JAPAN Law and Practice Contributed by: Akira Matsushita and Hideki Ben, Mori Hamada
public security or smooth management of Japan’s economy. For the purposes of the prior notification require- ments, the FEFTA provides exemptions for invest- ments that meet certain criteria in order to qualify as passive investments. The FEFTA also provides a post-acquisition notification requirement for foreign investors. Additionally, there are some restrictions on the holding of shares by a foreign investor in a company engaging in certain types of business (such as airlines and the broadcasting business), under laws regulating those specific business sectors. 1.7 Shareholders’ Agreements/Joint Venture Agreements When a shareholder intends to engage in a joint ven- ture with other persons, a shareholder commonly enters into a shareholders’ agreement or joint ven- ture agreement with other shareholders. While the joint venture company is usually a private company, in public or listed companies, shareholders sometimes enter into a shareholders’ agreement with other share- holders. 1.8 Typical Provisions in Shareholders’ Agreements/Joint Venture Agreements Shareholders’ agreements regarding private compa- nies typically include the following provisions: • agreements on governance (eg, process of general shareholders’ meetings, board composition, des- ignation of representative directors, process of the board, shareholders/board reserved matters, veto rights, deadlock process, composition of statutory auditors, designation of an accounting auditor and information rights); • agreements on shares (eg, transfer restrictions, anti-dilution (pre-emptive right), right of first refusal/ offer, put/call option, tag-along and drag-along); and • other agreements (eg, non-competition, non-solic- itation, dividend policy, dissolution/liquidation and termination).
The validity or enforceability of shareholders’ agree- ments depends on the types of provisions in question. Voting agreements – such as an agreement to exercise voting at a general shareholders’ meeting to establish an agreed board composition and to exercise veto rights with regard to certain material matters – are generally considered valid, unless they violate the pur- poses of the laws or public policy, and are generally enforceable to some extent among the shareholders who are parties to the shareholders’ agreement. However, if a shareholder exercises its voting rights in violation of a voting agreement entered into between some (but not all) shareholders of the company, the voting agreement would not generally be binding on the company, and a resolution made based on that exercise of voting rights would not generally be sub- ject to revocation. Conversely, if all shareholders of the company are parties to the voting agreement, the resolution made through such a process may be revo- cable. As to an agreement between shareholders regarding a restriction on transfer of shares, in general, a transfer of shares in violation of such an agreement would not generally be void in relation to the company and third parties. By contrast, agreements between sharehold- ers and the company restricting the transfer of shares might be void because it could be used by the man- agement to exert control over the company. Shareholders’ agreements involving private com- panies are not disclosed to the public, while certain agreements involving shares in listed companies are disclosed in large-scale shareholding reports filed by shareholders, or in security reports or extraordinary reports filed by target companies (see 3.4 Disclosure of Interests and 7.1 Duty to Report ). 2. Shareholders’ Meetings and Resolutions 2.1 Types of Meeting, Notice and Calling a Meeting A stock company must hold an annual general meet- ing (AGM) within a certain period of time following
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