2012.10.12

2010 (Ju) 622

Minshu Vol. 66, No. 10

Judgment concerning the situation where a right to demand rescission of a fraudulent act may be exercised against an incorporation-type company split carried out to incorporate a stock company

Case to seek rescission of the fraudulent act

Judgment of the Second Petty Bench, dismissed

Osaka High Court, Judgment of December 22, 2009

Where an incorporation-type company split is carried out to incorporate a stock company, if a creditor of the company carrying out the incorporation-type company split has a claim for which the corresponding obligation has not been transferred to the stock company newly incorporated through the incorporation-type company split and he/she is also ineligible to raise an objection to the incorporation-type company split, such creditor is eligible to rescind the incorporation-type company split by exercising a right to demand rescission of a fraudulent act.

(There is a concurring opinion.)

Article 424 of the Civil Code; Companies Act, Part V, Chapter III, Section 2, Subsection 2 Incorporation-type Company Split by Which a Stock Company is Incorporated
Article 424 of the Civil Code
(1) An obligee may demand the court to rescind any juristic act which an obligor commits knowing that it will prejudice the obligee; provided, however, that, this shall not apply to the cases where any person who benefits from such act, or any person who succeeds to such benefit, did not know, at the time of such act or succession, the fact that the obligee is to be prejudiced.
(2) The provision of the preceding paragraph shall not apply to a juristic act with a subject other than property rights.

The final appeal is dismissed.
The appellant of final appeal shall bear the cost of the final appeal.

Concerning the reasons for petition for acceptance of final appeal argued by the appeal counsel, BAE Hoon
1. In this case, the appellee of final appeal, which has been entrusted with the management and collection of a claim against A, alleges that A’s act of having caused the real property indicated in (1) and (2) of the list of articles attached to the judgment in first instance (hereinafter referred to as the “Real Property”) to be transferred to the appellant of final appeal through an incorporation-type company split constitutes a fraudulent act, and accordingly, seeks rescission of such act of A and demands performance of the procedure for canceling the registration of transfer of ownership made with regard to the Real Property by reason of a company split.

2. The outline of the facts legally confirmed by the court of prior instance is as follows.
(1) The appellee is a claim management and collection company prescribed in Article 2, paragraph (3) of the Act on Special Measures Concerning Claim Management and Collection Businesses.
(2) On December 13, 2000, B provided a loan of 560 million yen to C (hereinafter the claim relating to this loan shall be referred to as the “Loan Claim”), and on the same day, D provided a joint and several guarantee for B for the debt corresponding to the Loan Claim (hereinafter the guarantee obligation relating to this joint and several guarantee shall be referred to as the “Guarantee Obligation”).
On May 10, 2002, B assigned the Loan Claim to E. On September 16, 2005, E assigned the Loan Claim to F, and on the same day, F entrusted the appellee with the management and collection of the Loan Claim. The outstanding principal of the Loan Claim as of September 16, 2005, was about 455 million yen, and it does not seem to have been repaid since then.
On August 6, 2004, A merged with D and assumed the Guarantee Obligation.
(3) On September 1, 2007, A prepared an incorporation-type company split plan providing that: (i) A would newly incorporate the appellant as a stock company; (ii) A would have the appellant to succeed to its rights and obligations indicated in List of Rights and Obligations for Succession [1] attached to the judgment in first instance, including the Real Property; and (iii) the appellant would allot all shares of stock to be issued by the appellant to A (hereinafter the incorporation-type company split based on this plan shall be referred to as the “Incorporation-type Company Split”). On October 1, 2007, the incorporation of the appellant was registered, and the Incorporation-type Company Split became effective.
As a result of the Incorporation-type Company Split, the appellant assumed part of A’s obligations, while A continued to assume these obligations cumulatively. However, the Guarantee Obligation was not included in these obligations assumed by the appellant.
On October 12, 2007, A performed the procedure for registration of the transfer of ownership for the Real Property to the appellant, by reason of the company split effective as of October 1.
(4) When A carried out the Incorporation-type Company Split, the Real Property had a surplus value as security worth about 33 million yen. However, at that time, A did not have any special assets other than the Real Property that could cover its obligations, and as a result of the Incorporation-type Company Split and another incorporation-type company split to incorporate G that was carried out immediately following the former, A no longer held any assets except for the stocks of the appellant and G.

