## Facts

- Suzuken Corporation (Suzuken) became a shareholder of Kobasho Corporation (Kobasho) through a share-exchange transaction in which Kobasho acquired shares held by Suzuken and, in return, issued to Suzuken a 20% stake in Kobasho.
- Kobasho was a subsidiary within the Kobayashi Pharmaceutical Corporation (Kobayashi) group; after the transaction, Kobayashi kept a large majority stake (commonly described as about 80%), with small holdings also attributed to an employee shareholding association and individual shareholders in some accounts.
- As part of the transaction, Suzuken and Kobayashi entered into a shareholders’ agreement (basic agreement) governing their holdings in Kobasho.
- The agreement included a five-year restriction barring either party, absent the other’s prior written consent, from transferring all or part of the Kobasho shares it held under the agreement.
- The agreement also provided that, after the five-year period, if one party intended to transfer its shares, the other would have a priority right (first refusal) to purchase the shares to be transferred.
- Within roughly three years, Kobayashi pursued a corporate reorganization in which Kobasho would become a wholly owned subsidiary of Mediceo Paltac Holdings (through an affiliate) by means of a statutory share-exchange procedure, followed by further integration steps.
- Kobasho scheduled an extraordinary shareholders’ meeting to approve the share-exchange agreement. Because Kobayashi’s voting power could secure approval, Suzuken sought to prevent Kobayashi from voting in favor of the resolution.
- Suzuken filed an application for a provisional disposition (interim order) against Kobayashi, arguing that the proposed share exchange fell within the agreement’s “no transfer” clause and therefore Kobayashi had a contractual duty not to vote for the share exchange without Suzuken’s written consent.

## Issues

1. Does a shareholders’ agreement clause barring “transfer” of shares for five years, absent written consent, cover a statutory share exchange that would make the jointly held subsidiary a wholly owned subsidiary of a third party?
2. If a shareholder has contractually agreed (expressly or by implication) not to exercise voting rights in support of a transaction, can the other contracting shareholder obtain interim injunctive relief restraining the vote, particularly when not all shareholders are parties to the voting restraint?
3. In a provisional-disposition proceeding, did the applicant sufficiently show both a protectable right and the need for interim protection to avoid serious harm before a final merits determination?

## Decision

- The Nagoya District Court denied Suzuken’s application for a provisional disposition seeking to bar Kobayashi’s voting in favor of the share-exchange approval resolution.
- The court concluded that Suzuken had not shown that the agreement’s prohibition on “transfer” of Kobasho shares was intended to include a statutory share exchange, which is a corporate-law reorganization mechanism distinct from an ordinary share transfer.
- The court further indicated that, even if voting restraints in shareholder contracts may be valid as a matter of contract between the parties, restraining a shareholder’s voting by injunction is generally not allowed where the restraint would affect nonparty shareholders; any such remedy would be exceptional.
- The court also found that the requirements for provisional relief were not met, including the showing of necessity for interim protection.
- The application was dismissed; secondary sources report the dismissal became final.

## Legal Principles

- Contract interpretation of transfer-restriction clauses turns on the agreement’s text, drafting context, and the parties’ sophistication; where parties routinely use statutory reorganization tools, courts may require clear language before treating “transfer” as covering a share exchange.
- A statutory share exchange is legally distinct from a private-law share transfer; absent clear agreement language, courts may treat a “no transfer” clause as addressing transfers rather than corporate reorganizations accomplished by statute.
- Voting-restraint agreements between shareholders may have contractual effect between the parties (including possible damages for breach), but specific performance by enjoining voting is generally disfavored when it would affect shareholders who did not agree to the restraint.
- Interim relief in a provisional-disposition procedure requires a sufficient showing of both (i) the underlying right claimed and (ii) the need for interim protection to prevent serious harm that cannot be adequately addressed after the fact.

## Conclusion

Suzuken sought interim relief to stop Kobayashi from using its majority voting power to approve a share exchange that would place Kobasho under third-party control, arguing that a five-year “no transfer” clause and related voting restraint barred the transaction absent consent. The Nagoya District Court rejected the request, finding insufficient support for reading “transfer” to include a share exchange and treating injunctions against voting as generally unavailable where the restraint would affect nonparty shareholders, and it dismissed the provisional-disposition application.


Suzuken Corp. v. Kobayashi Pharmaceutical Corp., 12 November 2007, 1319 Kinyu Shoji Hanrei 50 (2007)