Types of shareholders' claims

Main claims

Identify the main claims shareholders in your jurisdiction may assert against corporations, officers and directors in connection with M&A transactions.

A responsible person of a company bears a duty of loyalty and a duty of care to the company and is liable for any loss or damage that the company sustains if he or she breaches these duties. Moreover, if a responsible person breaches these duties for his or her or any third party’s interests, the shareholders may resolve to require the responsible person to repay the earnings therefrom within one year of them being generated (paragraphs 1 and 3, article 23 of the Company Act).

In addition, if a responsible person violates any law or regulation while conducting business, thereby causing any loss or damage to any other person, he or she and the company will be held jointly and severally liable to the injured person (paragraph 2, article 23 of the Company Act).

The term ‘responsible person’ refers to:

  • directors;
  • managers, supervisors, liquidators or temporary managers, promoters, supervisors, inspectors, reorganisers or the reorganisation supervisor of a company, when exercising their duties; and
  • de facto directors, who are not directors but conduct business activities as a director or control the personnel or the financial or business operations of a company and instruct a director to conduct business.

 

De facto directors are subject to the same civil, criminal and administrative liabilities as directors. Unless stated otherwise, in this chapter ‘directors’ includes de facto directors.

If a director is in breach of the duties and obligations described above during an M&A transaction, the company may file a lawsuit against him or her within 30 days of the shareholders’ resolution. In addition, the shareholder or shareholders holding at least 1 per cent of the total issued shares for six consecutive months may request that the supervisor file a lawsuit against the director.

If a shareholder has registered its objection to an M&A transaction and waived the right to vote on this transaction, the shareholder may request that the company purchase its shares in the company at the fair market price by sending the company a written notice specifying the suggested purchase price and returning the share certificates within the prescribed period. A company must reach a consensus with this shareholder and pay the purchase price within 90 days of the shareholders’ resolution on the M&A transaction. If a company does not reach a consensus with the shareholder within 60 days of the shareholders’ resolution on the M&A transaction, within 30 days of the end of the 60-day period the company should apply to the court for a ruling on the fair purchase price and name the shareholder as the respondent.

Requirements for successful claims

For each of the most common claims, what must shareholders in your jurisdiction show to bring a successful suit?

Shareholders must prove that the directors and officers violated laws (eg, the Company Act and the Enterprises Mergers and Acquisitions Act) and regulations, the company’s articles of incorporation or the shareholders’ resolution on the M&A transaction, thereby causing loss and damage to the company.

In most claims, shareholders must prove that the directors or officers breached their fiduciary duty by presenting evidence showing that the directors or officers did not take the essential factors into consideration or ignored the critical facts of the transaction (eg, the financial capability of the counterparty to conduct the transaction). Any evidence that the directors or officers gained unjust interests from conducting the transaction would also be helpful to the case.

Publicly traded or privately held corporations

Do the types of claims that shareholders can bring differ depending on whether the corporations involved in the M&A transaction are publicly traded or privately held?

There is no difference between the claims that the shareholders of a publicly traded or privately held company can bring. However, the Securities and Futures Investors Protection Centre, a foundation established for the protection of public interests pursuant to the Securities Investors and Futures Traders Protection Act, may file a class action on behalf of the shareholders of publicly traded companies only.

Form of transaction

Do the types of claims that shareholders can bring differ depending on the form of the transaction?

There is no difference between the claims that shareholders can bring depending on different forms of the transaction. Even though a company may not be a party in certain types of M&A transactions (eg, in a tender offer or share purchase), its directors and officers are required to provide transaction-related information to the shareholders or advise whether to participate in the transaction and, thus, may still be held liable in these transactions.

Negotiated or hostile transaction

Do the types of claims differ depending on whether the transaction involves a negotiated transaction versus a hostile or unsolicited offer?

There is no difference between the types of claims in a negotiated transaction and a hostile or unsolicited offer.

Party suffering loss

Do the types of claims differ depending on whether the loss is suffered by the corporation or by the shareholder?

Only the party that suffered loss and damage may claim compensation. If a company suffers loss and damage, it may claim against its directors and officers. If a shareholder suffers loss and damage, it may claim against the company, directors and officers.