Risk Factors

The major risks envisaged by SoftBank Corp. and its subsidiaries (“the Group”) that could significantly affect investors' investment decisions are outlined below. These risks pertain to the status of businesses, financial position and other matters. Moreover, these risks do not include all of the risks that the Group could face in the course of carrying out its future business operations. Forward-looking statements were determined by the Group as of March 31, 2020, unless otherwise stated.
As of September 30, 2020, a risk has been added to “(3) Risks related to finance and accounting c. Impairment losses”.

(1) Risks related to management strategies

The Group aims to achieve further growth in the telecommunications business by increasing the number of smartphone and broadband subscribers and undertaking 5G initiatives. To achieve this goal, the Group believes that it will be crucial, among other priorities, to build a highly secure and reliable telecommunications network and to continuously operate the network in a stable manner, and to advance a multi-brand strategy with three clearly differentiated brands. Moreover, the Group will strive to grow the Yahoo business through synergies with Z Holdings Corporation, which has become a consolidated subsidiary of the Group. In parallel, the Group aims to expand new business fields by developing cutting-edge businesses in Japan together with SoftBank Group Corp.'s portfolio companies and its partners in Japan and elsewhere around the world. In relation to those management strategies, the major risks that could significantly affect investors' investment decisions are outlined below.

a. Changes in economic conditions and the market environment, and competition

With Japan's population trending downwards due to aging and a low birthrate, the outlook for continued growth in Japan's mobile communications, broadband and internet-related markets is uncertain in some respects.
Mobile virtual network operators (“MVNOs”) have been capturing a greater share of Japan's mobile communications market in recent years, fueling intensified competition between the MVNOs and mobile network operators (“MNOs”). Furthermore, the MNOs have been actively entering other business sectors to capture a broader array of earnings opportunities and achieve differentiation from other companies. In order to address the market environment described above, the Group deploys services, products and sales methods that fit consumer preferences. However, if the Group is unable to meet the expectations of consumers for price plans, voice and data communications quality and so forth, there are no assurances that the Group will be able to maintain its current number of subscribers. Moreover, the Group could incur rising costs due to unforeseeable changes in the market environment, or may be unable to streamline costs as planned.
Japan's internet-related markets could be impacted by factors such as overall internet usage, economic trends, the number of paid members and usage of paid services. The Group strives to retain and increase the number of users primarily by providing accurate and beneficial services for users, a secure and safe user experience, conducting activities to improve the value of its platform as an advertising medium, raising awareness, and providing attractive benefits and content to paid members. Unless these measures prove sufficiently effective, changes in the market environment and other factors could adversely affect the Group's business development, financial condition and results of operations.
In certain instances, the Group's competitors may have a competitive advantage over the Group in terms of capital, services and products, technology development capabilities, price competitiveness, customer base, sales capability, brands or public recognition, for example. If these competitors were to sell services and products that harness these competitive advantages to a greater extent than at present, the Group may be placed at a disadvantage in sales competition, or may be unable to provide services and products, or acquire or retain customers, as anticipated. Consequently, this could impact the Group's business development, financial position and results of operations.
Furthermore, in the telecommunications and internet industries, newly emergent services offered by recently founded startup companies and new entrants can occasionally achieve widespread adoption by garnering the support of users. While the Group will strive to provide services that can garner user support by grasping the opinions and trends of users, the services of startup companies and new entrants could raise competition with the Group's services. Moreover, it may be costly to develop the newly emergent services needed to demonstrate competitiveness. This could impact the Group's business development, financial position and results of operations.

