Responding to shareholder claims and disputes over control of the company

1. Initial response, the type of company and authority to represent it

When a written request arrives, the first things to check are which type of company under the Companies Act the company is, and who should receive the request. Many of the requirements for shareholders to exercise their rights vary with that type.

A stock company is a public company under the Companies Act if, among the shares it issues, there are shares for which the articles of incorporation do not require the company's approval for acquisition by transfer. This is a category separate from whether the company is listed. A company may be unlisted and still be a public company, and in that case it is not treated in the same way as a company all of whose shares are subject to a restriction on transfer. Whether a holding period is required before a shareholder may exercise a particular right, among other things, varies with this category.

We review the articles of incorporation, the certificate of registered information and the shareholder register, together with the materials on the acquisition, transfer and inheritance of shares. Where there is a dispute over whom the shares belong to, over the procedure for exercising rights against the company, or over the designation of the person who is to exercise the rights attaching to jointly held shares, that needs to be sorted out before the shareholding percentages are calculated. The entries in the shareholder register do not always determine the substantive ownership of the shares.

Where a company with a company auditor receives a request from a shareholder to bring an action pursuing the liability of a director, the company auditor represents the company. A company with a company auditor, for this purpose, does not include a company whose articles of incorporation limit the scope of the auditor's audit to accounting matters. For a company with an audit and supervisory committee, and for a company with a nominating committee and other committees, separate provisions on who represents the company need to be checked. Requests are sometimes addressed to the wrong person, so the company decides at the outset who receives the request and in whose name it replies.

2. Responding to a request to call a meeting and to the appointment and removal of officers

Where a request to call a general meeting is received, we check whether the requesting shareholder meets the requirements and whether the matters covered by the request fall within that shareholder's voting rights. On removal, the fact that it can be carried out by resolution is considered separately from the possibility that liability in damages arises.

In a stock company that is not a public company, a shareholder holding at least 3% of the voting rights of all shareholders (or a lower proportion where the articles of incorporation so provide) may request that a general meeting of shareholders be called, regardless of how long the shares have been held, setting out the matters that are to be the purpose of the meeting and the reasons for calling it. The request may cover only matters on which that shareholder is entitled to exercise voting rights. In calculating the proportion, the voting rights of shareholders who cannot exercise voting rights on the matter concerned are excluded from the denominator. In a public company, as a general rule a holding period of six months applies, and the articles of incorporation may provide for a shorter period.

If the procedure for calling the meeting is not carried out without delay after the request, or if no notice is issued calling a meeting to be held on a date within eight weeks from the date of the request, the requesting shareholder may call the general meeting itself with the permission of the court. Where the articles of incorporation provide for a period shorter than eight weeks, that period applies. The provision does not mean that the company may leave the request unattended for eight weeks.

A director may be removed by resolution of a general meeting of shareholders even during their term of office. The requirements for the resolution are those laid down in the Companies Act. Special rules apply to directors elected by cumulative voting and to directors who are audit and supervisory committee members, among others, and cases in which appointment or removal is carried out by a general meeting of a class of shareholders cannot be treated in the same way as the rest.

A director who has been removed is entitled to claim from the company damages for the loss caused by the removal, unless there are justifiable grounds for the removal. The effect of the removal and liability in damages are separate questions. Whether there are justifiable grounds, and what loss and what amount are covered, are decided case by case, and the full amount of the remuneration for the remainder of the term is not awarded as a matter of course.

In a company with a board of directors, other than a company with a nominating committee and other committees, the board of directors appoints the representative director and removes that person from office. For a company with an audit and supervisory committee, separate provisions likewise give this function to the board of directors. For a company with a nominating committee and other committees, the provisions on representative executive officers need to be checked. Removing a person from the office of representative director and removing that person as a director differ both in procedure and in effect.

3. Responding to a request to inspect the accounting books

For a request to inspect, we check the requesting shareholder's shareholding and the reasons given at the time of the request, and then consider whether one of the statutory grounds for refusal applies. The grounds for refusal are limited, and the company cannot refuse simply because it is in conflict with the shareholder.

A request to inspect the accounting books and related materials, and a request to inspect the financial statements, the shareholder register and similar documents, are separate regimes. Who may make the request, the shareholding requirement, whether the reasons must be stated and the grounds for refusal all differ according to the materials concerned. The first step is to check which materials are being asked for.

