Companies Act

A person who had been a shareholder of a stock company continuously for six months or more (or, if a shorter period is prescribed in the articles of incorporation, the period or more) before the day when the acts set forth in the following items became effective until that day (excluding a holder of shares of less than one unit who was unable to exercise rights pursuant to the provisions of the articles of incorporation set forth in Article 189, paragraph (2); hereinafter referred to as "former shareholder" in this Article) may demand the stock company (in the case prescribed in item (ii), a stock company surviving after the absorption-type merger set forth in the same item; hereinafter referred to as "wholly owned subsidiary company resulting from the share exchange, etc." in this Section), in writing or by any other method prescribed by Ministry of Justice Order, to file an action to enforce liability (limited to those related to liabilities or obligations for which the facts causing them occurred by the time when the acts set forth in the following items became effective; hereinafter the same applies in this Article) in the cases specified in those items even if the person is no longer a shareholder of the stock company; provided, however, that this does not apply if the purpose of the action to enforce liability is to seek unlawful benefits of the former shareholder or a third party or to inflict damages on the wholly owned subsidiary company resulting from the share exchange, etc. or wholly owning parent company set forth in the following items (meaning a stock company having all of the issued shares of a specific stock company or other stock companies specified by Ministry of Justice Order as equivalent thereto; hereinafter the same applies in this Section):

share exchange or share transfer of the stock company:when acquiring shares in the wholly owning parent company of the stock company through that share exchange or share transfer and continuing to hold those shares; and

absorption-type merger in which the stock company is the company that disappears:when acquiring shares in the wholly owning parent company of the stock company surviving after the absorption-type merger by the absorption-type merger and continuing to hold those shares.

For the purpose of the application of the provisions of the preceding paragraph to a stock company that is not a public company, "continuously from six months or more (or, if a shorter period is prescribed in the articles of incorporation, that period or more) before the day when the acts set forth in the following items until that day" in the same paragraph is read as "on the day when the acts set forth in the following items became effective".

A former shareholder may demand the wholly owned subsidiary company resulting from a share exchange, etc. to file an action to enforce liability in writing or by any other method prescribed by Ministry of Justice Order in the following cases even if the former shareholder is no longer a shareholder of the wholly owning parent company referred to in the items of paragraph (1); provided, however, that this does not apply if the purpose of the action to enforce liability is to seek unlawful benefits of the former shareholder or a third party or to inflict damages on the wholly owned subsidiary company resulting from the share exchange, etc. or a stock company issuing shares as referred to in the following items:

when, through a share exchange or share transfer by that wholly owning parent company, that person acquires shares in the wholly owning parent company and continues to hold those shares; and

when, through a merger in which the wholly owning parent company is the company that disappears, that person acquires shares in the stock company incorporated as a result of the merger or acquires shares in the stock company surviving after the merger or in its wholly owning parent company, and continues to hold those shares.

The provisions of the preceding paragraph apply mutatis mutandis to when a former shareholder is no longer a shareholder of shares referred to in item (i) of the same paragraph in the cases set forth in the same item (including cases where it is applied mutatis mutandis pursuant to this paragraph or the following paragraph; hereinafter the same applies in this paragraph).

The provisions of paragraph (3) apply mutatis mutandis to when a former shareholder is no longer a shareholder of shares as referred to in item (ii) of the same paragraph in cases set forth in the same item (including cases where it is applied mutatis mutandis pursuant to the preceding paragraph or this paragraph; hereinafter the same applies in this paragraph). In this case, "the wholly owning parent company" in paragraph (3) (including cases where it is applied mutatis mutandis pursuant to the preceding paragraph or this paragraph) is deemed to be replaced with "a stock company incorporated as a result of a merger or a stock company surviving after the merger or its wholly owning parent company".

