On August 30, 2017, the Supreme Court (second petty bench) held that, with respect to the shares of minority shareholders subject to a demand for the sale of shares (i.e., a cash-out demand), other minority shareholders acquiring such shares after public notice of the target company's approval of the cash-out demand may not object to the purchase price and petition a court for a share price determination.
Cash-out demands were introduced in the 2014 amendments to the Companies Act. They allow the holder of at least 90 percent of the voting rights of a target company ("Special Controlling Shareholder") to demand that the other minority shareholders sell all of their shares to the Special Controlling Shareholder. Under this system, the Special Controlling Shareholder may, on a certain date thereafter, forcibly acquire the minority shareholders' shares if: (i) a Special Controlling Shareholder notifies the target company of certain specified matters, including the purchase price; and (ii) the target company approves the cash-out demand and notifies the shareholders of its approval either individually or by public notice.
Although minority shareholders that object to the purchase price may petition the court for a share price determination, until this decision it was unclear whether such a petition could also be made by a separate minority shareholder that acquired the shares after public notice of the target company's approval of a cash-out demand. Because the Supreme Court held that separate minority shareholders may not make such post-notice petitions, minority shareholders are now unable to speculate on the share price by first acquiring shares (after public notice) and then petitioning the court for a higher price in order to profit on the difference. The ruling will result in increased predictability and procedural stability for cash–out demand transactions.