2023.10.26

2022 (Kyo) 11

Minshu Vol. 77, No. 7

(Civil Case)Decision on a case where a shareholder of a stock company disappearing in an absorption-type merger sent his/her power of attorney to that company prior to the shareholders meeting required to effect the absorption-type merger, and it was found to fall under notice to the effect that the shareholder dissented from the absorption-type merger, etc. as provided in Article 785, paragraph (2), item (i)(a) of the Companies Act

Case of an appeal with permission against the decision to dismiss with prejudice on the merits an appeal against the decision to dismiss without prejudice a petition for determination of price of shares to be purchased

Decision of the First Petty Bench, quashed and decided by the Supreme Court

Nagoya High Court, Decision of March 30, 2022

In a case where a shareholder of a stock company disappearing in an absorption-type merger sent to that company his/her power of attorney indicating that the shareholder authorized a third party to exercise voting rights by proxy to the effect that the shareholder dissented from the absorption-type merger prior to the shareholders meeting required to effect the absorption-type merger, based on the facts shown in (1) and (2) below, the sending of the power of attorney by the shareholder to that company falls under notice to the disappearing stock company, etc. to the effect that the shareholder dissented from the absorption-type merger, etc. prior to the shareholders meeting required to effect the absorption-type merger, etc. as provided in Article 785, paragraph (2), item (i)(a) of the Companies Act,
(1) The above stock company disappearing in an absorption-type merger sent to the above shareholder a power of attorney form addressed to that company on which there was a section to select either "approval" or "disapproval" by marking it with a circle with regard to the proposal for approving the absorption-type merger agreement, and thereby solicited that the shareholder exercise voting rights by proxy.
(2) In response to the above solicitation, the above shareholder prepared the power of attorney by selecting "disapproval" and marking it with a circle and then sent it back to the stock company disappearing in an absorption-type merger.

Article 785, paragraph (2), item (i)(a) of the Companies Act

The decision in prior instance is quashed, and the decision in the first instance is revoked.
The case is remanded to the Nagoya District Court.

