Shareholder Proposal
Hokkaido Chuo Bus Co., Ltd.
1-8-6 Irorinai, Otaru City, Hokkaido
Representative Director:
Nikaido Yasuhito
April 3, 2026
Proposing Shareholder:
Kazuo Narimiya
[Address omitted for privacy]
I, Kazuo Narimiya (hereinafter referred to as the “Proposing Shareholder”), have continuously held 300 or more voting rights of Hokkaido Chuo Bus Co., Ltd. (hereinafter referred to as the “Company”) for more than six months. Pursuant to Article 303, Article 305, and Article 325-4, Paragraph 4 of the Companies Act, I hereby request the following:
1. That the agenda item set forth in “First” below be included as a purpose of the Company’s 83rd Annual General Meeting of Shareholders.
2. That the full text of the proposal set forth in “Second” below (including the proposed agenda item, the content of the proposal, and all reasons for the proposal) be provided via electronic delivery measures.
【1】 Proposed Agenda Item
Amendment to the Articles of Incorporation concerning the establishment of a Governance Reform Committee.
【2】 Content of the Proposal
The following new article shall be added to the current Articles of Incorporation:
Chapter 4: Directors and Board of Directors
(Governance Reform Committee)
Article 30-2
(1) The Board of Directors shall establish a Governance Reform Committee (hereinafter referred to as the “Committee”) under the Board of Directors to examine measures for optimizing the Company’s governance structure.
(2) The Committee shall be composed of all the Company’s Outside Directors.
(3) The Committee may, at its own discretion, appoint external advisors. Such external advisors shall provide advice to the Committee from a position independent of the Company’s Board of Directors regarding the Committee’s activities set forth in the following paragraph.
(4) From an independent standpoint separate from the Board of Directors, the Committee shall carry out the following activities with the aim of optimizing the Company’s governance structure, realizing fair shareholder autonomy, and thereby enhancing corporate value and shareholder value:
(i) Verification of the appropriateness of allowing Central Bus Sogyo Co., Ltd., the Company’s major shareholder, to exercise voting rights in the Company, despite the de facto mutual control relationship existing between the two companies, in light of the intent of Article 308, Paragraph 1 of the Companies Act, and verification of whether the Company’s governance is functioning soundly under such a capital relationship;
(ii) Collection of opinions from the Company’s shareholders (excluding Central Bus Sogyo Co., Ltd. and its related parties) regarding clarification of management responsibility and measures to improve corporate governance (collectively referred to as “Governance Improvement Measures”);
(iii) Examination of Governance Improvement Measures based on the information collected under (i) and (ii) above, and presentation of such measures to the Board of Directors (Governance Improvement Measures shall prioritize, on the premise of maintaining the Company’s listing, implementation of measures to change the capital structure, strengthening of monitoring of the Board of Directors, and other measures to optimize the Company’s governance structure);
(iv) Explanation to shareholders and other stakeholders regarding the Governance Improvement Measures presented to the Board of Directors and reference materials provided in connection therewith.
(5) The Committee shall meet at least once per quarter. Any member may convene a meeting. Resolutions of the Committee shall be adopted by a majority of the members eligible to vote who are present, provided that a majority of such members attend. Details of procedures for convening and holding meetings, methods for appointing and dismissing external advisors, terms of office, and other matters shall be governed by the “Governance Verification Committee Rules” established by the Committee.
(6) All expenses necessary for the Committee’s activities, including remuneration for members and external advisors, shall be borne by the Company.
【3】 Reasons for the Proposal
Purpose of the Shareholder Proposal
Hokkaido Chuo Bus Co., Ltd. (“Chuo Bus”) and Central Bus Sogyo Co., Ltd. (“Bus Sogyo”) each hold shares and voting rights sufficient to control the other, resulting in a situation where proper governance and fair shareholder autonomy are not functioning.
The purpose of this shareholder proposal is to resolve this distorted capital structure, improve the common interests of all Chuo Bus shareholders, support improvements in employee working conditions, promote coexistence and mutual prosperity with local communities and business partners, and ultimately contribute to regional revitalization across Hokkaido.
Background and Reasons for the Proposal
Currently, Bus Sogyo holds 40.06% of the voting rights in Chuo Bus (including indirect holdings). Conversely, Chuo Bus holds 24.37% of the issued shares of Bus Sogyo (with parties closely related to or in agreement with Chuo Bus separately holding 49.58%, as detailed below).
Under Article 308, Paragraph 1 (particularly the parenthetical portion) of the Companies Act and Article 67 of the Enforcement Regulations of the Companies Act, if a company (in this case, Chuo Bus) holds 25% or more of the total voting rights of a shareholder (in this case, Bus Sogyo), that shareholder is prohibited from exercising its voting rights in the company (approximately 40% in this case). This is known as the “restriction on exercise of voting rights for mutually held shares.”
The purpose of this restriction is to prevent the management of a company from using its substantial control over a shareholder’s voting rights to harm the company’s interests or the interests of all shareholders — similar in spirit to the prohibition on management exercising voting rights attached to the company’s own treasury shares.
If Chuo Bus held 25% or more of Bus Sogyo’s total voting rights, Bus Sogyo would be barred from exercising its approximately 40% voting rights in Chuo Bus under the above provisions. However, Chuo Bus’s holding is kept at 24.37% — just below the 25% threshold — which appears to be a formalistic measure to comply with the letter of the law.