A shareholder holding at least 3% of the voting rights of all shareholders, or at least 3% of the issued shares (or a lower proportion where the articles of incorporation so provide), may state the reasons and request the inspection or copying of the accounting books and related materials at any time during the company's business hours. In the calculation by voting rights, shareholders who cannot exercise voting rights on any matter are excluded from the denominator; in the calculation by number of shares, treasury shares are excluded. There is no holding period requirement. Restrictions on the rights attaching to shares less than one unit need to be checked separately.

The company may not refuse such a request except where it is found that one of the grounds for refusal laid down in the Companies Act applies. Those grounds are: that the request is made for a purpose other than an investigation relating to securing or exercising the shareholder's rights; that the request is made for the purpose of interfering with the conduct of the company's business or of harming the common interest of the shareholders; that the person making the request carries on, or is engaged in, a business that is in substantial competition with the company's business; that the person made the request in order to report facts learned through the inspection or copying to a third party for profit; and that the person has, within the past two years, reported facts learned through inspection or copying to a third party for profit. Separate provisions govern requests to inspect the financial statements or the shareholder register, and the wording of the grounds for refusal there is not the same. Being in conflict with management is not, in itself, a ground for refusal. Before replying, we set out which ground the company considers to apply and whether there are facts to support it.

4. Litigation and provisional dispositions over resolutions and control of the company

Where the effect of a resolution or the position of an officer is in dispute, we check the time limit for bringing proceedings, the requirements a shareholder must meet in order to be a claimant, and what has to be shown on a prima facie basis in an application for a provisional disposition. Once a provisional disposition has been issued, the scope of the powers of the person appointed to act in place of an officer becomes an issue.

Where a resolution of a general meeting of shareholders is affected by one of the statutory grounds for revocation, a shareholder or other person with standing may bring an action for revocation of the resolution within three months from the date of the resolution. Defects in the procedure for calling the meeting or in the method of the resolution are distinguished from matters such as the content of the resolution violating the articles of incorporation. Where the procedure for calling the meeting or the method of the resolution violates laws and regulations or the articles of incorporation, the court may dismiss the claim if it finds that the facts constituting the violation are not serious and do not affect the resolution.

Confirmation that a resolution is invalid because its content violates laws and regulations, and confirmation that a resolution does not exist at all, are regimes separate from revocation. The three-month time limit on the action for revocation cannot simply be applied to them. Conversely, the fact that the period for revocation has passed does not mean that the same defect can be recast as an assertion of invalidity or non-existence. Which regime is to be used depends on the nature of the defect in question.

A provisional disposition is a Japanese court procedure for interim relief pending a decision on the merits. In an application for a provisional disposition determining a provisional status, the applicant must make a prima facie showing both of the rights or legal relationship to be preserved and of the need for the disposition in order to avoid substantial harm or imminent danger. Such a disposition is not granted merely because a general meeting is to be held or because the officers are in conflict with one another. As a general rule, this type of provisional disposition is issued after a date for oral argument, or for a hearing at which the other party can attend. An exception is provided where circumstances are such that the purpose of the application could not be achieved if such a date were held.

A person appointed by a provisional disposition order to act in place of a director or a representative director must obtain the permission of the court in order to carry out an act that does not belong to the ordinary business of the company, unless the provisional disposition order provides otherwise. An act carried out in breach of this is void, but the company may not assert that it is void against a third party acting in good faith. The provision applies to a person appointed to act in place of an officer under a provisional disposition order provided for in the Civil Provisional Remedies Act. It governs the powers of such a person once appointed; it does not lay down the requirements for the appointment. Whether a particular act belongs to the "ordinary business" of the company calls for consideration on the facts of the case.

Where, in relation to the performance of an officer's duties, there has been misconduct or a serious fact constituting a violation of laws and regulations or of the articles of incorporation, and a proposal for that officer's removal has nevertheless been rejected at a general meeting of shareholders, or a resolution for removal has not taken effect because a resolution of a general meeting of a class of shareholders was lacking, a shareholder who meets the statutory requirements may bring an action seeking the removal of that officer within 30 days from the date of that general meeting. The "officers" concerned are directors, accounting advisors and company auditors. A disagreement over management policy, or the rejection of a removal proposal, does not by itself satisfy the substantive requirements. For certain companies that issue class shares, the replacement of terms provided for in the Companies Act needs to be checked.

