The Research On Shares With Restriction To Transfer Institution In Japan’s Companies Act

Shares, which are issued by joint-stock companies, may be transferred freely.This is called Principle of the freedom of shares transfer, which can help to ensurethe shareholders recovering their capitals successfully. However, in somesmall-scale joint-stock companies, i.e. family firms, it is necessary to keep firmsocclusive. In this case, Japan’s Companies Act sets up the institution of Shares withRestriction on Transfer.Shares with Restriction on Transfer means that a joint-stock company intendsto transfer all or part of its shares and the approval of the stock company is requiredfor the acquisition of such shares by transfer. In Japan, the institution originatedfrom Meiji32Commercial Law Act. The institution has been revised for many timesover one hundred years.2005Companies Act has drawn lessons from previouslegislation experience, and has further enriched and improved this institution Basedon2005Companies Act, combined with precedents and theories, this thesis gives adetailed study on this institution.Japan’s Companies Act regulates the subject of Requests for Approval ofTransfer, who are the shareholders who are the transferors intending to transfer suchshares, or the transferees who have acquired such shares without companies’approval. In Japan’s Companies Act, is the two above mentioned subjects are called“Applicants for Approval of Transfer” collectively. This thesis gives carefulconsideration to the way of Requests for Approval of Transfer, the circumstanceswithout companies’ approval and the effect of Shares with Restriction on Transferwithout companies’ approval.The approval authority, which determines whether to approve the transfer ofshares, is the board of directors in a company with a board. In a company without aboard, it is the annual General Meeting of Shareholders. After making the decisionof whether to grant approval or not, the approval authority should notify theapplicants for approval of transfer. The thesis also analyzes the effect of notice madewithout the decision of the approval authority or violating the decision of the approval authority. The company denying the transfer of subject shares shouldpurchase the target shares itself or designate the third party to purchase them. Thecompany which intends to purchase the target shares or the designated party mustgive the applicants for approval of transfer the purchase notice. The company whichintends to purchase the target shares or the designated party must also depositprovisional purchase consideration. When the parties cannot reach an agreement onthe sale price and also do not require the court to decide the sale price, depositedprovisional purchase consideration is deemed to be the price of the shares.Japan’s Companies Act also regulates the decision mechanism of transferringprice for target shares, including three patterns: the party consultation, court decisionand deposited provisional purchase consideration as transferring price. The court’sprice decision mechanism is a complex process. The thesis organizes the precedents,and clarifies Japanese courts’ treatment for such cases.In the institution of Shares with Restriction on Transfer, every process carriedout by the company will be limited to a certain period of time. Once the companydoes not fulfill the corresponding process in the prescribed period, it will face therisk of approval fiction, which is called the institution of approval fiction.By comparing Shares with Restriction on Transfer in Japan’s Companies Actand the institution of Shares with Restriction on Transfer in Chinese limited liabilitycompanies, we can find out the deficiencies in Chinese legal system. This thesisrefers to Japan’s Companies Act and offers proposals for Chinese relevant legalsystem.