Companies Act

If a judgment upholding a claim relating to an action seeking invalidation of a share exchange or share transfer of a stock company has become final and binding, if the stock company acquiring all of the issued shares (hereinafter referred to as the "former wholly owning parent company" in this Article) of the stock company effecting the share exchange or share transfer (hereinafter referred to as the "former wholly owned subsidiary company" in this Article) has delivered the shares of the former wholly owning parent company (hereinafter referred to as the "shares of the former wholly owning parent company" in this Article) at the time of the share exchange or share transfer, the former wholly owning parent company must deliver to holders of the shares of the former wholly owning parent company as of the time relevant judgment became final and conclusive the shares of the former wholly owned subsidiary company (hereinafter referred to as the "shares of the former wholly owned subsidiary company" in this Article) that had been held, at the time of the share exchange or share transfer, by the persons who received delivery of the shares of the former wholly owning parent company. In these cases, when relevant former wholly owning parent company is a share certificate-issuing company, the former wholly owning parent company may request relevant shareholders to return the old share certificates representing relevant shares of the former wholly owning parent company in exchange for the delivery of relevant shares of the former wholly owned subsidiary company.

In the cases prescribed in the first sentence of the preceding paragraph, pledges on the shares of the former wholly owning parent company are effective with respect to the shares of the former wholly owned subsidiary company.

When the pledgees with respect to the pledges set forth in the preceding paragraph are registered pledgees of shares, the former wholly owning parent company must, without delay after the judgment set forth in paragraph (1) became final and binding, notify the former wholly owned subsidiary company of the matters set forth in the items of Article 148 regarding relevant registered pledgees of shares.

A former wholly owned subsidiary company that has received a notice under the provisions of the preceding paragraph must, when it enters or records in the shareholder register the information required to be entered in the shareholder register in connection with the shares underlying the pledges of the registered pledgees of shares referred to in that paragraph, immediately enter or record in the shareholder register the information set forth in the items of Article 148 regarding relevant registered pledgees of shares.

In the cases prescribed in paragraph (3), when the former wholly owned subsidiary company set forth in that paragraph is a share certificate-issuing company, the former wholly owning parent company must deliver the share certificates representing the shares of the former wholly owned subsidiary company referred to in paragraph (2) to its registered pledgees of shares; provided, however, that this does not apply until the old share certificates representing the shares of the former wholly owning parent company are submitted if the shareholders referred to in the first sentence of paragraph (1) must submit relevant old share certificates in order to acquire the shares of the former wholly owned subsidiary company.

If a judgment upholding a claim relating to an action seeking invalidation of a partial share exchange becomes final and binding, if the parent company resulting from a partial share exchange delivered shares of the parent company resulting from a partial share exchange (hereinafter referred to in this Article as "shares of the former parent company resulting from a partial share exchange") when effecting the partial share exchange , the parent company resulting from a partial share exchange must return the shares and share options, etc. of the subsidiary company resulting from a partial share exchange (hereinafter referred to in this Article as the "shares, etc. of the former subsidiary company resulting from a partial share exchange ") received from persons who received delivery of the shares of the former parent company resulting from a partial share exchange when the partial share exchange was effected. In these cases, if the parent company resulting from a partial share exchange is a share certificate-issuing company, relevant parent company resulting from a partial share exchange may demand that the shareholders return of the former share certificates relating to relevant shares of the former parent company resulting from a partial share exchange in exchange for return of the shares, etc. of the former subsidiary company resulting from a partial share exchange.

In the cases prescribed in the first sentence of the preceding paragraph, the pledges on the shares of the former parent company resulting from a partial share exchange are effective with respect to the shares, etc. of the former subsidiary company resulting from a partial share exchange.

If a judgment upholding a claim relating to an action seeking invalidation or rescission of the incorporation of a membership company becomes final and binding, if the cause of the invalidation or rescission is attributable only to part of the members, the membership company may continue in existence with the consent of all of the other members. In these cases, the members attributable to the cause are deemed to have withdrawn.

If the plaintiffs who filed actions concerning the organization of a company are defeated, if the plaintiffs have acted in bad faith or with gross negligence, they are jointly and severally liable to compensate the defendant for damages.

Invalidation of acquisition of all shares, etc. subject to the cash-out related to the demand for shares, etc. cash-out may only be asserted in an action filed within six months of the acquisition day (meaning the acquisition day prescribed in Article 179-2, paragraph (1), item (v); hereinafter the same applies in this Article) (if a subject company is not a public company, within one year from the acquisition day).