As a general rule, a shareholder bringing this action must have held continuously for the preceding six months at least 3% of the voting rights of all shareholders, or at least 3% of the number of issued shares, in each case reflecting the statutory exclusions; the articles of incorporation may lower the proportion or shorten the holding period. The voting-rights test and the share-number test are alternatives. In the calculation and the qualification by voting rights, shareholders who cannot exercise voting rights on the removal proposal and the officer concerned as a shareholder are excluded; in the calculation and the qualification by number of shares, the company itself and the officer concerned as a shareholder are excluded. In a stock company that is not a public company there is no continuous holding period requirement, but the requirement as to proportion remains. "Unlisted" and "not a public company" are not synonyms.

This action is brought against both the company and the officer whose removal is sought, in the district court having jurisdiction over the location of the company's head office.

Where the proportions of voting rights change through an issue of new shares or a disposal of treasury shares, the procedure for the decision, the terms of the issue and its purpose may be in issue. Where the issue or disposal violates laws and regulations or the articles of incorporation, or is carried out by a markedly unfair method, and shareholders are likely to suffer disadvantage, one option is to seek an injunction before it is carried out. Seeking an injunction before the act is carried out and challenging its effect after it has been carried out differ in requirements, procedure and time limits, so we check what is planned and when it is to take place.

5. Responding to claims against officers, and D&O insurance and company indemnification

A company that receives a demand to bring an action has to decide how to respond within the period allowed. For the officer concerned, the question of how the costs of a defense are to be met arises at the same time. This chapter deals first with responding to the demand and then with the procedures for insurance and indemnification.

Liability of officers and responding to a demand to bring an action

Where a director or other officer has neglected their duties, they are liable to compensate the company for the loss thereby caused. The persons concerned are directors, accounting advisors, company auditors, executive officers and financial auditors. This is liability owed to the company, and poor business performance or dissatisfaction with management policy does not establish that duties were neglected. Loss suffered by the company is also distinguished from loss suffered by a shareholder personally.

Unlike a request to call a general meeting or a request to inspect the accounting books, a demand to bring an action pursuing liability is not subject to a requirement to hold a given proportion of the voting rights or shares. In a public company, as a general rule the shares must have been held continuously for six months, and the articles of incorporation may shorten this; in a stock company that is not a public company there is no holding period requirement. Holders of shares less than one unit whose rights have been restricted by the articles of incorporation are excluded.

The demand must identify the person who is to be the defendant, the relief sought and the facts necessary to identify the claim, and must be made in writing or by an electromagnetic method prescribed by law. An action pursuing liability is not allowed where its purpose is to obtain an unlawful benefit for the shareholder making the demand or for a third party, or to cause loss to the company.

If the company does not bring the action pursuing liability within 60 days from the date of the statutory demand, the shareholder who made the demand may bring the action on the company's behalf. The provision presupposes that a statutory demand has been made.

A company that does not bring the action within those 60 days must, where it is asked to do so by the shareholder who made the demand or by the person against whom liability is asserted, notify that person without delay of the reasons for not bringing the action, in writing or by another method prescribed by Ministry of Justice ordinance. The duty to notify does not arise automatically in every case in which no action is brought; a request from a person entitled to make it is required. So that the company can respond without delay if reasons are requested, it needs to keep a record of what was investigated, of the conclusion reached on whether there is liability, and of the reasons for that conclusion.

Where the expiry of the 60-day period would give rise to a risk of harm to the company that cannot be recovered, a shareholder meeting the statutory qualification may bring the action pursuing liability on the company's behalf immediately, without first making a demand on the company. This does not apply where the purpose is to obtain an unlawful benefit or to cause loss to the company. The company is not assured of 60 days in which to respond in every case.

D&O insurance and company indemnification

A decision on the content of an officer indemnification insurance policy under the Companies Act (directors and officers liability insurance, or D&O insurance) that the company enters into requires a resolution of the general meeting of shareholders, or of the board of directors in a company with a board of directors. This applies to contracts falling within the definition in the Companies Act; contracts specified by the Regulations for Enforcement of the Companies Act are excluded. The provision concerns the procedure for deciding the content of the contract. It does not impose a duty to take out insurance, and it does not provide that insurance money will be paid in any particular case.

