Exclusive interview with Attorney Hajime Shinji of Shinozaki & Shinji Law Office – What is a shareholder meeting inspector who serves as a bridge between companies and shareholders? (September 2, 2024) – Excite News
Every year, during the general shareholders’ meeting season, attention is focused on the general shareholders’ meetings of listed companies that have received shareholder proposals. In order to ensure the appropriateness of the procedures for convening general shareholders’ meetings and the methods of resolution, an increasing number of companies are calling for the appointment of a “general shareholders’ meeting inspector.”
Regarding the unfamiliar term “shareholder meeting inspector,” a book entitled “Shareholder Meeting Inspectors: Their Duties and Appointment Examples” (※1) has been published by Attorney Hajime Shinji of Shinozaki & Shinji Law Offices (Minato-ku, Tokyo), who has experience as a shareholder meeting inspector on many occasions.
Tokyo Shoko Research (TSR) conducted an exclusive interview with Attorney Susumu and Attorney Ryoga Mitsui of the same firm. We asked them about the characteristics of the firm, the role of the shareholder meeting inspector, and the digitalization of civil court procedures (※2).
*1 Published in April 2024 (Commercial Law)
*2 The revised Civil Procedure Act of 2022 includes the digitalization of civil litigation.
◇ Attorney Hajime Shinji
1993: Registered as an attorney (Tokyo Bar Association, 45th term)
2008-2010 New Bar Examination Examiner (Commercial Law)
2012-2013 Chief of the Bankruptcy Law Section of the Legal Research Department of the Tokyo Bar Association
2013-2015: Instructor at the Supreme Court Judicial Research Institute (civil defense)
2015: Serves as trustee for the corporate reorganization procedures of Rams Corporation Co., Ltd. (TSR company code: 293357102, Minato-ku) and 38 other companies (current position)
From 2023, he will be a lecturer at the University of Tokyo Law School (bankruptcy proceedings research).
-About the characteristics of Shinozaki & Shinji Law Office
Our firm is a boutique firm with eight active lawyers, and we have two areas of expertise. The first is anti-social cases, which have been developed mainly by Yoshiaki Shinozaki, a lawyer who has been active as a front-runner in civil violence cases since the Showa era.
This field has a wide range of applications, and we have built up a track record in a variety of fields, including banking, securities, life and non-life insurance, leasing, trading companies, hotels, theme parks, and ship operations. We have also applied our expertise in a variety of areas, including debt collection, guidance for shareholder meetings, the establishment of regulations for dealing with anti-social forces, complaint handling, and special investigations.
Secondly, I am in charge of business restructuring cases. What is interesting about this job is that I can use various laws and soft laws to disentangle the complicated intertwining of one-to-many or many-to-many interests, and resolve the case while minimizing the disadvantages to the stakeholders. In doing so, I also make full use of my knowledge of corporate law, tax law, and accounting, so it is a very attractive job for a lawyer.
Taking advantage of these characteristics, our firm assists over 140 client companies. Of course, we also handle many cases for individual clients who are introduced to us by these companies.
Furthermore, we engage in pro bono activities. (※3) Attorney Shinozaki has served as an officer of the Bar Association and as chairman of the Special Committee on Civil Violence, and I have continued to be involved in legal training, having served as a civil defense instructor at the Supreme Court Legal Training and Research Institute for three years from 2013, and then as chairman of the Legal Training Committee of the Tokyo Bar Association.
Our idea is that if our skills and mindset can be of use in a socially meaningful way, regardless of whether it is related to legal practice or not, we will help as much as our time allows.
*3 Abbreviation of the Latin phrase “Pro Bono Publico.” Social contribution activities that utilize knowledge and skills.
– What is the background to the publication of “Shareholders’ Meeting Inspector (Commercial Law)”?
Individual shareholders have become more aware of their rights, and the Corporate Governance Code has encouraged active funds (*4) to make more contact with listed companies. Dialogue between companies and shareholders has increased, and there have been more cases of conflicts of interest and tensions arising from shareholders exercising their rights (especially the exercise of shareholder proposal rights). Conflicts ultimately manifest themselves when proposals are discussed (voted) at the general shareholders’ meeting. If shareholders have mistrust regarding the vote counting at that time, or if the company makes inadequate reports (violates its duty to explain), this can lead to lawsuits to cancel resolutions. Such a situation is unfortunate for shareholders and companies.
*4 A fund that aims to achieve returns that exceed those of the index based on its own investment decisions.
Attorney Susumu responding to an interview
As a “safety first” measure, inspectors of shareholder meetings come into play, but this system is surprisingly unknown. When I thought about why this is, I realized that one of the reasons is that there have been no books published up until now that integrate and organize the three aspects of (1) the parties that use this system, such as shareholders or companies, (2) the attorneys who assist in filing applications for the appointment of inspectors, and (3) the inspectors of shareholder meetings.
