Different types of share under Japanese corporate law

February 6, 2010  |  Corporate law

Sanzen-in paper

Recent years has seen a real revolution in Japanese corporate law and one area is the greatly increased flexibility in the different types of shares that can be issued.  For tax purposes ownership of 100% of all classes of shares is a requirement to tax consolidate a subsidiar however the share types are used in a variety of transactions – poison pills, minority squeeze outs, that of course have tax implications and that will be explored in later posts.

Article 108 of the CL allows companies to issue more than one type of share.  A company issuing more than two types of share under its articles of association (teikan/定款) is called a shurui kabishiki hakkou kaishi/種類株式発行会社 – a ‘Company Issuing Types of Shares’ could be a decent translation.  The table below summarises these types:

[table id=6 /]

The issue of multiple types of shares

A company has to record the rights and number of different types of shares in its company articles (CL 108(2) however it is possible to issue such shares without first determining the rights in the articles.   In such circumstances then prior to the first issue of the shares it is necessary to hold a shareholders meeting (for companies that have established a ボアboard of directors – torrishimeyakkaisechikaisha/取締役会設置会社 at either shareholders or board meeting) then the terms can be determined for inclusion in the articles.

The process for issue of a second or further type of shares is basically the same as a normal issue.   If there is a concern that the issue of shares could harm the interests of shareholders of other classes of shares then from the point of view of protecting shareholder rights a determination may be required in a meeting of the affected shareholders.

Cancellation of share rights

Under the corporate law the cancellation of shares is only recognised under the procedured to cancel your own shares – jikokabushiki no syoukyaku/自己株式の消却.  The type of shares and for each share type the number of shares would of course have to be determined.

Exercise of rights of different types of shares

For shares where the shareholders have rights of redemption as expected the shareholders have to make clear the number and type of shares of each class where redemption is required.

For shares where the company has the right to require redemption on the occurance of certain defined events then one the event occurs without delay the company is required to without delay to notify the shareholders or registered holders that the facts have occured through notification or public notice.  In cases where the company has determined a date for redemption in advance notification is required two months in advance.

Leave a Reply