When the use of D&O insurance is under consideration, we check, on the basis of the policy, the general terms and the endorsements, who is insured, which claims are covered, and the terms on notification, on the appointment of lawyers, and on the incurring of costs and settlement. The scope of cover and the conditions on appointing lawyers cannot be derived from the provisions of the Companies Act. The terms differ from contract to contract, and neither the insurer's consent nor the payment of costs is guaranteed. Once a claim has been received, checking the deadline for notification is the first task.

A decision on the content of a contract under which the company indemnifies an officer for the costs of dealing with a suspected violation of laws and regulations, or with a claim asserting liability, arising in relation to the performance of the officer's duties, or for losses arising from compensating or settling with a third party (an indemnity agreement), likewise requires a resolution of the general meeting of shareholders, or of the board of directors in a company with a board of directors. Indemnification by the company and payment by an insurer are separate regimes. The first step is to check whether an indemnity agreement exists and what it provides.

Company indemnification is not a regime under which the liability in damages that an officer owes to the company is itself shifted to the company by an indemnity agreement. On the other hand, the costs of dealing with a claim brought by the company asserting liability may be covered, subject to the terms of the indemnity agreement and to the statutory limits.

Even where there is an indemnity agreement, the company may not indemnify the officer for that part of the costs of dealing with a suspected violation of laws and regulations, or with a claim asserting liability, which exceeds the amount ordinarily required. This limit concerns the costs of dealing with such matters.

In addition, where, if the company were to compensate the loss caused to a third party, the officer would be liable to the company for neglect of duties, the company may not indemnify the officer under an indemnity agreement for the part of the loss relating to that liability. This limit concerns losses arising from compensating or settling with a third party, and does not extend to the costs of dealing with the matter as a whole.

Where an officer is liable to a third party because of bad faith or gross negligence in performing their duties, the company may not indemnify the officer under an indemnity agreement for any part of that loss. This is not the same as the exclusions under a D&O policy. For insurance, the general terms and related documents are checked separately.

A company that has indemnified an officer for the costs of dealing with a matter is entitled to demand repayment of an amount equivalent to the amount indemnified if it learns that the officer performed their duties for the purpose of obtaining an unlawful benefit for themselves or for a third party, or of causing loss to the company. Repayment does not follow as a matter of course merely because liability has been established.

6. Internal procedures after the response, and how we assist

For company indemnification, the reporting procedure that follows indemnification needs to be checked in addition to the decision on the content of the contract.

In a company with a board of directors, a director who has provided indemnification under an indemnity agreement and a director who has received it must report the material facts concerning that indemnification to the board of directors without delay. The same applies to executive officers. This is a procedure separate from the decision on the content of the indemnity agreement, and it does not require the reporting of insurance payments generally.

We act for the company or for the officer who has received a claim, and assist, to the extent instructed, with responding to requests from shareholders, with litigation and provisional dispositions, and with considering the use of D&O insurance and company indemnification. Before accepting instructions we check for conflicts of interest and set out clearly who the client is and what the scope of the work is, because the interests of the company and of its officers, and the approach each wishes to take, may not coincide. We do not guarantee that control of the company will be retained or that the dispute will be resolved.

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Where it appears	Legislation	Source type
Initial response, the type of company and authority to represent it	Companies Act（会社法）	Japanese legislation
Responding to a request to call a meeting and to the appointment and removal of officers	Companies Act（会社法）	Japanese legislation
Responding to a request to inspect the accounting books	Companies Act（会社法）	Japanese legislation
Revocation, invalidity and non-existence of resolutions; action seeking removal of an officer; injunction against an issue of shares	Companies Act（会社法）	Japanese legislation
Provisional disposition determining a provisional status; powers of a person appointed to act in place of an officer	Civil Provisional Remedies Act（民事保全法）, Companies Act（会社法）	Japanese legislation
Liability of officers and responding to a demand to bring an action	Companies Act（会社法）	Japanese legislation
D&O insurance and company indemnification	Companies Act（会社法）, Regulations for Enforcement of the Companies Act（会社法施行規則）	Japanese legislation
Reporting to the board of directors after indemnification	Companies Act（会社法）	Japanese legislation

Legal information reviewed: 2026-09-18

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This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.