JAPAN Law and Practice Contributed by: Akira Matsushita, Norihito Sato, Hideki Ben and Nobuhiko Suzuki, Mori Hamada
• restrictions on the transfer of shares in the JV (rights of first refusal (ROFR), tag-along rights, drag-along rights, put/call options); and • termination and dissolution. 6.2 Governance and Decision-Making Board of Directors A JV formed as a stock company ( kabushiki-kaisha ) would typically have a board of directors (BoD), in addition to the shareholders’ meeting, as a decision- making body. A BoD is comprised of directors and has the authority to make all decisions regarding the execution of the company’s business other than mat - ters to be resolved at a shareholders’ meeting pursu - ant to the CA and the AoI. BoD decisions require a majority vote of the directors present at the meeting (or, if a higher vote or quorum is specified in the AoI, such higher number). A representative director or an executive director conducts the company’s business pursuant to the decisions and under the monitoring of the BoD. Shareholders’ Meeting If the JV company has a BoD, shareholders’ meet - ings can only determine matters stipulated in the CA (examples are listed below) and the AoI. General matters – such as approval of financial state - ments, distribution of dividends, appointment and removal of directors, and appointment of statutory auditors – are passed by a simple majority vote of shareholders present at the meeting (quorum requires the attendance of shareholders holding more than half of all the voting rights, unless set out differently in the AoI. Matters that materially affect the status of share - holders or that require careful judgement – such as AoI amendments, corporate reorganisation includ - ing merger, business transfer, company split ( kaisha bunkatsu ), share-to-share transfer ( kabushiki kokan ), share delivery ( kabushiki kofu ), share exchange ( kabu- shiki iten ), share issuance (if share transfers are sub - ject to company approval under the AoI) and dissolu - tion of the company – are passed by a super-majority vote of shareholders equal to two thirds (or, if a high - er shareholding is specified in the AoI, such higher shareholding) of the affirmative votes of shareholders
present at the meeting (quorum requires the attend - ance of shareholders holding more than half of all the voting rights, unless set out differently in the AoI, but no less than one third). There are some exceptional matters that must be passed by special resolution of shareholders, requir - ing more than a super-majority of affirmative votes. Reserved Matters In order to protect minority shareholders, JV agree - ments typically provide for reserved matters (which would otherwise be passed without the vote of the minority shareholder) requiring the prior consent of the minority shareholder to pass as a resolution of the BoD or shareholders’ meeting. Such reserved matters may be stated in the AoI, or the JV company may issue class shares with separate voting rights to elect a minimum number of board members or to veto certain material matters. Typical reserved mat - ters include: • equity financing, including issuance of new shares and stock options; • corporate reorganisation including merger, busi - ness transfer, company split ( kaisha bunkats u), share-to-share transfer ( kabushiki kokan ), share delivery ( kabushiki kofu ) and share exchange ( kabu- shiki iten ); • amendments to the AoI or other material internal rules and regulations; • related-party transactions; and • liquidation, dissolution or otherwise winding-up of business or operations. Other less important matters are often contractual - ly stipulated as items for prior consultation with the minority shareholder. Initial funding is usually made by equity investment from JV partners. Moreover, assets necessary for the JV’s operation such as IP and facilities are typically transferred to the JV company in exchange for equity issued by the JV company (contribution in kind) or by way of company split ( kaisha bunkatsu ) pursuant to the provisions of the CA. 6.3 Funding Initial Funding
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