Listing

Criteria for Listing

Update : Sep. 26, 2012

Formal Requirements (Domestic Stocks)

Criteria	Securities Listing Regulations (Formal Requirment)
(1) Number of shareholders	800 or more (or 2,200 or more *2)
(2) Number of tradable shares *1	a. The number of tradable shares: 4,000 units or more (or 20,000 units or more *2) b. The market capitalization of the tradable shares: 1 billion yen or more c. The number of tradable shares: 30% or more of the listed stocks,etc. (or 35% or more *2)
(3) Market capitalization	2 billion yen or more (or 25 billion yen or more *2)
(4) Number of consecutive years of conducting business	The business activities have been continuously carried out by setting up a board of directors since a day before the day which is three (3) years prior to the end of a business year immediately prior to the business year containing the initial listing application day
(5) Amount of net assets	1 billion yen or more
(6) Amount of profits and market capitalization (a. or b. must be satisfied)	a. The total amount of profits in the last two (2) years shall be at least 500 million yen; b. The market capitalization as of the listing day is expected to reach at least 50 billion yen, except cases where sales for the last year are less than 10 billion yen
(7) False statement or adverse opinion, etc. (a. through d. must be satisfied)	a. No false statement is made in the securities reports, etc. which contain or make reference to financial statements, etc. for each business year or each consolidated accounting year which ended in the last two (2) years or quarterly financial statements, etc. for a quarterly accounting period in each business year or for a consolidated quarterly accounting period in each consolidated accounting year; b. The audit report attached to financial statements, etc. for each business year or each consolidated accounting year which ended in the last two (2) years contains an "unqualified opinion" or a "qualified opinion with exceptions" of certified public accountants, etc.; provided; c. The audit report attached to financial statements, etc. for the business year and consolidated accounting year which ended in the last year and a quarterly review report attached to quarterly financial statements, etc. for a quarterly accounting period in the business year which ended in the last year and a consolidated quarterly accounting period in the consolidated accounting year contain an "unqualified opinion" or an "unqualified conclusion" of certified public accountants, etc.; provided; d. Where a stock, etc. pertaining to an initial listing applicant is listed on any other financial instruments exchange in Japan, such stock, etc. shall not fall under the following (a) and (b): (a) The internal control report pertaining to the business year ending in the last year contains the fact that "appraisal results cannot be provided" contained in; (b) The internal control audit report regarding the internal control report pertaining toa business year ending in the last year contains the fact that "no opinion is provided".
(8) Audit by a listed company audit firm	The financial statements, etc. for each business year or consolidated accounting year ending in the last two (2) years as well as the quarterly financial statements, etc. for a quarterly accounting period in the business year or for a quarterly consolidated accounting period in the consolidated accounting year ending in the last year have undergone audit or quarterly review equivalent to that in the provisions of Article 193-2 of the Act by a listed company audit firm
(9) Establishment of a shareholder services agent	Shareholder services have been entrusted to an institution specified as the applicant’s shareholder services agent, or an informal consent of undertaking the entrustment of such shareholder services from the shareholder services agent has been received; provided, however, that the same shall not apply to a shareholder services agent approved by the Exchange
(10) Share Unit	The Share Unit shall be expected to be 100 shares
(11) Classes of stock	In the case that a stock, etc. pertaining to the initial listing application, such stock, etc. shall be, as a general rule, any of stocks referenced in the following a. through c. In this case, the initial listing applicant for the stock referenced in b. shall not have securities other than said stock as to which the applicant makes initial listing application a. In the case of a company issuing one class of stock with voting rights, said stock with voting rights; b. In the case of a company issuing multiple classes of stock with voting rights, a class of stock with voting rights whose value of rights, etc. to receive economic benefits including claim for surplus dividend pertaining to the number of shares that enables exercise of one voting right at a general shareholders meeting with regard to important matters including selection and dismissal of board members is higher than any other class of stock; c. Stock with no voting rights
(12) Restriction on transfer of shares	Transfer of shares pertaining to an initial listing application is not restricted or it is expected that there will be no restriction by the time of listing; provided, however, that the same shall not apply to cases where transfer of shares is restricted pursuant to the provisions of special laws at the same time the details of the restriction are deemed not to hinder trading in the market of the Exchange
(13) Handling by the designated book-entry transfer institution	The relevant issue is subject to the book-entry transfer operation of the designated book-entry transfer institution, or is likely to be so by the time of listing
(14) Expected implementation of merger, etc	The merger, etc. shall not fall under the following a. and b.: a. Where a merger, demerger, making other company a subsidiary or making a subsidiary a non-subsidiary or transfer of a business to or from other entity is scheduled to be carried out on or after the initial listing application day and within two (2) years from the end of the most recent business year before such day, and, in addition, where the Exchange deems that an initial listing applicant will cease to be a substantial surviving company by such an act; provided; b. Where a merger in which an initial listing applicant becomes a dissolution company,a stock swap or a stock transfer whereby it becomes a wholly-owned subsidiary of another company is expected to be carried out within two (2) years from the end of the business year immediately prior to the business year containing the initial listing application day.