The action referred to in the preceding paragraph (hereinafter referred to as "action seeing invalidation of acquisition of shares, etc. subject to the cash-out" in this Section) may be filed only by the following persons:

a person who was a shareholder subject to the cash-out (if demand for share option cash-out is made along with demand for share cash-out, shareholders subject to the cash-out and share option holders subject to the cash-out; the same applies in Article 846-5, paragraph (1)) on the acquisition day; and

a person who was a director (in cases of a company with company auditor, a director or company auditor; in cases of a company with nominating committee, etc., a director or executive officer; hereinafter the same applies in this item) of the subject company on the acquisition day, or a director or liquidator of the subject company.

With regard to an action seeking invalidation of acquisition of shares, etc. subject to the cash-out, the special controlling shareholder is to be the defendant.

An action seeking invalidation of acquisition of shares, etc. subject to the cash-out is under the exclusive jurisdiction of the district court having jurisdiction over the location of the head office of the subject company.

With regard to an action seeking invalidation of acquisition of shares, etc. subject to the cash-out, the court may order the shareholder subject to the cash-out who has filed the action seeking invalidation of acquisition of shares, etc. subject to the cash-out to provide reasonable security in response to a petition by the defendant; provided, however, that this does not apply when the shareholder subject to the cash-out is a director, company auditor, executive officer, or liquidator of the subject company.

In order for a defendant to file the petition referred to in the preceding paragraph, the defendant must make a prima facie showing that the plaintiff filed the action in bad faith.

When several suits relating to an action seeking invalidation of acquisition of shares, etc. subject to the cash-out for the same claim are simultaneously pending, the oral arguments and judicial decisions thereof must be made in consolidation.

A final and binding judgment upholding a claim relating to an action seeking invalidation of acquisition of shares, etc. subject to the cash-out is also effective against third parties.

When a judgment upholding a claim relating to an action seeking invalidation of acquisition of shares, etc. subject to the cash-out becomes final and binding, the acquisition of all shares, etc. subject to the cash-out that is held to be invalid by the judgment will become ineffective from then on.

If the plaintiffs who filed the action seeking invalidation of Acquisition of shares, etc. subject to the cash-out are defeated, if the plaintiffs have acted in bad faith or with gross negligence, they are jointly and severally liable to compensate the defendant for damages.

A shareholder (excluding a holder of shares less than one unit who is unable to exercise rights pursuant to the provisions of the articles of incorporation) having the shares consecutively for the preceding six months or more (or, if a shorter period is prescribed in the articles of incorporation, the period or more) may demand the stock company, in writing or by any other method prescribed by Ministry of Justice Order, to file an action to enforce the liability of an incorporator, director at incorporation, company auditor at incorporation, officers, etc. (meaning the officers, etc. prescribed in Article 423, paragraph (1)) or liquidator (hereinafter referred to as "incorporator, etc." in this Section), and an action to demand payment pursuant to the provisions of Article 102-2, paragraph (1), Article 212, paragraph (1), or Article 285, paragraph (1), an action seeking the return of the benefits referred to in Article 120, paragraph (3) or an action seeking payment or delivery under the provisions of Article 213-2, paragraph (1) or Article 286-2, paragraph (1) (hereinafter referred to as an "action to enforce liability" in this Section); provided, however, that this does not apply if the purpose of the action to enforce liability is to seek unlawful benefits of relevant shareholder or a third party or to inflict damages on relevant stock company.

With regard to application of the provisions of the preceding paragraph to a stock company that is not a public company, the phrase "a shareholder (excluding a holder of shares less than one unit who is unable to exercise rights pursuant to the provisions of the articles of incorporation)" in that paragraph is deemed to be replaced with "a shareholder".

When the stock company does not file an action to enforce liability within sixty days from the day of the demand under the provisions of paragraph (1), the shareholder who has made relevant demand may file an action to enforce liability on behalf of the stock company.

If the stock company does not file an action to enforce liability within sixty days from the day of the demand under the provisions of paragraph (1), if there is a request by the shareholder who made relevant demand or the incorporator, etc. set forth in that paragraph, it must, without delay, notify the person who made such a request of the reason for not filing an action to enforce liability in writing or by any other method prescribed by Ministry of Justice Order.

Notwithstanding the provisions of paragraphs (1) and (3), if the stock company is likely to suffer irreparable harm through the elapse of the period set forth in those paragraphs, the shareholder set forth in paragraph (1) may immediately file an action to enforce liability on behalf of the stock company; provided, however, that this does not apply in the cases prescribed in the proviso to that paragraph.