b. Response to technology and business models

The Group's primary business domain is the information technology industry, which is subject to rapid changes in technology and business models. The Group is constantly undertaking measures such as surveying the latest technology and market trends, conducting verification trials to introduce services with highly competitive technologies, and considering alliances with other companies. However, there are no assurances that the development of new technologies will proceed on time or results will be delivered as planned, or that common standards or specifications will be established and commercial viability will be achieved. Even if the aforementioned measures are undertaken, the Group may be unable to develop or introduce outstanding services, technologies and business models in keeping with market trends due to the inability to appropriately adapt to changes in the market environment in a timely manner, such as the emergence of new technologies such as 5G (fifth generation mobile communications system) technology and business models, or due to the inability to deploy equipment and facilities rapidly and efficiently. In this case, the Group's service offerings could lose competitiveness in the market, possibly curtailing the number of subscribers that the Group is able to maintain or obtain, or reducing ARPU*. This could impact the Group's business development, financial position, and results of operations.

[Note]
  • *
    ARPU (Average Revenue Per User): Measures the average monthly revenue generated per subscription.

c. Information leaks and the inappropriate use of products and services supplied by the Group

In its business operations, the Group handles customer information (including personal information) and other confidential information. The Group maintains and controls the level of information security through various measures. For example, under the leadership of the Chief Technology Officer (CTO) and the Chief Information Security Officer (CISO), the Group implements strict physical security control measures such as restricting access to work areas that involve customer information and other confidential information, and establishing room access management rules specific to those restricted areas. In terms of technology measures, the Security Operation Center (SOC) within the restricted areas and similar facilities monitor matters such as the use of business PCs in the office, usage of the intranet, and the status of access to internal servers by officers and employees. The Group also conducts monitoring and defensive measures against unauthorized access via cyberattacks from outside the company. In accordance with the information security level, the Group separates and ensures the independence of the access rights, networks used, and other matters pertaining to such information. Moreover, the Group provides rigorous educational and training sessions on information security for officers and employees as it strives to build a framework that allows all SoftBank Corp. personnel involved in information assets to fulfill their duties with a high degree of information literacy. Even with these measures in place, this information could be leaked, lost, or involved in a similar incident, either intentionally or accidentally by the Group (including officers and employees of the Group and people related to subcontractors), or through a malicious cyber-attack, hacking or other form of unauthorized access or other means by a third party.
Moreover, if the products and services supplied by the Group are used inappropriately, the Group could indirectly contribute to social problems such as crimes involving the use of mobile phones, accidents during the use of mobile phones, and high charges due to excessive use of content.
Such an occurrence could damage the Group's competitiveness, and incur significant costs to the Group for payment of damages and modification of security systems, in addition to having an adverse impact on the Group's credibility or corporate image and making it difficult to retain and acquire customers. These outcomes could impact the Group's business development, financial position and results of operations.

d. Provision of stable networks

(a) Capacity enhancement in telecommunications networks

To maintain and enhance the quality of telecommunications services for the purpose of maintaining competitiveness and retaining and expanding the customer base, the Group needs to continuously increase the capacity of its telecommunications networks based on predictions of the amount of future network traffic. The Group's policy is to systematically increase network capacity in these ways. However, if the actual amount of network traffic were to drastically exceed the Group's predictions, or if the Group were not to carry out network capacity enhancement (including but not limited to securing the required spectrum) in a timely manner, service quality, along with the Group's credibility and corporate image, could be adversely affected, making it difficult to retain and acquire customers. In this case, the Group would also need to execute additional capital expenditure. These outcomes could impact the Group's business development, financial position and results of operations.
In addition, the Group's ability to provide telecommunications services depends on the performance of network systems and securing sufficient spectrum. In the future, if the Group is unable to secure the required spectrum, the Group's service quality will be reduced compared with competitors or it may be unable to expand its network as planned, making it difficult to retain and acquire customers.
Furthermore, the Group may be required to contribute large amounts of funds, if, for example, an auction system is introduced for the allocation of spectrum, or a certain cost burden must be borne as a requirement for spectrum allocation. This could impact the Group's business development, financial position and results of operations, along with facilitating the entry of new operators into the industry.

