UT Soft Law Review

UT Soft Law Review No.2 2010Bull-Dog Source(Supreme Court Judgment of August 7, 2007,Supreme Court Reports (civil cases) vol.61 no.5, p.2215)[Summary of Facts]This was a provisional disposition case in which X (Steel Partners Japan Strategic Fund(Offshore), LP), a shareholder of Y (Bull-Dog Sauce Co., Ltd.) which listed in the SecondSection of the Tokyo Stock Exchange, sought a provisional injunction against Y with regard toY’s allotment of share options without contribution (Article 277 of the Companies Act). Theissues were whether or not Y’s allotment of share options without contribution, carried out asa countermeasure against X’s takeover bid, was in breach of the principle of the equality ofshareholders and in violation of legislation, and fell within ‘a method that is extremely unfair’.The following is the summary of the detailed facts.X and its affiliates were Y’s largest shareholders, holding approximately 10.25% of the totalnumber of issued shares. On 18 May 2007 (all dates hereinafter are in 2007), a limited liabilitycompany A, wholly-owned by X, commenced a takeover bid pursuant to the Securities andExchange Act, for the purpose of acquiring all of Y’s issued shares (hereinafter referred to asthe “Takeover Bid”). (The original acquisition price was 1,584 yen per share, which included apremium of roughly12.82% to 18.56% over the average market price of Y’s shares. Theacquisition price was raised to 1,700 yen per share after Y placed the adoption of a defensivemeasure against the acquisition on the agenda at a shareholders’ meeting.)On 25 May, Y submitted a statement of opinion to the Kanto Finance Bureau Chief whichcontained questions for A. In response, on 1 June, A submitted a report to Kanto FinanceBureau Chief which contained answers to the questions.On 7 June, due to the fact that A’s report, which contained answers to Y’s questions,included no specific statements with regard to business plans or capital investment recoverypolicies for after the acquisition of the right to control the business, Y’s board of directorspassed a resolution opposing the Takeover Bid. The board of directors also decided to submitto the annual shareholders’ meeting, scheduled to be held on 24 June 2007 (hereinafterreferred to as the “Shareholders’ Meeting”), the following proposals as countermeasuresagainst the Takeover Bid: (1) A proposal to amend the articles of incorporation to makematters concerning an allotment of share options without contribution matters for a specialresolution of a shareholders’ meeting; and (2) conditional on the approval of the previousproposal, a proposal to carry out an allotment of share options without contribution(hereinafter referred to as the “Allotment of Share Options without Contribution”). The107