JAPAN Trends and Developments Contributed by: Takao Shojima, Naohiro Nomura and Taiki Hirono, Anderson Mori & Tomotsune
Anderson Mori & Tomotsune Otemachi Park Building 1-1-1 Otemachi Chiyoda-ku Tokyo 100-8136 Japan
Tel: +81 3 6775 1139 Fax: +81 3 6775 2139 Email: takao.shojima@amt-law.com Web: www.amt-law.com
Introduction This article highlights emerging trends and develop - ments in joint venture law and practice in Japan. In particular, the authors discuss: • notable recent cases influencing joint venture practices; • key aspects of joint venture agreements for start- ups; and • the use of statutory company splits as a mecha - nism for establishing joint ventures. Notable Recent Cases Influencing Joint Venture Practices Remedy for breaching voting agreements It is common practice for shareholders of closely held companies to include voting agreements in sharehold - ers’ agreements, with provisions obligating parties to exercise their voting rights in accordance with the agreement – such as in the appointment of directors. While it is generally understood that such voting agreements are legally effective, the prevailing view has been that they constitute merely contractual obli - gations between parties, with breaches giving rise only to liability for damages. However, the Tokyo High Court decision dated 22 January 2020 acknowledged that, as legal effects of breaching voting agreements: • a court may issue a judgment or provisional injunc - tion compelling performance against the breach - ing party, requiring that voting rights be exercised according to the agreement; and/or
• a shareholders’ resolution passed in breach of such a voting agreement may be subject to annul - ment, similar to the annulment of a shareholders’ resolution violating the articles of incorporation – provided all outstanding shares are held by the parties to the shareholders’ agreement to avoid unintended consequences for non-party share - holders. For these legal effects to be recognised beyond sim - ple contractual obligations, the Tokyo High Court indi - cated that it must clearly recognise the intention of the parties to the shareholders’ agreement to constitute a juridical act, considering factors such as the following: • whether the shareholders’ agreement was conclud - ed between parties with sufficient legal knowledge and corporate governance planning capacity; • whether all or a substantial majority of issued shares are held by the contracting parties; • whether the voting agreement is sufficiently spe - cific to enable a clear finding of a breach; and • whether the purpose and intent of the parties to the voting agreement are clear. In this case, the legal effect of the voting agreement was not upheld. Nevertheless, this Tokyo High Court decision serves as a guiding precedent for assess - ing the legal effects of voting agreements. However, under what specific circumstances the aforemen - tioned effects will be recognised remains unclear and will depend on the accumulation of future case law.
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