(b) Natural disasters, accidents and other unpredictable events

The Group constructs and maintains telecommunications networks, information systems and other systems necessary for the provision of various services, including Internet and telecommunications services. Natural disasters, such as earthquakes, typhoons, flooding, tsunamis, tornadoes, heavy rainfall, heavy snowfall, or volcanic activity, other unexpected disruptions such as fires, power outages or shortages, incidents such as terrorist attacks, or the spread of infectious diseases such as the Coronavirus disease 2019 could interfere with the normal operation of telecommunications networks and information systems and other infrastructure. This could hinder the provision of various services by the Group. In order to ensure that it can provide a stable telecommunications environment even in the aforementioned circumstances, the Group has introduced measures to build redundancy into networks and mitigate power outages at network centers and base stations. In addition, the Group has implemented measures such as spreading out network centers, data centers, and other key facilities throughout Japan, as part of efforts to mitigate the impact of the aforementioned circumstances on the provision of various services. Even so, these measures cannot avoid every possible type of disruption. If the provision of various services were actually hindered, and such disruptions of services or decline in quality were to become widespread or if significant time were required to restore services, the Group's credibility or corporate image could deteriorate, making it difficult to acquire and retain customers. The Group may also bear a substantial cost burden to restore and refurbish telecommunications networks, information systems and other infrastructure. This could impact the Group's business development, financial position and results of operations.

e. Acquisitions of other companies, business alliances and establishment of joint ventures, etc.

In the course of executing its strategies, the Group could acquire other companies and make other stock investments, through such means as establishing joint ventures and turning companies into subsidiaries.
In other areas, the Group could acquire other assets believed to be strategically important to the Group's business, finances and results of operations.
When considering the execution of various investments, the Group conducts necessary and sufficient due diligence, and then makes investment decisions following a prescribed approval process. If the Group's portfolio companies are unable to generate the anticipated results, the Group overestimates corporate valuations when making investments, or the integration of new businesses into existing businesses or the development of internal control systems after integration do not succeed, these outcomes could negatively impact the Group's results of operations and financial position. In addition, if the Group borrows funds to make acquisitions or investments in the future, or if it is found that an acquired company has unpaid liabilities, the Group's liability burden will increase and this could lead to a deterioration in cash flows and a shortage of operating funds. The materialization of these risks could negatively impact the Group's businesses, financial position, and results of operations.
If the Group is to conduct joint businesses with business alliance or joint venture partners, the Group may require licenses and permits from the regulatory authorities and such joint businesses will be premised on the Group's ability to reach agreement with the business alliance and joint venture partners on the content of joint businesses. In addition, the Group will not necessarily have control over the business alliance and joint venture partners. These companies may drastically revise their business strategies without taking into account the Group's intentions. Furthermore, the Group's shareholding ratio in these companies could be reduced due to a third-party allotment of shares or the exercise of a call option by a shareholder other than the Group, or the results of operations and financial position of these companies could drastically deteriorate. In these situations, the business alliances, joint venture businesses and other arrangements may not generate the anticipated results, or they may find it difficult to continue their businesses. In addition, the Group may be restricted from undertaking business alliances, joint venture businesses and other such arrangements with other parties due to business alliances, joint venture businesses and other such arrangements formed with specific third parties. This could impact the Group's business development, financial position, and results of operations.
Furthermore, the Group may realign its businesses in the future. There are no assurances that such a realignment will have a positive impact on the Group.

f. Dependence on management resources of other companies

(a) Use of facilities, etc., of other companies

The Group makes use of certain telecommunications lines and facilities owned by other operators when constructing the telecommunications networks required for providing telecommunications services. In principle, the Group has adopted a policy of using telecommunications lines and facilities of several operators. The Group's business development, financial position and results of operations could therefore be impacted if it becomes difficult to continue to use those facilities, or if the usage agreement is revised on disadvantageous terms for the Group, such as by increasing utilization or connection rates for those facilities.