Concerning the reasons for the appeal stated by the counsels for the appeal, TSUCHIYA Katsuhiro and TAKAHASHI Yoshihisa
1. In this case, the appellant who was a shareholder of Sujahta Meiraku Co., Ltd. (hereinafter referred to as "Sujahta") demanded that Sujahta purchase the shares owned by the appellant at a fair price alleging that the appellant was a shareholder as specified in Article 785, paragraph (2) of the Companies Act (hereinafter referred to as the "Dissenting Shareholder") with regard to the absorption-type merger in which the interested party intervenor was the stock company surviving the absorption-type merger, and Sujahta was the stock company disappearing in the absorption-type merger (hereinafter referred to as the "Absorption-type Merger"). However, an agreement was not reached on the determination of the price thereof, and the appellant filed a petition for determination of price (hereinafter referred to as the "Petition") pursuant to Article 786, paragraph (2) of the same Act.
2. According to the case records, the background of this case is as follows:
(1) On October 15, 2020, Sujahta concluded an absorption-type merger agreement (hereinafter referred to as the "Merger Agreement") with the interested party intervenor to effectuate the Absorption-type Merger with effective date as December 1 of the same year.
(2) Sujahta decided to hold an extraordinary shareholders meeting (hereinafter referred to as the "Meeting") on November 13, 2020, to adopt a resolution on "Proposal No. 1: Approval for absorption-type merger agreement with Nagoya Seiraku Co., Ltd." (hereinafter referred to as the "Proposal"). On the 9th day of the same month, the representative director of Sujahta (hereinafter referred to as the "Representative Director") issued notice of calling of the Meeting to the appellant who owned 7,950 shares in Sujahta and also solicited that the appellant, if the appellant was to be absent from the Meeting, prepare a power of attorney by stating either approval or disapproval for the Proposal on the power of attorney form enclosed with the notice of calling (hereinafter referred to as the "Power of Attorney Form") and send it back to the company to exercise voting rights by proxy.
The Power of Attorney Form provided, at the top, sections for entering the date of preparation, number of voting rights, and the shareholder's address and name, and the addressee thereof was printed as "To: Sujahta Meiraku Co., Ltd." It was followed by the title "Power of Attorney." The form then continued with the printed statements: "I appoint ________ as a proxy and delegate the following authority" and "To be present at the extraordinary shareholders meeting to be held on November 13, 2020, and any adjourned or postponed meeting thereof and exercise my voting rights in accordance with my instructions (marked with a circle) with regard to the proposal specified below. However, if I do not mark and state either approval or disapproval for the specified proposal, or if any amendment proposal or motion is made with regard to the original proposal, I will give the proxy carte blanche thereon." Below those statements, there was a section to select either "approval" or "disapproval" for the Proposal by marking it with a circle (hereinafter referred to as the "Approval/Disapproval Section").
(3) In response to the solicitation for the exercise of voting rights by proxy mentioned in (2) above, the appellant used the Power of Attorney Form to prepare a power of attorney (hereinafter referred to as the "Power of Attorney") as shown in the Exhibit of the decision in the first instance, by entering the name of the Representative Director in the underlined space in (2) above, marking "disapproval" with a circle in the Approval/Disapproval Section and adding a remark stating, "I cannot express approval or disapproval because the content and purport of the merger agreement is unclear, and I received the notice only a few days prior to the meeting (please show me the merger agreement)" (hereinafter referred to as the "Remark"), and then sent it back to Sujahta on November 10, 2020.
(4) On November 13, 2020, the Meeting adopted a resolution to approve the Merger Agreement. When adopting the above resolution, the Representative Director, as proxy for the appellant, exercised voting rights to the effect that the appellant dissented from the Proposal.
(5) On or before November 30, 2020, the appellant demanded that Sujahta purchase all the shares owned by the appellant at a fair price.
(6) On December 1, 2020, the Absorption-type Merger came into effect, and Sujahta was merged into the interested party intervenor.
(7) The appellant filed the Petition on January 20, 2021.
(8) The appellant argues that the sending of the Power of Attorney by the appellant to Sujahta falls under notice to the disappearing stock company, etc. to the effect that the shareholder dissented from the absorption-type merger, etc. prior to the shareholders meeting required to effect the absorption-type merger, etc. as provided in Article 785, paragraph (2), item (i)(a) of the Companies Act (hereinafter referred to as the "Notice of Dissent"), and therefore, the appellant is Dissenting Shareholder and the Petition is lawful.
3. The court in prior instance determined that the Petition was not lawful on the ground that the appellant was not a Dissenting Shareholder and should be dismissed without prejudice. The outline of its decision is as follows:
The Power of Attorney was a document that expressed the appellant's intention to authorize a person who was to be a proxy to exercise voting rights at the Meeting. For this reason, "disapproval" marked with a circle in the Approval/Disapproval Section was the instruction given to the aforementioned person, but it was not the instruction given to Sujahta. Considering that it is provided that a document evidencing the authority of proxy must be submitted to the stock company (Article 310, paragraph (1) of the Companies Act), it is not unnatural that the Power of Attorney was addressed to Sujahta. In addition, considering that the Remark was added, it cannot be said that the Power of Attorney expressed the appellant's intention to dissent from the Absorption-type Merger. Accordingly, the sending of the Power of Attorney by the appellant to Sujahta does not fall under Notice of Dissent.
4. However, the aforementioned determination of the court of prior instance cannot be upheld. The reasons therefor are as follows:
Article 785, paragraph (1) and paragraph (2), item (i)(a) of the Companies Act provide that shareholders who can exercise voting rights at the shareholders meeting required to effect an absorption-type merger may make a demand for the purchase of shares as Dissenting Shareholders only if they have given Notice of Dissent prior to the relevant shareholders meeting. It is considered that these provisions aim to enable the disappearing stock company, etc. to estimate the number of voting rights held by the shareholders who dissent from the proposal for approving the absorption-type merger agreement, etc. and the number of shares that would be subject to demands for purchase, thereby giving the company an opportunity to take measures to adopt the proposal or to consider withdrawing the proposal. As in this case, even in a case where a shareholder sent to the disappearing stock company, etc. a power of attorney indicating that the shareholder authorized a third party to exercise voting rights by proxy to the effect that the shareholder dissented from the absorption-type merger prior to the shareholders meeting required to effect the absorption-type merger, if it can be said that the relevant shareholder's intention to dissent from the absorption-type merger, etc. was expressed to the disappearing stock company, etc. by taking into consideration the circumstances where the power of attorney was prepared and sent, the content thereof, and other matters, it can be said that the disappearing stock company, etc. was able to estimate as stated above and given the above opportunity. For this reason, it is reasonable to consider that the sending of such power of attorney to the disappearing stock company, etc. falls under Notice of Dissent.
In this case, the Power of Attorney was prepared as follows: Sujahta sent the Power of Attorney Form, which was addressed to Sujahta, to the appellant and solicited the appellant to exercise voting rights by proxy; and in response to this solicitation, the appellant completed the Power of Attorney Form and sent it back to Sujahta. Therefore, it can be said that the indication made by the appellant in the Approval/Disapproval Section was not only an instruction to the person who was to be the appellant's proxy regarding the details of the exercise of voting rights but also the appellant's response to Sujahta, which had made the aforementioned solicitation. It should be said that the sending of the Power of Attorney was also notice to Sujahta of the appellant's intention regarding the Absorption-type Merger. Because "disapproval" was marked with a circle in the Approval/Disapproval Section, it is clear that the Power of Attorney expressed the appellant's intention to dissent from the Absorption-type Merger. Incidentally, considering the content of the Remarks and other matters, it should be considered that the Remark stated the reasons for dissenting from the Proposal. The existence of the Remark does not affect the above determination that the Power of Attorney expressed the appellant's intention to dissent from the Absorption-type Merger.
Based on the above reasons, it can be said that the sending of the Power of Attorney expressed to Sujahta the appellant's intention to dissent from the Absorption-type Merger.
Accordingly, it is reasonable to consider that the appellant's sending of the Power of Attorney to Sujahta falls under Notice of Dissent.
5. The determination of the court of prior instance to dismiss the Petition without prejudice based on opinions different from those described above contains a violation of law or regulation that has clearly influenced the judicial decision. The counsels' arguments are well-grounded, and the decision in prior instance should inevitably be quashed. The decision in the first instance is revoked and this case is remanded to the court of prior instance for further examination.
Accordingly, the Court unanimously decides as set forth in the main text of the decision.

Justice MIYAMA Takuya
Justice YAMAGUCHI Atsushi
Justice YASUNAMI Ryosuke
Justice OKA Masaaki
Justice SAKAI Toru