JAPAN Law and Practice Contributed by: Akira Matsushita, Norihito Sato, Hideki Ben and Nobuhiko Suzuki, Mori Hamada
Regarding court decisions, there was a lower-court precedent ruling that the specific performance of a voting agreement between shareholders is only avail - able if all shareholders are parties to the voting agree - ment. However, in January 2020 the Tokyo High Court ruled that, depending on the intention of the parties to the voting agreement, the specific performance of a vot - ing agreement may be available even if not all share - holders are parties to the voting agreement. At the same time, though, the Tokyo High Court mentioned that courts can revoke a shareholders’ resolution that was passed in breach of a voting agreement only if all shareholders were parties to the voting agreement, to avoid any unexpected effect on the other sharehold - ers that are not parties to the voting agreement. 5. Negotiating the Terms 5.1 Preliminary Negotiation Instruments and Practices During negotiations (ie, before executing the definitive agreements), the following steps are usually taken. • NDA: parties usually enter into a mutual non- disclosure agreement (NDA) before discussing the details of a possible joint venture. • DD: if a JV is established using an existing entity or if existing businesses or assets of the JV part - ners will be contributed to the JV entity, the parties usually conduct due diligence (DD) on such entity, businesses or assets. • MoU: when the parties agree to proceed with their JV discussions, they often execute a memorandum of understanding (MoU) outlining the key terms and conditions of the JV and negotiation details. MoUs are generally not legally binding, but they often include legally binding exclusivity provisions regarding the negotiations. 5.2 Disclosure Obligations If a JV partner or the JV entity is a listed company and establishing the JV involves a disclosure matter under the Securities Listing Regulations of the relevant stock exchange (eg, a company split, business transfer, asset transfer or issuance of new shares), and if the
transaction is not deemed “insignificant”, the affected party must disclose the required information when it decides to proceed with the JV. Therefore, when the affected party enters into a definitive agreement, it would generally be required to disclose that fact. Also, even the mere execution of an MoU may trigger such disclosure requirements, unless the MoU is just an agreement to proceed with negotiations. In addition, a company that is required to submit an annual securities report may be required to file an extraordinary report under the FIEA regarding the establishment of a JV. Also, if the JV entity is a listed company and is a party to a JV agreement with JV investors (ie, its sharehold - ers), certain material agreements must be disclosed in its annual security report or extraordinary report under the FIEA. Such material agreements include: • an agreement between a listed company and a shareholder on the nomination of candidates for director, restrictions on exercising voting rights and prior consent rights on matters to be resolved at a shareholders’ meeting or by the board of directors; and • an agreement between a listed company and a shareholder who has filed a large-scale sharehold - ing report regarding restrictions on share transfers, standstill on share accumulation, share subscrip - tion rights, and the company’s call options. 5.3 Conditions Precedent, Material Adverse Change and Force Majeure JV agreements typically provide for conditions prec - edent to each party’s obligation to make a capital con - tribution or a business/assets transfer to the JV entity, such as no breach of representations and warranties and/or covenants. In particular, if the JV is set up by the transfer of the JV partners’ existing businesses, the completion of the carve-out of such businesses – including obtaining third-party consents to contract transfers and taking necessary actions for standalone issues – may be crucial and required as conditions precedent. In JV agreements, the so-called no-MAC (material adverse change) clause is often provided as a condi -
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