(b) Procurement of various equipment

The Group procures telecommunications equipment, network devices and so forth (including but not limited to mobile devices and radio equipment for mobile phone base stations). The Group has adopted a policy of procuring equipment from multiple suppliers, in principle. Even under this policy, the Group can be expected to remain heavily reliant on specific companies for equipment. The Group may be unable to switch suppliers or equipment in a timely manner without incurring substantial costs should problems occur with the procurement of equipment for which the Group is heavily reliant on specific companies. Such problems could include supply interruptions, delivery delays, order volume shortfalls and defects. Suppliers may also cease to provide the maintenance and inspection services required for telecommunications equipment to maintain performance. Either of these situations could impede the Group's provision of services, making it difficult to retain and acquire customers or cause the Group to incur additional costs for changing a supplier, or cause a decline in sales of telecommunications equipment. This could impact the Group's business development, financial position and results of operations.

(c) Consignment of operations

The Group consigns in whole or part to subcontractors customer sales activities, retention and acquisition of customers, and network construction and maintenance mainly for telecommunications services, along with the execution of other related operations. In addition, the Group's information search services make use of other companies' search engines and paid search advertising distribution systems. The Group conducts credit investigations when it selects subcontractors and regularly monitors their results of operations and other conditions. The Group's business development could therefore be impacted if these subcontractors are unable to execute operations in line with the Group's expectations.
Moreover, any damage to the credibility or corporate image of these subcontractors, to whom the Group consigns the services and products, would also have a negative impact on the Group's credibility or corporate image. This could hinder business development and the retention and acquisition of customers, which could impact the Group's business development, financial position and results of operations.
Furthermore, if these subcontractors should fail to comply with laws and regulations, the Group could receive a warning or administrative guidance from the regulatory authorities, or be investigated for non-fulfillment of its supervisory responsibility, and the Group's credibility or corporate image could deteriorate as a result, making it difficult to retain and acquire customers. These could impact the Group's business development, financial position and results of operations.

g. Brands

(a) Usage and infringement of the SoftBank brand

Until fiscal year 2017, the Company had been paying a brand usage charge to SoftBank Group Corp., the Parent, for using the SoftBank brand. The brand usage charge was calculated based on a certain formula in each fiscal year.
However, in March 2018, the Company and SoftBank Group Corp. concluded an agreement that grants indefinite brand usage and sub-licensing rights to the SoftBank brand, in principle, from March 31, 2018 through the payment of a lump-sum licensing charge. In accordance with this agreement, the Company may use the SoftBank brand in the Company's name, emblems, trademarks and domain name (exclusive use of trademarks related to mobile communications and telecommunications services and mobile phones, etc.). The Company may also sublicense the use of the SoftBank brand to its subsidiaries.
However, if SoftBank Group Corp.'s voting interest in the Company decreases to 50% or below based on a decision made by the Company, such as the Company deciding to issue shares to a third party, SoftBank Group Corp. would have the right to cancel the contract. Consequently, the Company would no longer be able to use and sublicense the SoftBank brand and could recognize an impairment loss on trademarks, which have been capitalized on the balance sheet in connection with the brand.
Moreover, if intellectual property held by SoftBank Group Corp., such as the SoftBank brand, were infringed upon by a third party, such an infringement could impair the Group's credibility or its corporate image.

