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2017 (Kyo) 7

2017.08.30
2017 (Kyo) 7
Minshu Vol. 71, No. 6
Decision on whether or not a person who acquired shares subject to a cash-out as set forth in Article 179-2, paragraph (1), item (ii) of the Companies Act after a notification under Article 179-4, paragraph (1), item (i) of the same act or a public notice under the same item and Article 161, paragraph (2) of the Act on Book Entry of Corporate Bonds and Shares had been issued is permitted to file a petition for determination of sale price under Article 179-8, paragraph (1) of the Companies Act
Case of appeal with permission against a ruling to dismiss an appeal against a ruling to dismiss a petition for determination of sale price of shares subject to a cash-out, etc.
Decision of the Second Petty bench, dismissed
Tokyo High Court, Decision of January 31, 2017
A person who acquired shares subject to a cash-out as set forth in Article 179-2, paragraph (1), item (ii) of the Companies Act after a notification under Article 179-4, paragraph (1), item (i) of the same act or a public notice under the same item and Article 161, paragraph (2) of the Act on Book Entry of Corporate Bonds and Shares had been issued is not permitted to file a petition for determination of sale price under Article 179-8, paragraph (1) of the Companies Act.
Article 179, paragraph (1), Article 179-4, paragraph (1), item (i) and Article 179-8, paragraph (1) of the Companies Act, and Article 161, paragraph (2) of the Act on Book Entry of Corporate Bonds and Shares



Companies Act

Article 179 (1) Special Controlling Shareholders of a Stock Company (in cases where a person in cases where not less than nine-tenths (9/10) of the votes of all shareholders of the Stock Company (in cases where a higher proportion is provided for in the articles of incorporation of such Stock Company, such proportion) are held by such person other than such Stock Company and in cases where a juridical person prescribed by the applicable Ordinance of the Ministry of Justice as a Stock Company all of the Issued Shares of which are held by such person or one equivalent thereto (hereinafter referred to as "Wholly Owned Subsidiary of the Special Controlling Shareholder" in this Article and paragraph (1) of the following Article), meaning such person; the same shall apply hereinafter) may demand from all shareholders of such Stock Company (excluding such Stock Company and said Special Controlling Shareholders) to sell all of the shares of such Stock Company that they hold to such Special Controlling Shareholder; provided, however, that such Special Controlling Shareholders may choose not to make a demand to a Wholly Owned Subsidiary of the Special Controlling Shareholder.

Article 179-4 (1) When a Subject Company approves under paragraph (1) of the preceding Article, it shall notify the persons listed in the following items of the matters specified in such items by twenty days before the Acquisition Day:

(i) Shareholders Subject to the Cash-Out (in cases where a Special Controlling Shareholder makes a Demand for Share Option Cash-Out along with the Demand for Cash-Out, Shareholders Subject to the Cash-Out and Share Option Holders Subject to the Cash-Out; hereinafter collectively referred to as "Shareholders, etc. Subject to the Cash-Out" in this Section): the fact that said approval is granted, name and address of the Special Controlling Shareholder, matters listed in Article 179-2(1)(i) through (v), and other matters prescribed by the applicable Ordinance of the Ministry of Justice; and

Article 179-8 (1) If a Demand for Shares, etc. Cash-Out is made, Shareholders, etc. Subject to the Cash-Out may file a petition for the court to determine the sale price of their Shares, etc. Subject to the Cash-Out, between twenty days prior to the Acquisition Day and the day immediately preceding the Acquisition Day.



Act on Book Entry of Corporate Bonds and Shares

Article 161(2)Notwithstanding the provisions of Article 116, paragraph (3), Article 158, paragraph (1), Article 168, paragraph (2), Article 169, paragraph (3), Article 170, paragraph (3), Article 181, paragraph (1), Article 195, paragraph (2), Article 201, paragraph (3), Article 240, paragraph (2), Article 469, paragraph (3), Article 776, paragraph (2), Article 783, paragraph (5), Article 785, paragraph (3), Article 797, paragraph (3), Article 804, paragraph (4) and Article 806, paragraph (3) of the Companies Act, in lieu of notifying the relevant persons as under those provisions, a company issuing Book-Entry Transfer Shares must issue public notice of the information of which it is required to notify those persons.
The appeal shall be dismissed.