3. The court of prior instance determined that an incorporation-type company split can be the subject of the exercise of a right to demand rescission of a fraudulent act because an incorporation-type company split is a juridical act involving a property right as a subject and there is no reason to preclude a creditor who is not covered by the creditor protection procedure prescribed in Article 810 of the Companies Act from exercising a right to demand rescission of a fraudulent act, and also because the exercise of such right is only effective in rescinding the incorporation of the company between the parties to litigation and does not make it impossible to assert the effect of the incorporation against all parties. Based on this, and given the facts mentioned in 2 above, the court found that the Incorporation-type Company Split constitutes a fraudulent act, and upheld the appellee’s claims.

4. The appeal counsel argues that an incorporation-type company split, which falls within the scope of acts concerning the organization of a company, is a juridical act involving a subject other than a property right as set forth in Article 424, paragraph (2) of the Civil Code, and if an incorporation-type company split is made subject to the exercise of a right to demand rescission of a fraudulent act, this would run counter to the purport of the Companies Act that only allows an action to seek invalidation of an incorporation-type company split as a means to deny the effect of an incorporation-type company split, and would also result in providing creditors who are not covered by the creditor protection procedure prescribed in Article 810 of said Act, with greater protection than that guaranteed for creditors who are covered by said procedure, and considering these matters, an incorporation-type company split is not subject to the exercise of a right to demand rescission of a fraudulent act.

5. An incorporation-type company split is defined as a company split whereby a stock company or companies or a limited liability company or companies incorporate a company by a split and have it succeed to all or part of their rights and obligations in connection with their business (Article 2, item (xxx) of the Companies Act), and according to this definition, it can be regarded as having the nature of a juridical act involving a property right as a subject, while, at the same time, it is also an act concerning the organization of a company including the incorporation of a new company. As long as an incorporation-type company split has the nature of a juridical act involving a property right as a subject, it cannot be understood that such company split is excluded from the scope of subject of the exercise of a right to demand rescission of a fraudulent act immediately because it is an act concerning the organization of a company (see 1918 (O) No. 464, judgment of the Former Supreme Court of October 28, 1918, Minroku No. 24, at 2195). However, in light of such nature, an incorporation-type company split cannot necessarily be regarded as the subject of the exercise of a right to demand rescission of a fraudulent act. Therefore, in order to determine whether or not it is possible to rescind an incorporation-type company split by exercising a right to demand rescission of a fraudulent act it is necessary to examine in more detail the relevant provisions of the Companies Act and other laws and regulations concerning an incorporation-type company split.
Looking at the Companies Act and other laws and regulations, they have no explicit provisions to rule out the exercise of a right to demand rescission of a fraudulent act against an incorporation-type company split. Although the Companies Act (Article 810) provides for protection of creditors of a stock company that carries out an incorporation-type company split (hereinafter referred to as a “splitting stock company in an incorporation-type company split”), creditors who are able to request a splitting stock company in an incorporation-type company split to perform obligations are ineligible to enjoy protection under said clause except in the prescribed cases. Hence, if a creditor has a claim that is not secured because the corresponding obligation has not been transferred to the stock company to be newly incorporated by the incorporation-type company split (hereinafter referred to as a “stock company incorporated through an incorporation-type company split), and he/she is also ineligible to enjoy protection under said clause, it is necessary to protect such creditor by allowing him/her to exercise a right to demand rescission of a fraudulent demand.
As a means to assert invalidity of an incorporation-type company split, the Companies Act (Article 828, paragraph (1), item (x)) provides for an action to seek invalidation, while limiting the standing to sue and the period for filing an action from the perspective of defining the legal relationships uniformly. Even if an incorporation-type company split is rescinded through the exercise of a right to demand rescission of a fraudulent act, the effect of such rescission should be considered to have no influence at all on the effect of the incorporation of a stock company through the incorporation-type company split. Therefore, where there is a creditor who needs protection as mentioned above, it is inappropriate to exclude an incorporation-type company split from the scope of subject of the exercise of a right to demand rescission of a fraudulent act only on the grounds that the Companies Act provides for an action to seek invalidation as a means to assert invalidity of an incorporation-type company split.
Consequently, where an incorporation-type company split is carried out to incorporate a stock company, if a creditor of the splitting stock company in an incorporation-type company split has a claim that is not secured because the corresponding obligation has not been transferred to the stock company incorporated through the incorporation-type company split and he/she is also ineligible to raise an objection to the incorporation-type company split, such creditor is considered to be eligible to rescind the incorporation-type company split by exercising a right to demand rescission of a fraudulent act pursuant to Article 424 of the Civil Code. In such case, it should be said that the creditor can deny the effect of the succession to rights on the part of the stock company incorporated through the incorporation-type company split, to the extent necessary for preserving his/her claim.