(b)Use of Yahoo! and LINE MOBILE brands

The Group provides services aligned to customer needs through three brands. The SoftBank brand targets those who use their smartphones frequently, and Y!mobile is for light users, while LINE MOBILE focuses on students and the younger generation.
Yahoo Japan Corporation has concluded a license agreement with Oath Holdings Inc., a subsidiary of Verizon Communications Inc. of the U.S. Under this agreement, almost all trademarks pertaining to information search and other services (including the Yahoo! brand), software, and tools, etc. (“trademarks, etc.”) provided by Yahoo Japan Corporation are owned by Oath Holdings Inc. Yahoo Japan Corporation conducts business activities based on licenses obtained from Oath Holdings Inc. for the use of these trademarks, etc. and related activities. The Group gains access to the Yahoo! brands belonging to Oath Holdings Inc. through Yahoo Japan Corporation and makes use of the Yahoo! brand in certain service names such as Y!mobile, as it does with Yahoo! Keitai, Yahoo! BB and other brand names.
LINE Mobile is a service name offered by LINE MOBILE Corporation, a subsidiary of the Group. For LINE Mobile, the Group makes use of the LINE MOBILE brand owned by LINE Corporation.
Therefore, if the Group were to become unable to use these brands because of the amendment, termination or non-fulfillment of agreements due to a drastic change in its relationship with these companies or their credibility or corporate image deteriorate, the Group may be prevented from developing businesses as anticipated. This could impact the Group's business development, financial position and results of operations.

h. Service disruptions or decline in quality due to faults in related systems and other factors

In the provision of various services by the Group, including telecommunications networks, systems for customers, and the smartphone payment service PayPay, there is a possibility that a major problem could occur if the Group were to become unable to continuously provide the services, or were to suffer a decline in the quality of the services, due to human error or serious problems with equipment or systems, or cyber-attack, hacking or other form of unauthorized access or other causes by a third party. Under the leadership of the CTO, Chief Network Officer (CNO) and Chief Information Officer (CIO), the Group has built redundancy into its networks, along with clearly defining restoration procedures in preparation for systems faults and other incidents. In the event of a system fault or other incident, the Group conducts restoration activities with appropriate capabilities in place, such as setting up an Incident Response Headquarters according to the scale of the incident. Even with these measures in place, the Group may be unable to avoid disruptions of services or declines in quality. If such disruptions of services or declines in quality were to become widespread or significant time were required to restore services, the Group's credibility or corporate image could deteriorate, making it difficult to retain and acquire customers. This could impact the Group's business development, financial position and results of operations.

i. Securing and developing human resources

The Group is making a concerted effort to develop human resources in order to respond swiftly to trends in technological innovation. However, the Group may occasionally require a certain period of time to produce the desired effects in terms of human resources development. In addition, the cost of human resources investments may increase in the future.
Moreover, under the leadership of the Chief Human Resources Officer (CHRO) and the General Manager of the Human Resources Division, the Group is working to secure human resources by instituting a remuneration structure for high-market-worth personnel that recognizes their advanced expertise. If the Group is unable to secure engineers and other such personnel required in its business operations, this could impact the Group's business development, financial position and results of operations.

(2) Risks related to laws, regulations and compliance

a. Laws, regulations and systems

The Group is subject to laws and regulations pertaining to its businesses, such as the Telecommunications Business Act of Japan and the Radio Act of Japan, as well as various laws, regulations and systems pertaining to general corporate business activities (including but not limited to laws, regulations and systems related to the environment, fair competition, consumer protection, personal information and privacy protection, anti-bribery, labor affairs, intellectual property, taxation, foreign exchange, and import and export activities). Moreover, various conditions can be attached to many of the licenses and permits required to operate a telecommunications business, and the Group is required to comply with all of these conditions.
If the Group (including officers and employees) conducts activities in breach of those laws, regulations, systems and so forth, the Group may be subject to administrative guidance or sanctions by government agencies (including but not limited to deregistration, revocation of licenses and fines), or may face cancellation of business agreements by business partners, regardless of whether the violation was deliberate or not. Under the leadership of the Legal Division, the Group conducts monitoring of amendments to guidelines based on various laws and regulations. In parallel, if there are amendments, the Group undertakes measures such as changing how operations are implemented, as necessary. Additionally, the Group consults with external experts such as lawyers, as necessary. Even with these measures in place, the Group may be unable to prevent all activities in breach of laws and regulations. As a result, the Group's credibility and corporate image may be impaired, or its business development may be hindered. In addition, the Group may incur a financial burden and it could impact the Group's business development, financial position and results of operations. However, as of March 31, 2020, there were no grounds for revoking these licenses and registrations, or denying the renewal thereof.
In the future, laws, regulations and systems that have a disadvantageous impact on the Group's businesses could be introduced, or existing laws could be reformed with such a disadvantageous impact. In the mobile communications business undertaken by the Group, government agencies allocate wireless spectrum to the Group. Accordingly, this business is highly susceptible to the direct and indirect government influences based on the government's policy intentions. Going forward, it is difficult to accurately predict whether laws, regulations and systems that have a disadvantageous impact on the Group's businesses will be introduced and the impact of the introduction thereof on the Group's businesses. If such laws, regulations and systems are introduced, amended, or the products, services and rate plans, etc. that the Group can deliver to customers will be effectively restricted, causing the Group to experience a decline in revenue and to incur a larger financial burden. This could impact the Group's business development, financial position and results of operations.