The costs of the appeal shall be borne by the appellant.
Reasons for the appeal filed by the appellant

1. According to the records, the circumstances of this case are as described below:

(1) The interested party intervenor acquired shares of Kabushiki Kaisha Matsuya, which had issued book-entry shares (hereinafter referred to as the “Target Company”), through a tender offer and became a special controlling shareholder of the Target Company under Article 179, paragraph (1) of the Companies Act (hereinafter referred to as the “Act”). In December 2015, the interested party intervenor notified the Target Company of its intention to make a demand for sale of shares under the said paragraph and of the amount of money that it would pay to shareholders who would sell its shares (hereinafter referred to as “shares subject to a cash-out”) to the interested party intervenor in response to the demand for sale of shares (hereinafter referred to as the “seller shareholders”) in consideration of such shares (hereinafter referred to as the “amount of consideration”), as well as of the other matters listed in the items of paragraph (1) of Article 179-2 of the Act.

(2) The Target Company approved the demand for sale of shares notified as described above and issued a public notice of such approval, the amount of consideration, and the other matters listed in Article 179-4, paragraph (1), item (i) of the Act in accordance with Article 179-4, paragraph (1), item (i) and Article 161, paragraph (2) of the Act on Book Entry of Corporate Bonds and Shares (hereinafter referred to as the “Public Notice).

(3) After the Public Notice, the appellant acquired 3,000 shares of the shares subject to a cash-out of the Target Company (hereinafter referred to as the “Shares”).

2. In the present case, the appellant filed a petition for determination of sale price under Article 179-8, paragraph (1) of the Act with regard to the Shares (hereinafter referred to as a “petition for determination of sale price”). The point at issue is whether or not the appellant, who acquired the Shares after the Public Notice, is permitted to file a petition for determination of sale price.

3. The appellant argues that, since Article 179-8, paragraph (1) provides nothing about seller shareholders who are eligible to file a petition for determination of sale price, a person who acquired shares subject to a cash-out after the Public Notice should be eligible to file a petition for determination of sale price.

4. If a special controlling shareholder makes a demand for sale of shares and if the target company, which has issued shares subject to the demand for sale of shares, approves such demand without a resolution of the shareholders meeting and notifies the seller shareholders of, or issues a public notice of, such approval, the amount of consideration, etc. (Article 179-4, paragraph (1), item (i) of the Act and Article 161, paragraph (2) of the Act on Book Entry of Corporate Bonds and Shares), then a legal relationship is formed between the special controlling shareholder and the seller shareholders as if a purchase and sale agreement for the shares subject to a cash-out were executed between them, automatically by law and without the consent of the individual seller shareholders (Article 179-4, paragraph (3) of the Act), and the special controlling shareholder acquires all of the shares subject to a cash-out on the date of acquisition specified by the special controlling shareholder in the demand for sale of shares (Article 179-9, paragraph (1) of the Act). It is understood that the intention of Article 179-8, paragraph (1), which establishes the system of petition for determination of sale price, is to give an opportunity to obtain fair consideration to those of the affected shareholders of the target company who are dissatisfied with the amount of consideration, since the aforementioned notification or public notice will compel the shareholders of the target company at that time to sell their shares in exchange for the amount of consideration, regardless of their intentions. It is reasonable to understand that the said paragraph does not intend to offer protection to any person who acquired shares subject to a cash-out after it has become definite that the shares would be sold in response to the above notification or public notice.

Therefore, it should be considered that a person who acquired shares subject to a cash-out after the above notification or public notice had been issued is not eligible to file a petition for determination of sale price.

As the appellant is a person who acquired the Shares after the Public Notice, he is not eligible to file a petition for determination of sale price.

5. The ruling of the court of prior instance is to the same effect as above and is acceptable as justifiable. The appellant’s reasons for appeal are unacceptable.

Accordingly, the Court unanimously decides as set forth in the main text.
Justice ONIMARU Kaoru

Justice ONUKI Yoshinobu

Justice YAMAMOTO Tsuneyuki

Justice KANNO Hiroyuki
(This translation is provisional and subject to revision.)