Brother International 2011 Annual Report Download - page 37

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Brother Annual Report 2011
11. Equity
Since May 1, 2006, Japanese companies have been subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:
(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolu-
tion at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent
auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years
of normal term by its articles of incorporation. The Board of Directors may declare dividends (except for dividends in kind) at any time during
the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation
and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the
company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of equity after dividends must be
maintained at no less than ¥3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained
earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of
such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the
Companies Act, the total amount of additional paid-in capital and legal reserve may be reserved without limitation. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is deter-
mined by specific formula. Under the Companies Act, stock acquisition rights, which were previously presented as a liability, are now pre-
sented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition
rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from
stock acquisition rights.
12 . Stock Options
The stock options outstanding as of March 31, 2011 were as follows:
Stock Option
Persons
Granted
Number of
Options granted
Date of
Grant
Exercise
Price Exercise Period
2007 Stock Option 6 directors 46,000 shares Mar 19, 2007 ¥ 1
($0.01)
30 years starting
on the following
day of stock option
grant date
2008 Stock Option 6 directors 65,100 shares Mar 24, 2008 ¥ 1
($0.01) Same as above
2009 Stock Option 5 directors 114,500 shares Mar 23, 2009 ¥ 1
($0.01) Same as above
2010 Stock Option 4 directors
14 executive o cers
51,900 shares
49,600 shares Mar 23, 2010 ¥ 1
($0.01) Same as above
2011 Stock Option 4 directors
13 executive o cers
43,200 shares
40,300 shares Mar 23, 2011 ¥ 1
($0.01) Same as above