Corporate Governance System

Overview of the Corporate Governance System and Reasons for its Adoption

The Company has adopted the system of a company with an Audit and Supervisory Committee. The current system was adopted to strengthen auditing and supervisory functions through Audit and Supervisory Committee members with voting rights in the Board of Directors, to encourage outside directors to more actively voice opinions from an independent perspective based on the views of shareholders and other stakeholders in Board of Directors meetings, and to seek increased transparency and objectivity in decision-making.

Board of Directors

The Company’s Board of Directors consists of eight Directors (three of whom are Audit and Supervisory Committee Members), including three Outside Directors (two of whom are Audit and Supervisory Committee Members). Consequently, Outside Directors account for more than one third of the total number of Directors, and the majority of the Audit and Supervisory Committee are Outside Directors.

System of Internal Audits, Audits of Audit and Supervisory Committee members and Accounting Audits

Audit System of the Audit and Supervisory Committee

The Audit and Supervisory Committee shall receive a report on the status of internal audits and their results on a regular basis from the Internal Audit Department, in addition to recommending or instructing additional audits and investigations, as necessary. Moreover, it shall audit and supervise the status of the execution of duties of Directors as well as those of Corporate Officers by coordinating with Accounting Auditors at any time.
Audit and Supervisory Committee members shall attend a meeting of the Board of Directors and other important meetings, request a report from the relevant department executing duties, as needed, and gather information on the status of the Company’s execution of duties. The Company shall secure sufficient human resources and a system to support the duties of the Audit and Supervisory Committee, and is working on strengthening its management and supervisory function.

Internal Audit System

A department that is responsible for company-wide compliance has been established, with the department verifying the legality of major decision-making items in advance and educating and providing guidance to Directors and employees. In addition, internal audits are being conducted within all departments of the Group based on internal audit rules as a way to verify to see whether the compliance system is operating appropriately.

Risk Management System

Regarding the Company’s risk management system, under the leadership of the Representative Director, the Company identifies, analyzes and assesses uncertainties and exposures to loss (hereinafter “risks”) associated with the Group’s business, and establishes sections responsible for managing individual risks. For matters that require a cross-functional response within the Company or across the Group, the Company has established a Risk Management Committee with risk oversight functions directly under the Representative Director, and promptly puts in place systems to manage risks and implement preventive measures.

Status of Other Corporate Governance

Criteria for Independence of Outside Directors

The Company has appointed one Outside Director (excluding Directors who are Audit and Supervisory Committee Members) to strengthen the supervisory functions of the Board of Directors and to ensure highly transparent management. The Company has also appointed two Outside Directors who are Audit and Supervisory Committee Members, to strengthen the corporate governance system and to enhance the audit system. The Company’s basic policy when appointing Independent Directors is to adhere to the standards for independence set forth by the Tokyo Stock Exchange. It has also established its own standards as more specific standards for judging materiality, and elects candidates only if it judges that there is no possibility of a conflict of interest arising between the candidate and general shareholders.
The two Outside Directors who are Audit and Supervisory Committee Members are registered as independent directors with the Tokyo Stock Exchange.

Matters to be resolved at the shareholders meeting that can be resolved at a meeting of the Board of Directors

(a) Acquisition of treasury stock
The Articles of Incorporation of Park24 stipulate that the Company may acquire its own shares in market and other transactions by resolution of a meeting of the Board of Directors, in accordance with the provision of Article 165, Paragraph 2 of the Companies Act, for the purpose of operating a flexible capital policy for its shareholders.

(b) Interim dividends
The Articles of Incorporation also stipulate that the Company may pay interim dividends with April 30 every year as the record date by resolution of a meeting of the Board of Directors for the purpose of executing a flexible dividend policy.

Number of Directors

The Articles of Incorporation stipulate that the Company shall have no more than ten Directors (excluding Directors who are Audit and Supervisory Committee Members), and that it shall have no more than five Directors who are Audit and Supervisory Committee Members.

Requirements for Resolutions for the Election of Directors

The Articles of Incorporation stipulate that the resolution to elect Directors shall be made by a majority of the eligible votes of shareholders present at a shareholders’ meeting, where shareholders holding at least one-third or more of the votes with voting rights are present. The Articles of Incorporation also stipulate that resolutions to elect directors shall not be by cumulative voting.

Agreements Limiting Liability

The Articles of Incorporation of Park24 stipulate that, pursuant to Article 427, Paragraph 1 of the Companies Act, the Company may enter into agreements with non-Executive Directors to limit their liability. In accordance with these provisions, the Company has entered into agreements with three Directors who are Audit and Supervisory Committee Members and one Director who is not an Audit and Supervisory Committee Member, limiting their liability under Article 423, Paragraph 1 of the Companies Act, and the maximum amount of the compensation for damage under such agreement shall be the minimum liability amount stipulated in Article 425, Paragraph 1 of the Companies Act.