When a wholly owned subsidiary company resulting from a share exchange, etc. does not file an action to enforce liability within sixty days from the day of demand (hereinafter referred to as "demand for filing an action" in this Article) pursuant to the provisions of paragraph (1) or paragraph (3) (including cases as applied mutatis mutandis pursuant to the preceding two paragraphs; hereinafter the same applies in this Article), a former shareholder who makes the demand for filing an action may file an action to enforce liability for the wholly owned subsidiary company resulting from the share exchange, etc.

If a wholly owned subsidiary company resulting from a share exchange, etc. does not file an action to enforce liability within sixty days from the day of the demand for filing an action, when it receives a demand from a former shareholder who makes the demand for filing an action or an incorporator, etc. who becomes a defendant of an action to enforce liability related to the demand for filing an action, it must notify the person who made the demand of the reason not to file an action to enforce liability in writing or other method prescribed by Ministry of Justice Order without delay.

Notwithstanding the provisions of paragraphs (1), (3), and (6), if a wholly owned subsidiary company resulting from a share exchange, etc. is likely to suffer irreparable harm through the elapsing of the period set forth in those paragraphs, a former shareholder who can make a demand for filing an action may immediately file an action to enforce liability for a wholly owned subsidiary company resulting from the share exchange, etc.

For the purpose of the application of the provisions of Article 55, Article 102-2, paragraph (2), Article 103, paragraph (3), Article 120, paragraph (5), Article 213-2, paragraph (2), Article 286-2, paragraph (2), Article 424 (including cases as applied mutatis mutandis pursuant to Article 486, paragraph (4)), proviso to Article 462, paragraph (3), Article 464, paragraph (2), and Article 465, paragraph (2) to when exempting a liability or obligations whose causative fact occurred by the time when the acts set forth in the following items of paragraph (1) became effective if there are qualified former shareholders (meaning former shareholders who become able to make a demand for filing an action pursuant to the provisions of main clause of paragraph (1) or main clause of paragraph (3); hereinafter the same applies in this Section) related to a wholly owned subsidiary company resulting from a share exchange, etc., "all shareholders" in these provisions is read as "all shareholders and all qualified former shareholders prescribed in Article 847-2, paragraph (9)".

A shareholder who holds votes of one-hundredths (or, if a lesser proportion is prescribed in the articles of incorporation, that proportion) or more of the votes of all shareholders (excluding shareholders who cannot exercise voting rights for all of matters that can be resolved at the shareholders meeting) of the ultimate, wholly owning parent company, etc. of a stock company (meaning the wholly owning parent company, etc. of the stock company which itself has no wholly owning parent company, etc.; hereinafter the same applies in this Section) continuously over six months (or, if a shorter period is prescribed in the articles of incorporation, that period or more) or a shareholder who holds shares at or more than one-hundredths (or, if a shorter period is prescribed in the articles of incorporation, that period or more) of issued shares (excluding treasury shares) of the ultimate, wholly owning parent company, etc. may demand the stock company to file an action to enforce specific liability (hereinafter referred to as "action to enforce specific liability" hereinafter in this Section) in writing or by any other methods specified by Ministry of Justice Order; provided, however, that this does not apply to cases corresponding to any of the following:

if the action to enforce specific liability is to seek unlawful benefits of the shareholder or a third party or to inflict damages on the stock company or the ultimate, wholly owning parent company, etc.; and

if the ultimate, wholly owning parent company, etc. does not suffer damages by the fact of causing the specific liability.

An "ultimate, wholly owning parent company, etc." as prescribed in the preceding paragraph means the stock companies set forth in the following:

a wholly owning parent company; and

if all of the issued shares of a stock company are held by another stock company and its wholly owned subsidiary companies, etc. (meaning a corporation all of the shares or equity interests of which are held by a stock company; hereinafter the same applies in this Article and Article 849, paragraph (3)) or by the wholly owned subsidiary companies, etc. of another stock company, that other stock company (other than a wholly owning parent company).