6. According to the above, we can affirm the determination of the court of prior instance that an incorporation-type company split can be the subject of the exercise of a right to demand rescission of a fraudulent act and therefore the appellee’s claims should be upheld. We cannot accept the appeal counsel’s arguments.

Therefore, the judgment has been rendered in the form of the main text by the unanimous consent of the Justices. There is a concurring opinion by Justice SUDO Masahiko.

The concurring opinion by Justice SUDO Masahiko is as follows.
I am in agreement with the court opinion, but I would like to give some comments as a supplement regarding the possibility that the Incorporation-type Company Split could harm the creditor.
As a result of the Incorporation-type Company Split, the general claims against A that had existed immediately before this event were divided into two categories, (i) general claims corresponding to obligations, including the Guarantee Obligation (about 455 million yen), which were not transferred to the appellant (hereinafter referred to as the “Remaining Claims”), and (ii) general claims corresponding to obligations which were transferred to the appellant (hereinafter referred to the “Transferred Claims”), depending on the type of property to cover the obligations (non-exempt property). More specifically, according to the facts confirmed by the court of prior instance, immediately before the Incorporation-type Company Split, both the Remaining Claims and the Transferred Claims, which had constituted the whole of the general claims (the claim corresponding to the Guarantee Obligation and other claims), were supposed to be covered by the common non-exempt property, that is, the whole of the general property that A had held immediately before the Incorporation-type Company Split, which had consisted of the Real Property (for its surplus value as security worth about 33 million yen) and other assets. However, as a result of the Incorporation-type Company Split, the Real Property was taken out of the non-exempt property for the Remaining Claims, and the property available as non-exempt property to cover these claims was limited to the general property that was not transferred to the appellant and the appellant’s stock, whereas the general property including the Real Property (for its surplus value as security) became available as the non-exempt property to cover the Transferred Claims. It seems that immediately before the Incorporation-type Company Split, A had been in effect insolvent to a considerable degree as it had held excessive liabilities even excluding the Guarantee Obligation and owned almost nothing but the Real Property as property that could serve as non-exempt property, and that the amount of the Remaining Claims had been much larger than that of the Transferred Claims. Meanwhile, the appellant’s stock added to the non-exempt property for the Remaining Claims was the price for the Incorporation-type Company Split. Even if such price was reasonable, in light of the difference between rights and obligations to be transferred as a result of the Incorporation-type Company Split, or in other words, the difference between assets and liabilities indicated in List of Rights and Obligations for Succession [1] attached to the judgment in first instance, as well as the fact that the appellant’s stated capital was one million yen, the value of its stock may not be very far from one million yen. In that case, under the circumstances of the case, it could be said, to put it very metaphorically for the convenience to explain, that as a result of the Incorporation-type Company Split, the non-exempt property to cover the Remaining Claims, which were in a large amount, was reduced from about 33 million yen to about one million yen, whereas the non-exempt property for the Transferred Claims, which were in a smaller amount, was kept at about 33 million yen. In short, even if the Incorporation-type Company Split was carried out at a reasonable price, this caused a considerable change to the non-exempt property for the Remaining Claims, although A’s net assets (stock value) remained the same, and it resulted in an extreme inequality between creditors of the Remaining Claims and creditors of the Transferred Claims.

Justice CHIBA Katsumi
Justice TAKEUCHI Yukio
Justice SUDO Masahiko
Justice ONUKI Yoshinobu