Request for Permission to Convene a General Meeting of Shareholders (Management Control Dispute)
Outline of the case
In T Corporation, three families, Family A, Family B, and Family C, descendants of the founder, each owned about one-third of the company’s shares, and there has been a fierce dispute over the acquisition of management control. As a result, no general shareholders’ meeting or board of directors’ meeting had been held for a long time. The company had taken the form of holding a general shareholders’ meeting only among some of the shareholders, and had requested a tax accountant to prepare the minutes of the meeting and register,the resolution of the meeting Which had not actually resoled .When Family C, who had been completely excluded from the management of the company, made a request to hold a shareholders’ meeting, and family member A who was in effect the representative of the company, refused the request, Family C filed a petition with the court for permission to call a shareholders’ meeting. Our firm was asked by Family A to represent the other party in a case requesting permission to convene a general meeting of shareholders.
Representation in Requests for Permission to Convene Shareholders’ Meetings
In a company with a board of directors, the board of directors decides to convene a general shareholders meeting, and the representative director convenes the meeting as part of the execution of business (Article 296, Paragraph 3 of the Companies Act; Article 398, Paragraph 4 of the same Act). However, as an exception, minority shareholders may convene a general shareholders’ meeting with the permission of the court in cases where a general shareholders’ meeting is not convened for statutory resolutions such as election of officers. and other important matters
(Article 297, Paragraph 4 of the Companies Act).
In order for a minority shareholder to file a petition for permission to convene a general meeting of shareholders, the minority shareholder must (i) have held the voting rights of not less than 3/100 of the total voting rights of all shareholders (or the ratio if the Articles of Incorporation stipulate a lower ratio) for six consecutive months (Article 297, Paragraphs 1 and 2 of the Companies Act), (ii) To request the Directors to convene a General Meeting of Shareholders, indicating the matters that are the purpose of the General Meeting of Shareholders (limited to matters on which such shareholders may exercise their voting rights) and the reasons for convening the meeting (Article 297, Paragraph 1 of the Companies Act), (iii) (1) the procedures for convening a general meeting of shareholders are not carried out without delay after a request for such meeting is made, or (2) a notice of convocation of a general meeting of shareholders is not issued for a date within 8 weeks (or such shorter period as specified in the articles of incorporation, if any) of the date of the request for such meeting (Article 297, Paragraph 4 of the Companies Act).
In other words, even shareholders holding 3% or more of the company’s shares cannot immediately call a shareholders’ meeting, but must first request the company to hold a shareholders’ meeting. If a shareholders’ meeting is not held within a certain period of time, a petition for permission to convene a shareholders’ meeting can be filed with the court. Only after the court issues a decision permitting the convocation of a general shareholders’ meeting can the shareholders concerned call the meeting by themselves.
When petitioning for permission to convene a general meeting of shareholders, the petitioner must make a prima facie showing of the facts giving rise to the petition (Article 869 of the Companies Act). Although a petition for permission to convene a general meeting of shareholders does not require a hearing to hear statements (see Companies Act, Article 870), the Tokyo District Court generally operates by summoning the company’s representative directors, etc. and setting a hearing date to give them an opportunity to hear the company’s opinions. In the case of a request for permission to convene a meeting, the opposing party (the company) often argues (1) that the petitioner does not have the necessary shares and (2) that the petitioner’s petition is an abuse of rights. However, since it is a petition to convene a general shareholders meeting, which is a meeting to decide important matters of the company (the content of the meeting is ultimately decided by a resolution of the general shareholders meeting), a prima facie case with a low degree of proof is sufficient, and the case is a non-litigious case where a decision is supposed to be made in a short time, the decision is generally made in favor of the petitioner.
If the court’s decision to convene the meeting is granted, the minority shareholders may convene the meeting on their own within a period of time set by the court (usually about 6 weeks). Once the court has given its permission, the company is no longer allowed to call a general shareholders’ meeting on the same agenda. At a general shareholders’ meeting called by the convoking shareholder, resolutions can be adopted only within the scope of the permitted agenda (Supreme Court of Japan, April 8, 1929; Kanazawa District Court, September 23, 1959). However, even if it is not included in the permitted agenda and is not stated in the notice of convocation, a person may be appointed to investigate the state of the company’s business and assets (Article 316, Paragraph 2 of the Companies Act). On the hearing date, the court will recommend the company’s representative director to hold a shareholders’ meeting, and if the company voluntarily holds a shareholders’ meeting in response, the court may withdraw the petition for permission by the minority shareholders, or dismiss the petition if the petitioner does not withdraw it.
When a petition for permission to hold a general shareholders’ meeting was filed, we argued that such a request for permission to hold a general shareholders’ meeting was not allowed due to abuse of rights. In the end, the court refused to accept our argument and issued an order granting permission to convene the shareholders’ meeting. However since it took nearly six months for the court to make its decision, we were able to make significant progress toward resolving the underlying dispute by having opportunities to discuss various issues with the petitioner during that time.
Services offered by Kuribayashi Sogo Law Office
Kuribayashi Sogo Law Office represents the minority shareholders in their request to convene a shareholders’ meeting, and if the company refuses to do so, we file a request with the court for permission to convene a shareholders’ meeting. If the court issues a decision to permit the convocation of a shareholders’ meeting, the firm will work with the client to represent the minority shareholders in the procedures for convening the meeting and in the management of the meeting on the day of the meeting. On the other hand, at the request of a company that has filed a request to convene a general meeting of shareholders, we often represent the company in a court case requesting permission to convene a general meeting. In such cases, we examine whether the petitioner’s petition satisfies the requirements stipulated in the Companies Act, and if the petitioner is found to be filing the petition for his/her own personal benefit, we will argue the company’s position by asserting an abuse of rights. Even if a decision is made to permit the convocation of a general meeting of shareholders, we will monitor whether the convocation and operation of the meeting by the minority shareholders are properly conducted in accordance with the law.
Fees
For representation in a case involving a petition for permission to convene a general meeting of shareholders, the retainer fee is 600,000 yen (excluding tax) and the success fee is 600,000 yen (excluding tax).
Advice on procedures for convening a general meeting of shareholders and on the operation of a general meeting of shareholders will be billed on a time-charge basis. Partners are charged 35,000 yen per hour (excluding tax) and associates are charged 25,000 yen per hour (excluding tax), and invoices will be issued based on the amount of time spent each month.
For clients with an advisory contract, the hourly rate for partner attorneys is 30,000 yen (tax not included), and the hourly rate for associate attorneys is 20,000 yen (tax not included) because we apply special discount rate . For clients Legal Counsultant Agreement with our firm, we offer a discount of approximately 20%.