• (*1)"Tradable Shares" refers to listed shares excluding shares held by parties with a special interest such as officers, shares owned by the company itself, and shares held by persons who individually own 10% or more of listed shares.
• (*2)If listed directly on the 1st section.
• (*3)1 unit is the minimum number of shares necessary for 1 voting right.

Eligibility Requirements

Securities Listing Regulations, Rule 207	Guidelines Concerning Listing Examination, etc.
(1) Corporate continuity and profitability: A business is operated continuously and a stable revenue base is present	(1) The business plan of corporate group of an initial listing applicant is appropriately drawn up in light of its business model, business environment, risk factors, etc.; (2) The corporate group of an initial listing applicant is reasonably expected to be able to maintain a stable profit in the future; (3) Management activities of the corporate group of an initial listing applicant are recognized to be able to be carried out stably and continuously in light of the matters enumerated in the following a. to d. and other matters: a. Business activities of the corporate group of an initial listing applicant are in a state enumerated in the following (a) and (b): (a) Business activities are able to be conducted stably and continuously in light of purchases, production and sales, actual results of transactions with customers and suppliers, characteristics and demand trends for manufactured products and services, and the state of performance of any other business; and (b) The structure of the corporate group is no serious obstacle to continuous business activities; b. Investment activities such as capital investment and business investment, etc. of the corporate group of an initial listing applicant do not hinder continuous management activities in light of the trend and future outlook, etc. of the state of investment; c. Financial activities such as fundraising, etc. of the corporate group of an initial listing applicant do not hinder continuous management activities in light of the trend and future outlook, etc. of the state of financial affairs; and d. Concerning the matters which become the premise of the main business activities of the corporate group of an initial listing applicant, there are no obstacles to the continuous business activities.
(2) Soundness of corporate management: A business is carried out fairly and faithfully	(1) The corporate group of an initial listing applicant is recognized not to give or receive profits wrongfully through a trading act or any other management activities with relevant parties and other specified entities, in light of the matters enumerated in the following a. and b. and other matters: a. Where a transaction has took place between the corporate group of an initial listing applicant and its relevant parties or any other specified entities, and such transaction has rationality of continuing the transaction and reasonability of trading terms including trading prices; and b. Benefits of the corporate group of an initial listing applicant are not lost wrongfully because relevant parties and any other specified entities of the corporate group of an initial listing applicant give priority to their own benefits; (2) The mutual relationship of relatives of officers (including board members, accounting advisors of an initial listing applicant, its composition, actual working situation or the state of concurrent posts as officers and employees, etc. with any other company, etc. are recognized not to impair the fair, faithful and full execution of office duties or the implementation of effective auditing as officers of such initial listing applicant. In this case, where board members, accounting advisors or executive officers, otherwise, spouses of persons corresponding to these and blood relatives within the second degree and relatives by affinity take a position as an auditor, a member of an auditing committee or any other positions corresponding to these, it shall be deemed to impair the implementation of an effective auditing; and (3) Where an initial listing applicant has a parent company, etc., management activities of the corporate group of an initial listing applicant are recognized to be carried out independently from such parent company, etc. in light of the matters enumerated in the following a. to c. or any other matters: a. In light of the relationship between the business line of the corporate group of an initial listing applicant and that of the corporate group of the parent company, etc., the state of business adjustment made by the corporate group of the parent company, etc. and its possibility and any other matters, an initial listing applicant is not recognized to be substantially a business division of such parent company, etc.; b. The corporate group of an initial listing applicant or that of a parent company, etc. does not coerce or induce transaction which become disadvantageous to such parent company, etc. or the corporate groups of such initial listing applicant such as transactions under markedly different terms from those of normal transactions;and c. The state of receiving seconded persons of the corporate group of an initial listing applicant is recognized not to excessively depend on the parent company, etc. and not to hinder continuous management activities.
