Nihon M&A Center: Exceeds Distributable Amount by 830M Yen, Sets Probe Panel

The core issue revealed by Nihon M&A Center is that dividends for the fiscal years ending March 2025 and March 2026 exceeded the distributable amounts under the Companies Act.

Recent investigations show that the total mid-term dividend for the fiscal year ending March 2026 (resolution date: Oct. 30, 2025) was approximately 4.44 billion yen, while the distributable amount at the time of effectiveness (Dec. 5, 2025) was about 360 million yen. This resulted in an excess payment of up to 833 million yen. A similar excess of approximately 71.7 million yen was identified for the prior fiscal year ending March 2025.

Cause Identified as Calculation Error, Not Intent
Company officials stated the incident stemmed from a procedural gap rather than intentional wrongdoing. The primary cause was the accounting treatment of the company's substantial treasury stock, which is deducted from retained earnings at book value. It was discovered that internal procedures to accurately calculate and verify the distributable amount at the time of effectiveness were insufficient, particularly after previous year-end dividends reduced available funds below the mid-term dividend total.

Additionally, four share buyback transactions for fractional shares (totaling approximately 18,451 yen) conducted after the March 2026 fiscal year dividend also exceeded the distributable amount. In response, the company has decided to establish a third-party committee of external experts to investigate the root cause and discuss preventive measures.

While investors may worry about potential corporate tax revisions or shareholder lawsuits, Nihon M&A Center stated that the impact on consolidated performance and financial statements is minimal.

A key factor is the treatment of dividend repayment. The company has decided not to demand repayment of the excess mid-term dividend from shareholders at this time. This avoids direct financial burden for investors but confirms a violation of the Companies Act, making the third-party committee's report on director liability a focal point.

The company confirmed that year-end dividends are unaffected, as distributable amounts were secured at fiscal year-end. The year-end dividends paid in June 2025 and June 2026 fell within normal ranges. For the mid-term dividend of the fiscal year ending March 2027 and other shareholder return strategies, the company plans to consider the excess amount while ensuring compliance with distributable limits.

This case illustrates a typical pitfall in distributing dividends for companies holding significant treasury stock. Since book value is deducted from retained earnings, effective distributable capacity shrinks even if theoretical earnings appear robust. The failure to guarantee this mechanism through internal controls highlights gaps in audit and legal department coordination.

Compliance Gap Period
The scale of approximately 830 million yen is substantial for a firm of this size and cannot be dismissed as a simple error. Whether the company faces severe repercussions depends on the strictness of the third-party committee's investigation. The risk of questioning the board's supervisory responsibilities remains high.

However, the minimal financial impact offers some relief. Given the volatile nature of M&A brokerage profits, avoiding immediate cash outflows due to the no-recourse decision helps avert short-term financial stress. The real challenge is restoring trust. A prompt and transparent third-party report will be crucial in preventing excessive stock market reaction and determining future corporate valuation.