b. Litigation

In the course of conducting business activities, the Group confirms the applicable laws, regulations, and systems, as well as contractual conditions stipulated in contracts and other agreements, and pays careful attention to ensure that it does not breach the foregoing. If it breaches the rights (including intellectual property) or legally protected benefits of third parties, the Group may be prevented from using the rights, or subjected to claims for compensatory damages, consideration or other matters. These third parties may include customers, business partners, shareholders (including shareholders of subsidiaries, affiliates, and portfolio companies) and employees. The Group may also be subject to investigations and other actions by government agencies. Such actions may impair the Group's corporate image as well as compel the Group to revise its products and services as well as business practices, and impose a burden on management resources, including financial resources, which could impact the Group's business development, financial position and results of operations.

(3) Risks related to finance and accounting

a. Fund procurement and leasing

The Group procures funds through such means as bank loans and the securitization of receivables. In addition, the Group employs leasing when making capital expenditures. Therefore, if interest rates rise, or the creditworthiness of the Company and its subsidiaries decreases, the Group's fund procurement costs will increase, which could impact the Group's business development, financial position and results of operations. In addition, under the leadership of the General Manager of its Finance Division, the Group has established a financial base that maintains sufficient cash and credit facilities through diverse means of fund procurement (including but not limited to bank loans and borrowings through the securitization of receivables), along with controlling fund procurement in consideration of the cash position. The Group may be unable to procure funds or form leases as envisioned by the Group depending on the status of financial market. This could impact the Group's business development, financial position and results of operations.
Additionally, restrictive financial covenants are attached to the Group's borrowings from financial institutions. For details, please see “19. Interest-bearing debt,” in “1. Consolidated Financial Statements, Notes to Consolidated Financial Statements,” in “Annual Report 2020 (Financial Book)”.

To ensure that it does not infringe upon restrictive financial covenants, the Group has the Finance Division conduct across-the-board monitoring of the business plans of various business divisions. Concurrently, transactions that could infringe upon restrictive financial covenants such as credit guarantees and borrowings may only be executed with the prior approval of the Finance Division. Even with these measures in place, if the Group is unable to comply with the restrictive financial covenants, the Group may forfeit the benefit of term, which could require it to repay a portion or all of an outstanding debt, or impose restrictions on new borrowings.

b. Changes in accounting and taxation systems

The Group makes changes in accounting and taxation systems known to employees through training sessions and other means. The Group also consults with external experts such as tax advisors, as necessary. However, the introduction of new accounting standards or taxation systems, or changes to existing systems, and the occurrence of an additional tax burden due to differences of views with the tax authorities could impact the Group's business development, financial position and results of operations.

c. Impairment losses

In the course of doing business, the Group invests funds in various assets. As a result, the Group owns assets such as property, plant and equipment needed to build telecommunications networks, which include wireless equipment, switching equipment, towers, antennas, and other network equipment, and buildings and fixtures; intangible assets such as software, trademarks, spectrum migration costs and goodwill; and financial assets, such as shares of associates that the Group has invested in when forming business alliances with other companies and setting up joint ventures.
The Group has put a framework in place to conduct regular monitoring of these assets, and it assesses these assets appropriately to determine whether there is any impairment based on IFRS. As a result, if the Group determines that it does not expect the future economic benefits from an asset to be sufficient to recover the amount of investment in the asset, an impairment loss is recognized, and this could impact the Group's business development, financial position and results of operations. This determination relies heavily on estimates made by the Group. Additionally, it is not possible to accurately predict the timing of recognition or the amount of impairment losses.