(3) Effectiveness of corporate governance and internal management system of an enterprise: Corporate governance and internal management system are properly prepared and functioning	(1) The system to secure the execution of appropriate work duties of officers of the corporate group of an initial listing applicant is recognized to be appropriately prepared and operated in light of the matters enumerated in the following a. and b. and other matters: a. An initial listing applicant has an organizational structure and an officer composition which is able to effectively implement checks and balances as well as auditing concerning the execution of work duties of officers of the corporate group of an initial listing applicant. A listing examination in such a case shall be conducted in consideration of the state of compliance with matters prescribed in the provisions of Rules 436-2 through 439 of the Regulations (Securing Independent Director(s)/Auditor(s), Organs of Listed Domestic Companies, Certified Public Accountants, etc., and Development of System and Structure Necessary to Ensure Appropriateness of Business); b. In the corporate group of an initial listing applicant, checks and balances as well as auditing are implemented with regard to the execution of work duties of officers for the purpose of the continuous and efficient management of the corporation. Moreover, such checks and balances as well as auditing effectively function; (2) The internal management system is deemed to be appropriately developed and operated so that an initial listing applicant and its corporate group carry out effective management activities in light of the matters enumerated in the following a. and b. and other matters: a. A necessary managerial and administrative system is developed and operated appropriately to secure efficiency of management activities and internal check-and balance functions of the corporate group of an initial listing applicant; and b. An internal auditing system of the corporate group of an initial listing applicant is prepared and operated appropriately; (3) Necessary personnel are deemed to be secured in order to carry out stable and continuous execution of management activities of the corporate group of an initial listing applicant and to maintain its appropriate internal management system; (4) The corporate group of an initial listing applicant adopts accounting treatment standards adaptable to its actual condition, and a necessary accounting system is deemed to be developed and operated appropriately; and (5) It is deemed that an effective system to comply with laws and regulations, etc. concerning management activities and other matters in the corporate group of an nitial listing applicant is prepared and operated appropriately, and that no material breach of laws and regulations has recently been made, and no act which is likely to become a material breach of laws and regulations in the future is being carried out.
(4) Appropriateness of disclosure of corporate information, etc.: The applicant is in a status where disclosure of the corporate information, etc. may be carried out in an appropriate manner	(1) The corporate group of an initial listing applicant is deemed to be able to reasonably manage corporate information including facts which will has a material effect on management and to disclose it in a timely and appropriate manner to investors. Moreover, its system for the preemptive prevention of insider trading is deemed to be developed and operated appropriately; (2) Documents pertaining to disclosure of corporate information, out of the initial listing application documents, are deemed to be prepared in compliance with laws and regulations, etc., and contain the following items enumerated in the following a. and b. and other matters: a. The financial condition and financial results of an initial listing applicant and its corporate group, and matters which may have an important effect on investment decisions of investors with respect to important matters, etc. concerning officers, major shareholders, affiliated companies, etc.; and b. Items enumerated in the following (a) to (d) pertaining to the matters which are the premises of main business activities of the corporate group of an initial listing applicant: (a) Details of the matters which are the premises of the main business activities of the corporate group of an initial listing applicant; (b) Where the validity period of permission and authorization, etc. and any other time limit is specified by laws and regulations or contract, etc., such time limit; (c) Where cancellation, rescission and any other event of permission and authorization, etc. are stipulated in laws and regulations