In the cases set forth in item (ii) of the preceding paragraph, when another stock company and its wholly owned subsidiary companies, etc. as referred to in that item, or the wholly owned subsidiary companies, etc. of another stock company as referred to in the same item, hold all of the shares or equity interests of another corporation, the relevant other corporation is deemed to be the wholly owned subsidiary company, etc. of that other stock company.

"Specific liability" as prescribed in paragraph (1) means the liability of the incorporator, etc. of a stock company, if the book value of the stock company's shares at the ultimate, wholly owning parent company, etc. and its wholly owned subsidiary companies, etc. (including anything deemed to be the wholly owned subsidiary company, etc. thereof pursuant to the provisions of the preceding paragraph; the same applies in the following paragraph and Article 849, paragraph (3)) exceeds one-fifth (or, if a lesser proportion is prescribed in the articles of incorporation, the proportion) of the value calculated by the method prescribed by Ministry of Justice Order as the total assets of the ultimate, wholly owning parent company, etc. on the day when the fact giving rise to the liability of the incorporator, etc. occurred (the same applies in paragraph (10) and paragraph (7) of the same Article).

If an ultimate, wholly owning parent company, etc. takes, as its wholly owned subsidiary company, etc., a stock company that, on the day when the fact giving rise to the liability of the incorporator, etc. occurred, was an ultimate, wholly owning parent company, etc., the stock company that was formerly an ultimate, wholly owning parent company, etc. is deemed to be the ultimate, wholly owning parent company, etc. set forth in the preceding paragraph and the provisions of that paragraph apply.

For the purpose of the application of the provisions of paragraph (1) to an ultimate, wholly owning parent company, etc. that is not a public company, "a stock company continuously over six months (or, if a shorter period is prescribed in the articles of incorporation, that period or more)" in the same paragraph is read as "stock company".

If a stock company does not file an action to enforce specific liability within sixty days from the day of demand pursuant to the provisions of paragraph (1), shareholders of the ultimate, wholly owning parent company, etc. that made the demand may file an action to enforce specific liability for the stock company.

If a stock company does not file an action to enforce specific liability within sixty days from the day of demand pursuant to the provisions of paragraph (1), when receiving a demand from a shareholder of an ultimate, wholly owning parent company, etc. which has made the demand or an incorporator, etc. who will become a defendant of the action to enforce specific liability related to the demand, the stock company must notify the person who made the demand the reason for not filing an action to enforce specific liability in writing or other method prescribed by Ministry of Justice Order without delay.

Notwithstanding the provisions of paragraphs (1) and (7), if a stock company is likely to suffer irreparable damages due to the elapsing of the period set forth in the same paragraph, the shareholder prescribed in paragraph (1) may file an action to enforce specific liability immediately for the stock company; provided, however, that this does not apply to cases where it is prescribed in the proviso to the same paragraph.

If there is an ultimate, wholly owning parent company, etc. with a stock company, for the purpose of the application of the provisions of Article 55, Article 103, paragraph (3), Article 120, paragraph (5), Article 424 (including cases where it is applied mutatis mutandis pursuant to Article 486, paragraph (4)), proviso to Article 462, paragraph (3), Article 464, paragraph (2), and Article 465, paragraph (2) to cases of exempting specific liability, "all shareholders" in these provisions is read as "all shareholders and all shareholders of an ultimate, wholly owning parent company, etc. as prescribed in Article 847-3, paragraph (1)".

An action to enforce liability set forth in Article 847, paragraph (3) or (5), Article 847-2, paragraph (6) or (8), or paragraph (7) or (9) of the preceding Article is deemed as an action bringing a claim that is not on a property right as to the calculation of value of the subject matter of the suit.

When a shareholder, etc. (meaning a qualified former shareholder or a shareholder of an ultimate, wholly owning parent company, etc.; hereinafter the same applies in this Section) files an action to enforce liability, a court may order the shareholder, etc. to provide reasonable security in response to a petition by the defendant.

When a defendant intends to file the petition set forth in the preceding paragraph, the defendant must make a prima facie showing that the plaintiff filed the action to enforce liability in bad faith.