the website. Having said that, matters required to be stated or recorded in the notice of calling of a shareholders meeting will be matters to be made accessible by an Electronically Accessible Method (Section 1-2(i)a and d of the Interim Proposal). Under the current law, if the matters required to be stated or recorded in the notice of calling of a shareholders meeting in writing or by an electronic or magnetic means are stated in a Voting Form or the Reference Documents for Shareholders Meeting, such matters are not required to be stated or recorded in the notice of calling of a shareholders meeting (Article 66, Paragraph 3, Article 73, 12

Paragraph 4 of the Ordinance for Enforcement of the Companies Act). However, if the Electronically Accessible Method is adopted, Voting Forms or Reference Documents for Shareholders Meeting are not necessarily delivered to shareholders in writing or by an electronic or magnetic means. Therefore, it may be considered to provide that the matters required to be stated or recorded in a notice of calling of a shareholders meeting in writing or by an electronic or magnetic means may not be omitted. 4 Delivery or Provision of Reference Documents for Shareholders Meeting, etc. (1) Special Provisions, etc. of Article 301, Paragraph 1 of Companies Act Because delivery or provision of the Reference Documents for Shareholders Meeting, etc. is not required at the time of the notice of calling of a shareholders meeting under the Notice & Access, Section 1-4(1)(i) of the Interim Proposal provides that delivery or provision of the documents for a shareholders meeting, etc. is not required notwithstanding the provisions of Article 301, Paragraph 1 of the Companies Act, etc. Also, the Interim Proposal states that, if the Electronically Accessible Method is adopted, the matters to be stated or recorded in the notice of calling of a shareholders meeting shall be limited to the matters considered material to encourage the shareholders to access the website, and the matters set forth in each Item of Article 298, Paragraph 1 of the Companies Act which are the matters to be stated or recorded in the notice of calling of a shareholders meeting under the current law are organized as the Matters to be made accessible by an Electronically Accessible Method (Section 1-2(1)a, 1-3(2) of the Interim Proposal). Given the above, Section 1-4(1)(ii) of the Interim Proposal provides that, where a shareholder exercises the right to demand a notice of a summary of proposals (Article 305 of the said Act), if a director issues the notice of calling of a shareholders meeting in writing or by an electronic or magnetic means, such shareholder may demand that the Electronically Accessible Method is taken with respect to the summary of a proposal it intends to propose, not that the summary of a proposal it intends to propose is stated or recorded in such notice (also refer to Section 1-2(1)(iv) of the Interim Proposal). (2) Request for a Paper Copy a Because Notice & Access is a system that if a director posts the Shareholders Meeting Materials on a website such as the homepage of his/her company and notifies shareholders of the address of such website, etc. in writing, the director is deemed to have legally delivered the Shareholders Meeting Materials to the shareholders even if individual consent of the shareholders is not obtained, under this system, proper care must be taken with regards to the interest of shareholders who have difficulties in using the internet. According to the results of the 13

