JAPAN Trends and Developments Contributed by: Takao Shojima, Naohiro Nomura and Taiki Hirono, Anderson Mori & Tomotsune
In terms of practice, even after this decision, given that a degree of legal uncertainty remains, it is advis - able to avoid drafting and implementing shareholders’ agreements on the presumption that the aforemen -
termination of the shareholders’ agreement where a board of directors’ resolution cannot be passed and the joint venture parties fail to reach agreement through mutual consultation), it did not provide for a deadlock clause for shareholders’ meetings. The aforementioned shareholder argued that, because an actual deadlock occurred at the shareholders’ meet - ing, the deadlock clause for the meetings of the board of directors should be applied to the shareholders’ meeting mutatis mutandis, allowing the shareholders’ agreement to be terminated. The Tokyo High Court rejected this argument, holding that in the absence of clear intent to include a deadlock clause for the shareholders’ meetings, extending the clause beyond its explicit scope was not consistent with the parties’ intentions, and the clause could thus not be applied mutatis mutandis. Key Aspects of Joint Venture Agreements for Start-Ups The start-up ecosystem and venture investment landscape in Japan Start-ups are increasingly recognised as engines of innovation in advanced sectors such as artificial intel - ligence (AI), the internet of things (IoT), fintech, robot - ics and space exploration. The Japanese government and local municipalities have launched a variety of initiatives to support start-up growth – including grant programmes, tax incentives and the creation of spe - cialised “start-up cities” such as Fukuoka and Tokyo. Collaborative efforts between the public and private sectors are also growing, with universities and cor - porations establishing incubators and accelerators to nurture new businesses. Securing funding is a critical driver of the development of start-ups. In addition to public subsidies, capital is commonly provided by venture capital firms, cor - porate venture arms and angel investors who back promising start-ups. The primary motivation for these investors is to foster innovation and accelerate busi - ness growth, usually in return for equity. Joint venture agreements for venture investments When an investor puts capital into a start-up, two main agreements are typically established:
tioned legal effects will be recognised. Decisions on matters absent from the shareholders’ agreement
In a Tokyo High Court judgment dated 25 April 2024, the following points were made. While these conclu - sions are generally accepted in relation to contract interpretation, the clear ruling serves as a guideline when drafting shareholders’ agreements in similar situations, emphasising the importance of explicitly stipulating the matters that were the object of the rul - ing. In this case, a joint venture representative was dis - missed, and a shareholder in the joint venture – whose representative director was the dismissed individual – argued that the shareholders’ agreement should be terminated and therefore no longer binding. The shareholders’ agreement in this case defined, as “basic matters” of the joint venture, the number of rep - resentative directors and the composition of the direc - tors immediately after the capital increase. Meanwhile, the selection and dismissal of a representative director were only stipulated to be determined “in accordance with applicable laws and regulations”. After the board of directors dismissed the joint venture representa - tive, the aforementioned shareholder claimed that this dismissal constituted a breach of the shareholders’ agreement since it unilaterally made changes to the “basic matters”. Accordingly, the shareholder assert - ed that this breach of the shareholders’ agreement warranted its termination and that, as a result, they were no longer bound by its terms. The Tokyo High Court rejected this argument, holding that, since the shareholders’ agreement only stipulates that the dis - missal of a representative director is subject to being “in accordance with applicable laws and regulations”, it could not be interpreted that the dismissal of the representative director is not permitted. Additionally, although the shareholders’ agreement in this case included a deadlock clause for the meet - ings of the board of directors (ie, a clause permitting
65 CHAMBERS.COM
Powered by FlippingBook