Cross Shareholding Agreement

The determination of a dominant relationship must take into account not only the majority of voting rights, but also other situations referred to in Article 195 of the TCC. Where a company has the right to appoint, in accordance with the statutes, the members of the management body of another company in a number which constitutes the majority of decisions or represents, under its own voting rights, the majority of the voting rights on the basis of an agreement, alone or jointly with other shareholders or members, or maintains that undertaking under its dominant position on the basis of an agreement or otherwise: the first enterprise is considered dominant and the other is the dependent enterprise. The holding of more than 50% of the shares of a company is the presumption of the law on the existence of a dominant relationship. The term “all participation rights” should be the set of rights related to shares, such as voting rights, liquidation and enjoyment rights, as well as preferential subscription rights. Only the right to acquire free shares, which is clearly outside the scope of the law, is not frozen. In Japan, Keiretsu has a long tradition of companies that have interdependent business relationships and shareholdings. As an informal group, member companies hold a small share of the shares held in each other`s companies. This system makes it possible to isolate each company from stock market fluctuations and acquisition attempts, thus allowing long-term planning in projects. We need to carefully assess the role of cross-holding in corporate purchases and executive management. From the creation of a company, the allocation of shares and the entry into negotiations, entrepreneurs / managers often fall into the trap of the task of preparing a shareholders` agreement for “another day” and instead relying on the company`s standard articles for protection.

Unfortunately, this day usually only comes after a bitter shareholder dispute or the exit proposed by a shareholder, at this point it may be too late to mitigate the unintended consequences. In many cases, one company holds shares in several other companies. The more cross-holdings a company has, the more difficult it becomes to properly value companies. Critics argue that the practice of creating cross-shareholdings or “strategic” between listed companies contributes greatly to the docility of shareholder registers, the complacency of failing management teams, and the difficulty of giving real impetus to the desire for better administration and corporate governance. . . .