JAPAN Law and Practice Contributed by: Akira Matsushita and Hideki Ben, Mori Hamada
for director, restrictions on exercising voting rights or prior consent rights on matters to be resolved at a shareholders’ meeting or board of directors’ meeting; and • agreements between a listed company and its shareholders who have filed a large-scale share- holding report regarding restrictions on transfer of shares, standstill regarding accumulation of shares, share subscription rights or such company’s call options. The Companies Act does not stipulate explicit duties and liabilities of a controlling company with respect to the shareholders of a company it controls. Although it is theoretically recognised that a controlling company may be liable to the minority shareholders of its sub - sidiary in respect of its management of the subsidi- ary, the law is not clear on what triggers this liability. Because of this uncertainty, in Japan the issue of con- flict of interests in a transaction between a controlling company and its subsidiary is generally expected to be solved by the election of independent directors for the subsidiary, who are independent from the control- ling company, and by letting such independent direc- tors conduct their duties for the benefit of the minority shareholders of the subsidiary. 8. Controlling Company 8.1 Duties of a Controlling Company 9. Insolvency 9.1 Rights of Shareholders If the Company Is Insolvent Under the Companies Act, a company may be dis- solved by an extraordinary resolution at its general shareholders’ meeting and go into liquidation. The shareholders of a company in liquidation have a right to receive residual assets of the company after the performance of its obligations is complete. Liquida- tion is eventually concluded upon the approval of the settlement of accounts by an extraordinary resolution at a general shareholders’ meeting. Shareholders of a liquidating company may file a petition for the com- mencement of special liquidation, which is a liquida- tion procedure carried out under supervision of the
court in cases where circumstances prejudicial to the implementation of the liquidation exist or there are suspicious reasons for or factors regarding the insol- vency of the company (Article 511 of the Companies Act). A shareholder with one tenth or more of the voting rights of all shareholders of a company has the right to file a petition for the commencement of corporate re-organisation proceedings against the company if there is a risk that grounds for commencement of bankruptcy proceedings may occur pursuant to the Corporate Reorganisation Act; however, shareholders do not have a right to file a petition for commence- ment of bankruptcy proceedings or civil rehabilitation proceedings (the Bankruptcy Act and the Civil Reha- bilitation Act). While shareholders are not allowed to be involved in bankruptcy proceedings, they have some rights with respect to, or can participate in, civil rehabilita- tion proceedings and corporate re-organisation pro- ceedings, to some extent. This is because these are restructuring proceedings, the results of which might be unjustly disadvantageous to shareholders. How- ever, if the company has debts exceeding assets, the shareholders cannot participate in or object to these proceedings. Shareholders have some rights against a company to remedy actions carried out by its directors or others. The following remedies are typical remedies against a company. Revocation of a General Shareholders’ Meeting Resolution A shareholder may file for a revocation of a resolu- tion of a general shareholders’ meeting by filing an action with the court within three months from the date of that resolution, if any of the following events has occurred (Article 831 of the Companies Act): • where the calling procedures or the methods of a resolution at the general shareholders’ meeting 10. Shareholders’ Remedies 10.1 Remedies Against the Company
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