or contract, etc., such event; and (d) The effect that there is no factor which hinder their continuity concerning the matters which are the premises of the main business activities of the corporate group of an initial listing applicant, and if there is such factor, the fact that it will have a material effect on business activities; (3) The corporate group of an initial listing applicant does not provide distorted information disclosure on the actual state of the corporate group of the initial listing applicant by carrying out a trading act with its relevant party or any other specified entity or adjustment of the share ownership ratios, etc.; and (4) Where an initial listing applicant has a parent company, etc., any one of the following a. or b. shall be met on the condition that disclosure of such parent company, etc. is valid: a. A stock, etc. issued by a parent company, etc. of an initial listing applicant is listed on a domestic financial instruments exchange; and b. An initial listing applicant can appropriately grasp company information such as facts concerning the parent company, etc. which has a material effect on its management, and the initial listing applicant pledges in writing that such parent company, etc. agrees to its disclosure of company information which has a material effect on its management, out of such company information concerning the parent company, etc., to investors in an appropriate manner.
(5) Other matters deemed necessary by the Exchange from the viewpoint of the public interest or the protection of investors	(1) The contents of the rights of shareholders and the state of their exercise are deemed appropriate from the viewpoints of the public interest or the protection of investors, due to the matters enumerated in the following a. and b. and other matters: a. The contents of shareholder rights and exercise thereof are not unreasonably restricted; and b. Where an initial listing applicant has introduced a takeover defense measure, the initial listing applicant complies with the matters enumerated in each item of the Rule 440 of the Regulations (Matters to be Observed Pertaining to Introduction of Takeover Defense Measures); (2) The corporate group of an initial listing applicant does not have a contention, a dispute, etc. which may have a material effect on management activities and business results; (3) The corporate group of an initial listing applicant is deemed to have developed an internal system to prevent criminal and extremist elements from being involved in management activities, and make efforts to prevent such involvement, and their actual state is deemed to be appropriate from the viewpoint of the public interest or the protection of investors; (4) Where a domestic stock, etc. pertaining to an initial listing application is shares without voting rights or shares with a small number of voting rights, all of the following a. to f. shall be met: a. Where a state of controlling a company with an extremely small ratio of contribution, a scheme of shares without voting rights or a small number of voting rights is expected to be dissolved; b. Where conflicts of interest arise between shareholders of different classes, protection measures are deemed to be able to be taken so that shareholders of a domestic stock, etc. pertaining to such initial listing application do not unreasonably suffer damage; c. Where the issuer of a domestic stock, etc. pertaining to such initial listing application carries out a transaction with an entity enumerated in the following (a) to (c), protection measures for minority shareholders are deemed to be expected to be able to be taken: (a) A parent company; (b) A controlling shareholder and his/her close relatives; and (c) The company referenced in the preceding (b) that holds the majority of the voting rights, etc. and a subsidiary of such company, etc.; d. It is prescribed that where a domestic stock, etc. pertaining to such initial listing application is shares with a small number of voting rights, shares with a large number of voting rights shall be converted to shares with a small number of voting rights, when they are transferred, etc.; e. Where a domestic stock, etc. pertaining to such initial listing application has preferential contents concerning dividends from retained earnings, estimated profits for two (2) years after the end date of the business year immediately prior to the business year including the listing application date and a distributable amount as of the end date of the business year immediately prior to the business year involving the listing application date are deemed to be good, and it is expected that the issuer of such domestic stock, etc. will account for profits sufficient to carry out dividends from retained earnings pertaining to such domestic stock, etc., in principle; and f. Benefits of shareholders and investors are deemed to be highly unlikely to be infringed; and (5) It is deemed appropriate from the viewpoints of the public interest or the protection of investors.