CSR

Basic Policy for Establishing the Internal Control System

“The development of systems necessary to ensure that execution of the duties
by directors complies with laws and regulations and the articles of incorporation”
(Article 362, Paragraph 4, Item 6 of the Companies Act)

  1. The board of directors shall establish an effective internal control system and secure a system for compliance with laws and the Articles of Incorporation, so that the company’s business execution is appropriate and sound.
  2. Corporate auditors shall audit the effectiveness and functionality of this internal control system.

“Systems necessary to ensure the properness of operations of
the company and operations of its subsidiary companies”
(Article 362, Paragraph 4, Item 6 of the Companies Act)

Systems related to the retention and management of information pertaining to the execution of the duties of a director
(Article 100, Paragraph 1, Item 1 of the Ordinance for Enforcement of the Companies Act)

  1. The directors are to appropriately store and preserve the minutes of general meetings of shareholders, the board of directors’ meeting, and the managing directors’ meeting, approval documents and other information pertaining to the execution of the duties of the directors in accordance with laws, regulations, and internal policies.
  2. If requested by any director or auditor, these documents are to be submitted for their inspection.

Rules and other systems related to management of the risk of loss of the company and its subsidiary companies
(Article 100, Paragraph 1, Item 2 and Item 5 (b) of the Ordinance for Enforcement of the Companies Act)

  1. In terms of individual risks relating to the company’s operations, systems will be established in each corresponding division to formulate rules and guidelines, conduct training, and prepare and distribute manuals in order to prevent losses due to risks before they occur. As to newly arising risks, the company shall promptly appoint a responsible division and a person in charge.
  2. In the event that grave and serious risks occur, the company shall immediately set up an emergency headquarters with its representative director and president to act as the chairperson thereof, and create an advisory team consisting of corporate attorneys and external professional organization(s) as needed, in order to provide swift and proper responses to the risks, prevent enlargement of damage, and keep any loss to a minimum.
  3. The Management Administration Headquarters is in charge of general and achievement control of the company’s subsidiaries in accordance with the Rules for Segregation of Duties.

Systems to ensure that the execution of the duties of a director of the company and the execution of the duties of a director of a subsidiary company of the company are performed efficiently
(Article 100, Paragraph 1, Item 3 and Item 5 (c) of the Ordinance for Enforcement of the Companies Act)

  1. We shall execute operations efficiently in accordance with the regulations that define the decision-making rules pertaining to the board of directors' meeting, the managing directors' meeting, internal approval processes, and segregation of duties.
  2. The board of directors shall formulate a medium-term management plan, and thoroughly manage its performance accordingly during each fiscal year.
  3. The board of directors shall hold meetings for affiliate presidents as needed to aim for the overall growth of its domestic subsidiaries, and deliberate important matters relating to the operations of its subsidiaries including managerial strategies for each division.

Systems to ensure that the execution of the duties of an employee of the company and the execution of the duties of a director and an employee of a subsidiary company of the company comply with laws and regulations and the article of incorporation
(Article 100, Paragraph 1, Item 4 and Item 5 (d) of the Ordinance for Enforcement of the Companies Act)

  1. Based on the Nippon Paper Group’s Action Charter, we shall formulate the “NP Trading Codes of Conduct” to ensure thorough compliance
  2. The Internal Audit Office shall conduct internal audits of the company and its subsidiaries in accordance with internal auditing guidelines and rules periodically to ensure the efficiency and validity of internal control functions.
  3. By utilizing the Nippon Paper Group Help Line, we shall maintain a whistle-blowing system to encourage employees to report and consult regarding compliance issues.

Systems related to reporting to the company the matters regarding the execution of the duties of a director, etc. of a subsidiary company of the company
(Article 100, Paragraph 1, Item 5 (a) of the Ordinance for Enforcement of the Companies Act)

  1. The company shall establish management regulations concerning affiliate companies to make appropriate management control of its subsidiaries.
  2. The Auditors shall ensure the proper execution of the duties of the company and its subsidiaries in cooperation with the auditing sections of its subsidiaries.
  3. The company will hold meetings for affiliate presidents whenever appropriate to receive reports on the current situation and issues for its major subsidiaries.

Matters related to employees assigned to assist the duties of auditors, related to the independence of the employee under the preceding item from the directors of the company, and related to ensuring the effectiveness of instructions given to the employee
(Article 100, Paragraph 3, Item 1, Item 2, and Item 3 of the Ordinance for Enforcement of the Companies Act)

  1. When corporate auditors request that assistants be assigned to provide assistance to them, the company shall assign supplementary assistants selected from among the employees of the company. The company shall secure the independence of said assistants to the auditors from the directors with respect to the selection of assistants.
  2. No auditor assistants may assume any executive post or function regarding the execution of the company’s business.

Systems for the directors and employees of the company, and the directors, company auditors, executive officers, members who execute the business, those who are to perform the duties of Article 598, paragraph (1) of the Company Act, other persons in equivalent positions (hereinafter referred to as “directors and auditors of its subsidiary companies” in this article), and employees of its subsidiary companies, or a person who has received a report from those above to report to the auditors of the company, and systems to ensure that audits by the auditors of the company are performed effectively
(Article 100, Paragraph 3, Item 4, Item 5, Item 6, and Item 7 of the Ordinance for Enforcement of the Companies Act)

  1. The directors and employees of the company, and directors, company auditors, and employees of the subsidiaries of the company, and a person who has received a report from those above must report, with no delay, to the corporate auditors material violations of law or the Articles of Incorporation, illegal conduct, or the facts that could cause severe damage to the company regarding the execution of the duties.
  2. Representative directors shall meet with the corporate auditors regularly or whenever necessary to promote mutual communication concerning the management of the company aside from operational report.
  3. The board of directors shall secure the participation of corporate auditors in important meetings to ensure that the company’s business is executed properly.
  4. Corporate auditors may seek reports from directors and employees of the company, or from directors and employees of the subsidiaries of the company as necessary.
  5. In addition, the company shall establish an environment in which corporate auditors are allowed to closely exchange information not only with directors and employees, but also with certified public accountants and corporate attorneys to ensure that company information is communicated to the auditors appropriately.
  6. The division of the company in charge of the Nippon Paper Group Help Line shall report the status provided by Nippon Paper on whistle-blowing by the officers and employees of the company and its subsidiaries to the company auditors on a case-by-case basis.
  7. The identity of a person who uses the whistle-blowing system is protected to ensure that he or she does not suffer any unfair treatment.
  8. Based on the audit plans formulated by the auditors, the company will secure a certain amount of budget spent on the cost for the execution of duties by the auditors on a yearly basis.
  9. If corporate auditors make requests to the company, with respect to the execution of their duties, for advancement of expenses set forth in Article 388 of the Company Act, the company shall process the payment for these expenses or debts immediately.

Systems to ensure credibility of the financial reporting of the company and its subsidiaries

In accordance with the regulations for internal control over financial reporting, the company shall develop and manage systems for effective internal control on financial reporting in order to ensure the reliability of the financial reports. The company shall also assess the validity of these internal controls on an ongoing basis and take necessary measures to improve them.

Systems of the company and its subsidiaries in place to eliminate antisocial forces

We shall have no association whatsoever with antisocial forces and groups. We shall deal with undue claims made by such forces resolutely, in cooperation with external specialized agencies, if necessary.

Formulated on May 29, 2006 Revised on September 25, 2015 Revised on April 28, 2017

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