Nevertheless, in its timely disclosure materials, Chuo Bus has publicly stated that “closely related or consenting parties” of Chuo Bus hold 49.58% of Bus Sogyo’s voting rights, separate from the 24.37% directly held by Chuo Bus. This overwhelming additional holding is one of the reasons I assert that Chuo Bus’s *substantive* ownership of Bus Sogyo’s total voting rights exceeds 25%.
Furthermore, even from publicly available information, it is evident that newly appointed Chuo Bus officers soon become officers of Bus Sogyo and acquire shares in Bus Sogyo. There are also cases where, upon resigning from Chuo Bus, officers transfer (or are made to transfer) their positions and shares in Bus Sogyo.
For example, current President Yasuhito Nikaido was appointed as a Director of Chuo Bus in March 2016. Two years later, in March 2018, he became an officer of Bus Sogyo and acquired 1,900 shares. In contrast, Mr. Kazuo Makino, who held positions in both companies and 4,000 shares in Bus Sogyo as of March 2016, resigned from Chuo Bus on January 22, 2018, immediately resigned from Bus Sogyo, and divested his shares. Those 4,000 shares appear to have been largely transferred to President Nikaido via then-Representative Director Kazuya Hirao.
Additionally, of the Company’s 13 current officers, approximately half (6 officers, including 5 of the 10 current Directors) are shareholders of Bus Sogyo. As of March 2025, the holdings are as follows: Director Kazuya Hirao 4,500 shares, Full-time Auditor Masaaki Omori 1,000 shares, Representative Director Yasuhito Nikaido 3,600 shares, Director Toshihiko Izumiyama 2,500 shares, Director Shuntaro Sugie 3,500 shares (under Sapporo-Yokohama Tire Co., Ltd.), and Director Koji Kato 3,500 shares (under a related company of the Showa Sogyo group).
These facts strongly suggest that Chuo Bus and its management have systematically engaged in the following practices to protect their own positions:
1. Keeping Chuo Bus’s voting rights in Bus Sogyo formally just below 25% so that Bus Sogyo does not lose its voting rights in Chuo Bus.
2. Maximizing influence over Bus Sogyo by having closely related or consenting parties hold Bus Sogyo shares (effectively a “nominee” arrangement), thereby maintaining substantive dominant control.
3. Linking the officer compositions of both companies and synchronizing the appointment/resignation of Chuo Bus officers with Bus Sogyo shareholdings.
4. As a result, Bus Sogyo maintains approximately 40% of Chuo Bus’s voting rights while Chuo Bus (and its management) effectively controls Bus Sogyo’s exercise of those voting rights.
This is a situation that destroys the fundamental principle of the Companies Act — “shareholders control the company” — and constitutes precisely the kind of circular, closed-loop control structure through mutually held shares that Article 308, Paragraph 1 of the Companies Act seeks to prohibit.
In today’s rapidly changing business environment, the bus and tourism industries are no exception. Under this looped control structure, management and strategic renewal are not functioning adequately, yet officers face no accountability through changes in personnel, resulting in a zero-tension environment.
Chuo Bus is currently struggling with a severe driver shortage, making it difficult to maintain its route network. Starting in December 2025, the company implemented reductions of 228 weekday and 175 weekend/holiday services in the Sapporo area, followed by further reductions of 173 weekday services and the abolition of multiple routes in April 2026 — an overall timetable contraction of approximately 4%. These cuts threaten local residents’ mobility. While urgent measures such as hiring foreign drivers and improving conditions are needed, fundamental solutions remain distant. In the tourism business, despite owning prime locations such as the Niseko Annupuri International Ski Resort, the company appears to have lagged behind competitors in the same Niseko area in implementing aggressive customer acquisition and yield-improvement measures during the full recovery phase of inbound demand. Furthermore, even with the recent rise in share price, the PBR remains around 0.60x (based on the March 31, 2026 closing price), indicating insufficient valuation from the capital markets.
I believe the root cause of Chuo Bus’s current difficulties — despite its enormous potential — lies in this closed-loop control structure with Bus Sogyo and the resulting governance failure, whereby management can substantially control shareholder meeting resolutions at will. I am convinced that if this distorted capital structure is resolved and a tense management system with proper oversight by general shareholders is restored, Chuo Bus’s potential will be fully realized, leading to the development of both the company and the Hokkaido region.
I am not advocating easy solutions such as a Management Buyout (MBO) or going private.
I strongly hope that the Governance Reform Committee will examine measures to change the capital structure and optimize governance on the premise of maintaining the Company’s listing status. One possible measure, for example, would be for Chuo Bus to repurchase the shares held by Bus Sogyo, hold them as treasury stock, and later sell them after enhancing corporate value, thereby securing funds for redevelopment of idle assets and aging facilities.
I have strong confidence in the future of Chuo Bus and intend to hold my shares on a long-term basis. I believe there are many other investors who share my confidence in the Company’s potential and would also pursue long-term holding if governance is normalized.
Chuo Bus was founded in March 1943 through the merger of 21 bus operators in the central Hokkaido region. It overcame numerous hardships, including material shortages, labor shortages, and funding difficulties before and after World War II. With a strong awareness of its public mission to provide transportation for local residents, it expanded routes, increased its vehicle fleet, and built bus terminals, establishing today’s foundation. It was also Chuo Bus that developed the now world-famous Niseko ski area. The current Chuo Bus exists thanks to the blood, sweat, and extraordinary foresight of its predecessors. I express my utmost respect to all the founding families, managers, and employees who have supported the company. To reawaken that pioneering spirit, I hereby submit this shareholder proposal for the establishment of a Governance Verification Committee.
For a more detailed explanation of this proposal, please refer to https://www.believe-chuobus.com.