[Note]
  1. *
    Regarding the share exchange agreement concerning the business integration of Z Holdings Corporation and LINE Corporation
    As noted in “(8) Measures Taken to Avoid Conflict of Interest” under “3. Summary of Business Integration” in the attachment 2 of “Notice Concerning Entry into a Definitive Agreement Relating to the Business Integration of Z Holdings Corporation (Securities Code: 4689) and LINE Corporation (Securities Code: 3938)” announced on December 23, 2019, the terms and conditions of the share exchange agreement concerning the business integration of Z Holdings Corporation and LINE Corporation are decided taking measures to ensure the appropriateness of the transaction terms and the fairness of the business integration procedures. Impairment test will be performed on the effective date of the share exchange by comparing the fair value with the acquisition cost of LINE Corporation (current LINE Split Preparation Company which will succeed LINE’s businesses) which is derived by multiplying the number of shares of Z Holdings Corporation delivered (following the share exchange ratio) by the closing stock price of the effective date.

(4) Matters other than the above that could have a significant impact on investors' decisions

a. Management team

In preparation for unforeseen situations concerning key members of senior management, the Group has established a system that enables other officers to take over their duties. However, if the other officers are unable to effectively discharge the duties they take over, the Group's business development could be impeded.

b. Relationship with the Parent

(a) The Parent has control and significant influence over matters requiring approval at the General Meeting of Shareholders

As of March 31, 2020, SoftBank Group Corp., the Parent of SoftBank Corp. (the Company), effectively holds 67.13% of the issued shares of the Company through SoftBank Group Japan Corporation and Hinode 1 GK. Ratio of SoftBank Group Corp.'s ownership of the Company's shares and its voting interest in the Company vary with conditions such as the repurchase of own shares by the Company and the exercise of stock options by option holders. Accordingly, SoftBank Group Corp. has significant influence, including approval and veto rights, over matters requiring approval at the General Meeting of Shareholders, according to its voting interest in the Company at the time. These include matters requiring special resolutions at the General Meeting of Shareholders (for example, such matters may include but are not limited to absorption-type mergers, business transfers, and changes in the Articles of Incorporation), and matters requiring ordinary resolutions of the General Meeting of Shareholders (for example, such matters may include but are not limited to the election and dismissal of directors, and the appropriation of surplus and dividends, etc.). The Company strives to ensure independence by voluntarily establishing the Nominating Committee and the Remuneration Committee, both of which comprise independent external directors and the CEO, and are chaired by independent external directors. However, even with these measures in place, SoftBank Group Corp. may still have an impact on matters that require the approval of the General Meeting of Shareholders. There are no prior-approval matters or other such items.
Moreover, good relations with SoftBank Group Corp. lie at the core of the Group's business. If for some reason these relations deteriorate in practice or if they are perceived to have deteriorated, the Group's business development, financial position and results of operations could be impacted.
Details on the main relationship between the Company and SoftBank Group Corp., among related matters, are outlined in the sections titled “(b) Concurrent appointments of officers” to “(e) Business relationship with the SoftBank Group” below.

