Governance

Corporate Governance Report

Basic Stance on Corporate Governance

Our Group’s basic policy regarding corporate governance is based on the belief that establishing effective governance is essential for ensuring transparency and fairness in corporate management and promoting continuous growth.

Specifically, it is fundamental that each director, corporate auditor, and employee recognize their individual roles and responsibilities in corporate management. Establishing a highly effective, flexible, and robust organizational structure will ensure that internal checks and balances function effectively. This will earn the trust of shareholders and other stakeholders and promote the continuous growth of the Group.

Corporate Governance Structure

Basic Policy on the Internal Control System

Established on August 19, 2019
Revised on December 24, 2024

1. System to Ensure Compliance with Applicable Laws, Regulations, and HENNGE’s Articles of Incorporation in the Execution of Duties by Directors and Employees

1. The Board of Directors, composed of both internal and outside directors, makes decisions on important matters and supervises the execution of directors’ duties in accordance with applicable laws and regulations, the Articles of Incorporation, and the Rules for the Board of Directors.
2. Directors shall oversee their assigned duties as determined by the Board of Directors in compliance with applicable laws and regulations, the Articles of Incorporation, Board resolutions, and internal company rules.
3. An Executive Officer System shall be implemented to strengthen the Board’s decision-making function and improve the efficiency of the Board’s execution of duties. Executive officers shall carry out their responsibilities based on the decisions made by the Board of Directors and under the delegation of the Board of Directors and the Representative Director.
4. The HENNGE Compliance Basic Policy and Rules for Compliance (hereinafter collectively referred to as “Rules for Compliance, etc.”) shall be established to ensure that all directors and employees are consistently aware of the company’s social responsibility and act in accordance with not only stipulated laws, regulations, and rules but also general social norms. This will promote a culture of compliance management within the company.
5. Following the Rules for Compliance, a director responsible for compliance matters shall be appointed. A Compliance Committee, chaired by the Compliance Director, shall be established to monitor, investigate, and provide oversight and guidance on compliance-related matters. The committee will also work to prevent actual or potential violations of relevant laws and regulations by the directors and the employees. To ensure effective compliance management, the committee will hold regular meetings and collaborate with internal whistleblowing channels.
6. In the event of a compliance violation, a system shall be established to report the issue to the Chief Executive Officer, the Board of Directors, and the Audit and Supervisory Committee, with the Compliance Committee playing a central role. Additionally, the company’s legal counsel shall be consulted and informed as appropriate.

2. System for the Storage and Management of Information Related to the Execution of Directors’ Duties

Important business documents, confidential information, and personal data shall be recorded, maintained, and managed appropriately based on applicable laws and regulations, including the Rules for Information Management, Rules Regarding the Management of Confidential Information and Trade Secrets, Rules for Handling of Personal Data, and the Information Security Management Rules.

3. Rules and Systems For Managing the Risk of Loss

The Risk Management Rules and Crisis Management Policy shall be established to prevent the emergence of risks and develop a system for taking prompt and appropriate measures when risks materialize.

4. System to Ensure the Efficient Execution of Directors’ Duties

1. To ensure the efficient execution of directors’ duties, matters related to the operation of the Board of Directors shall be outlined in the Rules for the Board of Directors. In addition to holding regular monthly meetings, the Board will be convened on an ad-hoc basis as needed.
2. Directors shall leverage information technology for a prompt and accurate understanding of management information.

5. System for Ensuring the Proper Conduct of Business Within HENNGE and Its Subsidiaries as a Corporate Group

1. Regarding matters related to the execution of duties by the directors of subsidiaries, the HENNGE Board of Directors shall receive periodic reports on the management status of subsidiaries and ensure the proper conduct of their business operations.
2. Regarding the risk items specified in the Risk Management Rules, the Board of Directors of each subsidiary will conduct evaluations as appropriate, implement measures to prevent the materialization of risks, and establish a system to take prompt and appropriate measures in the event that risks materialize.
3. HENNGE Audit and Supervisory Committee members, appointed by the Audit and Supervisory Committee, shall oversee whether the internal control systems of HENNGE subsidiaries are properly established. Committee members shall exercise their power granted by applicable laws and regulations to conduct investigations into the subsidiaries’ operations as necessary.
4. The internal audit personnel shall carry out regular or ad-hoc internal audits of the subsidiaries, promote the development of internal control systems, and provide support and advice on the implementation of corrective measures.

6. Matters Relating to Directors and Employees Appointed to Assist the Audit and Supervisory Committee in Performing Its Duties, Including Their Independence from the Board of Directors (Excluding Directors Who Are Members of the Audit and Supervisory Committee) and the System Established to Ensure the Effectiveness of Instructions Given to These Directors and Employees

1. If the Audit and Supervisory Committee requests the appointment of assistants, the Board of Directors and the Audit and Supervisory Committee shall discuss to determine the directors and employees who will assist the Committee in performing its duties and assign the necessary personnel.
2. If directors and employees are appointed to assist the Audit and Supervisory Committee, they shall not be subject to the direction or authority of the Board of Directors (excluding directors who are Audit and Supervisory Committee members) or senior management concerning requests made by the Audit and Supervisory Committee.
3. All personnel transfers and disciplinary actions for directors and employees assisting the Audit and Supervisory Committee shall require prior approval from the Audit and Supervisory Committee.

7. System for Reporting to the Audit and Supervisory Committee by Directors and Employees

1. HENNGE’s directors and employees, as well as those of its subsidiaries, shall promptly report the status of business operations upon request by the Audit and Supervisory Committee.
2. HENNGE’s directors, as well as those of its subsidiaries, shall promptly report to the Audit and Supervisory Committee upon discovering any facts that may cause significant harm to HENNGE or its subsidiaries.
3. HENNGE and its subsidiaries shall establish a system that enables HENNGE employees and those of its subsidiaries to promptly report to the Audit and Supervisory Committee through internal reporting channels or other means if they discover any facts that may cause significant harm to HENNGE or its subsidiaries.
4. HENNGE and its subsidiaries shall establish a system so that employees who report to the Audit and Supervisory Committee, as outlined in the preceding paragraph, are not subjected to unfair treatment.
5. The Director in charge of compliance shall promptly report any internal whistleblowing incidents under the whistleblowing system to the Audit and Supervisory Committee as appropriate.

8. A System to Ensure Effective Implementation of Audits Conducted by the Audit and Supervisory Committee

1. Audit and Supervisory Committee members shall participate in important meetings, in addition to the Board of Directors meetings, to stay informed about key decision-making processes and the status of business execution. They may also offer their input and review relevant documents related to business execution, such as written requests for major approvals. Furthermore, they may request explanations from directors and employees when necessary.
2. In the event that Audit and Supervisory Committee members request prepayment of expenses or other claims regarding the execution of their duties (limited to those concerning the execution of the Audit and Supervisory Committee’s responsibilities) based on Article 399-2, Paragraph 4 of the Companies Act of Japan, the company shall promptly process the relevant expenses or obligations.