Market News
Sep. 29, 2022 TSE Continued Designation as Security on Alert: Asia Development Capital Co.Ltd.
The following issue will continue to be designated as Security on Alert.
*This decision is based on the results of the examination by Japan Exchange Regulation.
| １．Issue Name | Asia Development Capital Co.Ltd. stock (Code: 9318, Market Segment: Standard Market) |
| ２．Date of Decision | Sep. 28, 2022 (Wed.) |
| Provision | Securities Listing Regulations, Rule 503, Paragraph 4, Item 2 (Due to falling under cases where the Exchange deems that there is a problem in the internal management system, etc. of the listed company on the basis of the written confirmation of internal management system submitted by such listed company) |
| ３．Reason | Asia Development Capital Co.Ltd. (hereinafter "the Company") disclosed an investigation report of the special investigation committee concerning inappropriate accounting processing on Jun. 22, 2021 and disclosed corrections to its past earnings reports on Jun. 30, 2021. These disclosures revealed that, in sale and purchase transactions of storage batteries in which a subsidiary of the Company participated as part of its commercial distributions, storage batteries had not been physically delivered and money had been routed back to buyers. They also revealed the following facts, among others: - There were inadequacies in the Company's system for sharing, consulting, and examining information when it starts new transactions. - The management of the Company failed to acknowledge the risk of erroneous accounting processing and financial reporting and fell short of understanding the importance of examination in order to avoid risk. - A board member of the Company concurrently served as the director of the treasury and accounting department of the Company and a board member of a subsidiary, which resulted in a concentration of information and authority in his hands. Consequently, the system of checks and balances among officers was not functioning. - There was an operational inadequacy in that the board dismissed significant matters for subsidiaries as not requiring a resolution by the board based on the Company's rules on the board of directors. - Even though statutory auditors had concerns about commercial distribution and other matters, they did not conduct sufficient investigation to verify the facts. Therefore, TSE deemed that improvement of the internal management system, etc. of the Company was highly necessary, and designated its stock as a Security on Alert on Aug. 7, 2021. Then, on Aug. 5, 2022, the Company disclosed an investigation report by the Board of Auditors regarding a discovery at the Company of a loan certificate that stated a loan amount of JPY 10 billion (hereinafter referred to as the "Loan Certificate"). This disclosure revealed that the Loan Certificate had been prepared with the representative seal affixed without careful consideration. TSE has checked the written confirmation of internal management system submitted by the Company after one (1) year elapsed since designation as a Security on Alert and deemed that the Company has, to a certain extent, worked on the improvement plans the Company disclosed on Mar. 31, 2022, as instanced by the fact that the system of checks and balances among officers has started to function due to efforts made by a management oversight committee composed of outside directors, etc. However, TSE found that the Company needs further measures for the following areas of its internal management system. As such, TSE deemed that it still needs to verify how the Company will make improvements in these areas in the future. - The Company's system for sharing, consulting, and examining information as well as that of checks and balances among officers remain inadequate, as, for instance, the Loan Certificate was prepared without sufficient information sharing or examination due to information and authority being concentrated in a certain individual. - Although the Company has completely revised its internal rules, among other things, awareness of officers and employees regarding implementation and operation of the improvement plan is low, as instanced by the fact that multiple continued issues have been identified such as deficiencies in the system of rights to authorize transactions, inconsistencies within the internal rules, and operational deficiencies, and that the Company has yet to develop an operational manual that is linked to these rules. - Statutory auditors have yet to point out deficiencies in the process of internal approvals or give instructions to correct them as part of their after-the-fact confirmations of requests for internal approval and other documents. - Internal audits of subsidiaries are inadequate, as auditors sometimes only hold interviews with the person at the Company in charge of the subsidiary's management without fully grasping the situation of the subsidiary such as its actual business conditions. - Although the Company has placed top priority on improving awareness toward compliance, compliance awareness among officers and employees is not sufficiently nurtured, as evidenced by the fact that, even after the designation of Security on Alert, the Loan Certificate was prepared with a representative's seal without careful consideration. Based on this situation, because it falls under cases where TSE deems that there is a problem in the internal management system, etc., TSE has decided to continue the stock's designation as a Security on Alert. If, on or after the date on which one (1) year and six (6) months elapse from the designation as a Security on Alert (Feb. 7, 2023), TSE deems that the internal management system, etc. of the Company has not improved upon reviewing the situation, including the contents of the written confirmation of internal management system to be resubmitted by the Company, then its stock shall be delisted. |
Current Designations of Securities on Alert
Designation History of Designation of Securities on Alert
Designation History of Designation of Securities on Alert
DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc. and/or Japan Exchange Regulation shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with regard to this translation.
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