(b) Concurrent appointments of officers

Four directors of the Company, specifically Masayoshi Son, Ken Miyauchi, Kazuhiko Fujihara, and Kentaro Kawabe, concurrently serve as officers of SoftBank Group Corp. and its major subsidiaries. Mr. Son concurrently serves as Chairman & CEO of SoftBank Group Corp., the Company's Parent, and Director of Z Holdings Corporation. These concurrent appointments have been made based on the belief that Mr. Son's extensive track record and experience in leading the SoftBank Group and Z Holdings Corporation will contribute positively to strengthening the functions of the Company's Board of Directors. Mr. Miyauchi concurrently serves as Director of SoftBank Group Corp. and Director of Z Holdings Corporation. These concurrent appointments are intended to put Mr. Miyauchi's knowledge of these companies, which have a strong affinity with the Company's existing and new businesses, to good use in the management of the Company. Mr. Fujihara concurrently serves as Director of Z Holdings Corporation. This concurrent appointment is intended to put Mr. Fujihara's knowledge in the finance, accounting and governance fields to good use in the management of Z Holdings Corporation. Mr. Kawabe concurrently serves as President and Representative Director of Z Holdings Corporation and Executive Director of ZOZO, Inc. These concurrent appointments are intended to leverage Mr. Kawabe's knowledge and leadership of Z Holdings Corporation in the management of the Company, as it seeks to capture business synergies with Z Holdings Corporation.
Kazuko Kimiwada, one of the Company's Audit & Supervisory Board Members, concurrently serves as Senior Vice President of SoftBank Group Corp. This concurrent appointment is intended to strengthen the Company's audit system.

(c) Assignment and concurrent appointments of employees

From the standpoint of forming career paths based on operating efficiency, business necessity, human resources development, and the future prospects of each employee, the SoftBank Group facilitates the interaction of personnel within the Group. The Company takes onboard employees on assignment from other group companies, including SoftBank Group Corp.
However, in order to ensure independence from the Parent and management stability, the Group does not plan to concurrently assign to other group companies employees holding the post of Line Manager or above. Line Managers manage organizational units responsible for business operations (leaders of organizations in each organizational unit). Moreover, with regard to the assignment of employees between SoftBank Group Corp., the Group has ended concurrent assignments of employees other than Line Managers, with the exception of assignments determined to be necessary to the Company's business.
Assignments of employees from the Company to other group companies, including SoftBank Group Corp., is conducted only when the Group determines that the assignment is necessary to the Company's business. Going forward, the policy is to continue to conduct such assignments of employees only within the scope of business necessity.

(d) Competition with other companies in the SoftBank Group

Currently, the Group makes decisions on its policies and business development independently and does not compete with other companies in the SoftBank Group. However, SoftBank Group Corp. and its subsidiaries are involved in the management of various businesses around the world and consider new businesses and investments on a daily basis. For this reason, it is possible that the Group might compete with other companies in the SoftBank Group in the course of seeking investment opportunities. While the Group will respond by considering partnerships with those companies and so forth, this competition could impact the Group's businesses to a certain extent.

(e) Business relationship with the SoftBank Group

The Group conducts transactions with various companies in the SoftBank Group. The main transactions during the year ended March 31, 2020 are outlined below.

Description of transaction Counterpart Amount of transaction
(Millions of yen)
How transaction conditions and other terms are determined
Issuance of new shares through third-party allotment* SoftBank Group Corp. 46,000 The valuation was determined reasonably through negotiations based on prices calculated by an independent third-party institution.
[Note]
  1. *
    PayPay Corporation, a group company of the Company, resolved at its Board of Directors' meeting held on April 22, 2019 to issue new shares to SoftBank Group Corp. through a third-party allotment, and SoftBank Group Corp. made a payment of ¥46,000 million for the shares on May 15, 2019.

From the perspective of ensuring independence, the Company has established Related Party Regulations and Related Party Transactions Management Manual for transactions with related parties, including SoftBank Group Corp. In accordance with these regulations and manuals, the Company seeks the approval of the Board of Directors on a case-by-case basis for transactions of particular importance with related parties, from the perspectives of whether or not those transactions are based on a sound management rationale, and whether the transaction conditions are appropriate in comparison with conditions for similar arm's length transactions, among other matters.