Communications Usage Trend Survey in 2016 compiled by the Ministry of Internal Affairs and Communications dated as of June 8, 2017, the rate of utilization of the internet for each age category in Japan (ratio of persons who have used the internet within the past one year) is 75.7% for those aged 60 to 69, 53.6% for those aged 70 to 79 and 23.4% for those aged 80 or above, and there are still persons who have difficulties in using the internet mainly among aged persons, and therefore it is considered necessary to take measures to protect the interest of shareholders who have difficulties in using the internet. Given this, in order to protect the interest of such shareholders, Section 1-4(2) of the Interim Proposal provides that the Request for a Paper Copy by shareholders is allowed. Having said that, if the Request for a Paper Copy by a shareholder is allowed, a Stock Company is required to undertake administration to print the document stating the Matters to be made accessible by an Electronically Accessible Method and mail it to the shareholder who has made the Request for a Paper Copy. Therefore, if the Request for a Paper Copy by shareholders is allowed, it is considered necessary to pay attention so that the administrative burden borne by the Stock Company does not become excessive. b In the Sub-Committee, as the structure of the Request for a Paper Copy, (i) a proposal that the due date for the Request for a Paper Copy is set after the issuance of notice of calling of shareholders meeting (one week after the due date of dispatch of the notice of calling of a shareholders meeting), and (ii) a proposal that although the due date for the Request for a Paper Copy is not expressly stipulated, if a Record Date is set to identify persons who may exercise voting rights at the shareholders meeting, it is sufficient if the Stock Company delivers the document stating the Matters to be made accessible by an Electronically Accessible Method to the shareholders who have made the Request for a Paper Copy by such Record Date and who were the shareholders as of such Record Date (i.e., a proposal that the due date for the Request for a Paper Copy is effectively set on such Record Date), were discussed. Because there is a concern regarding proposal (i) that, based on the schedule under the current practice, a Stock Company is required to process the administrative procedures related to the Request for a Paper Copy in a short period of time and the administrative burden becomes heavy, many members expressed their opinion in support of proposal (ii). Therefore, Section 1-4(2) of the Interim Proposal adopts proposal (ii). Where proposal (ii) is adopted, if a Record Date is not set, it is interpreted that, in principle, the document stating the Matters to be made accessible by an Electronically Accessible Method in connection with the shareholders meeting is not required to be delivered to shareholders who have made the Request for a Paper Copy after the day which is two weeks prior to such shareholders meeting. However, if a shareholder becomes the registered shareholder in the shareholder register after the day which is two weeks prior to the shareholders 14

meeting, such shareholder would not be entitled to make the Request for a Paper Copy by the day which is two weeks prior to the meeting even though he/she has a voting right at such shareholders meeting. Considering that the Request for a Paper Copy is a right closely related to the voting rights at the shareholders meeting (refer to (f) below), it is not reasonable to interpret that the Request for a Paper Copy may not be made at all in such case. Therefore, we consider it should be interpreted that a person who becomes the registered shareholder in the shareholder register after the day which is two weeks prior to the shareholders meeting may make the Request for a Paper Copy at the time of the change of registration and the Stock Company must promptly deliver the document stating the Matters to be made accessible by an Electronically Accessible Method to such shareholder. Also, assuming that proposal (ii) is adopted, with respect to the structure of the Request for a Paper Copy in connection with Book-Entry Transfer Shares, the following proposals were discussed in the Sub-Committee: (a) a proposal that the Request for a Paper Copy shall be made to the Stock Company (shareholder register administrator) through an Account Management Institution and the Book-Entry Transfer Institution; (b) a proposal that it shall be made to the Stock Company (shareholder register administrator) through an Account Management Institution only; (c) a proposal that it shall be made to the Stock Company (shareholder register administrator) not through an Account Management Institution or the Book-Entry Transfer Institution. Because, with respect to proposal (b), there is a concern that the burden on the Account Management Institution will become heavy and, with respect to proposal (c), it will be difficult for the shareholder register administrator to confirm, as of the time when it receives the Request for a Paper Copy, that the shareholder who has made the Request for a Paper Copy is the shareholder under the book-entry account register, many members expressed their opinion in support of proposal (a). Therefore, the Interim Proposal adopts proposal (a) as stated in (Note 1) to Section 1-4(2)(i) of the Interim Proposal. With respect to proposal (ii)(a), more specifically, the following proposals are considered: (a) a proposal that a shareholder may make the Request for a Paper Copy for each issue of stock by referring to the scheme under the book-entry transfer system concerning the current method of designation of dividend remittance (so-called simplified broking method); (b) a proposal that a shareholder may make the Request for a Paper Copy for all of the issues of stock it holds by referring to the scheme under the book-entry transfer system concerning the referral of Common Number. In the Sub-Committee, based on the purpose of ensuring the right to Request a Paper Copy to protect the interest of shareholders having difficulties in using the internet, because it is not necessary to allow the Request for a Paper Copy for each issue as proposal (a), many members expressed their opinion in support of proposal (b). It is thought necessary to further 15