I myself have served as a shareholder meeting inspector appointed by the court about two or three times a year. I have been involved in cases that have attracted public attention, such as the LIXIL Group Corporation case. In August 2022, I also participated as a panelist in a roundtable discussion entitled “Practice and Guide for General Meeting Inspectors” hosted by the 8th Civil Division of the Tokyo District Court (※5), which was published in the “Financial Law Affairs” (Financial and Fiscal Affairs Research Institute) (※6) in December of the same year. This opportunity allowed me to listen to the valuable opinions of the court and other lawyer panelists, which was very inspiring.
So I consulted with lawyers Nakae Tamito and Mitsui Ryoga, who had assisted me in my inspector cases, and decided to write this book together with them.
*5 Specializes in commercial litigation cases, non-contentious corporate cases, and cases stipulated in the Arbitration Act
※6 No.2200 (December 25, 2022)
-What is the role of the inspector?
Inspectors are essentially just record-keepers of the general shareholders’ meeting. The main players are the company and its shareholders. Inspectors are not allowed to go beyond their bounds and stick their noses in without understanding their role.
On the other hand, inspectors can, to a certain extent, coordinate in advance to clarify conflicts and to prevent the general shareholders’ meeting from becoming unnecessarily chaotic through advance interviews with the company and shareholders (and their proxies). In addition, shareholders and companies who bear the expenses and apply for the appointment of an inspector often have the desire for the inspector to convey their views to the company or to contribute to the stable running of the general shareholders’ meeting.
The appeal of the inspector’s job is to listen to them and think about how I can be of help to each case without going beyond the bounds of propriety. My stance is to try to take a slightly more proactive approach to the passive role of an inspector, which is similar to the work of trustees and supervisory committee members in legal reorganization cases. It may be a bit of a nuisance.
The number of cases requiring the appointment of inspectors will surely increase in the future. I believe this is why the Tokyo District Court Civil Division 8 also planned the roundtable discussion. There will definitely be an opportunity for young lawyers, so when the time comes, I hope you will read the document in Chapter 1 of “Shareholder Meeting Inspectors” to study in advance and immerse yourself in the atmosphere. Also, I hope that those currently in charge of inspectors will actively appoint young lawyers as assistants in order to train the next generation.
(Right) Attorney Susumu and (Left) Attorney Mitsui
(Right) Attorney Susumu and (Left) Attorney Mitsui
–What are the costs of appointing an inspector?
The biggest obstacle to using the shareholder meeting inspector service may be the lack of clarity regarding the costs involved in filing a petition. However, if you inquire at the court in advance, you will be informed of the costs.
This book does not provide an estimate of the cost, but it ranges from several hundred thousand yen depending on the size of the company, to several million yen for large listed companies.
– Advice for lawyers who will be appointed as inspectors
When selecting inspectors, the court assigns experienced lawyers and newcomers depending on the case. I also think that they are mindful of training the next generation of inspectors to be able to handle the expected increase in cases in the future. The quickest way for young lawyers who want to try this job in the future is to experience assisting an inspector, observe how the inspectors work up close, and help write investigation reports. It will be easier for the court to approach a lawyer with such experience to take up the position. This is the same reason why it is easier to appoint someone with experience as a bankruptcy trustee representative as a trustee.
The work of an inspector involves a surprisingly large amount of work to be done beforehand or on-site, making it difficult for an inspector to handle it alone. Because it is a one-shot deal, it cannot be tolerated that an investigation is not carried out adequately due to a lack of personnel. Therefore, assistants are needed, and depending on the case, multiple assistants. And when inspectors carry out their work together with their assistants, this ultimately leads to the training of younger generations. When a senior lawyer is selected as an inspector, we would like young lawyers to volunteer to be assistants and actively help out.
– Advice for struggling small and medium-sized businesses
The environment surrounding small and medium-sized enterprises is becoming increasingly harsh, with rising prices, a labor shortage due to the “Workstyle Reform” – also known as the 2024 problem, rising interest rates, and currency fluctuations – and small and medium-sized enterprise managers are having a very hard time.
When looking at business restructuring and bankruptcy, the simple answer is “be careful about your cash flow,” but there are many turning points before reaching a critical point.
The scope of a manager’s responsibilities is wide-ranging, including business planning, sales, finance, advertising, human resources, legal affairs, tax accounting, and problem resolution, and there is a limit to what one person can handle alone. At times like these, just having someone nearby to consult with about anything can greatly reduce the mental burden and lead to better results. You can think of us as a presence to be prepared for such situations.
If you consult us as early as possible, we can use our wisdom to the fullest and provide you with the best or better options. If you are in trouble, please consult us as early as possible, either with a tax accountant close to you, or, if you feel that the matter is beyond your ability, with a lawyer.
Our firm’s client companies regularly review their monthly trial balances and financial statements, and this is often the time when they come to us for advice on problems. We can also look at the trial balances and financial statements, and provide insight into any problems that may arise, allowing us to uncover problems early on.
– Civil court procedures are increasingly being digitized.
In light of the situation in which 126,664 court proceedings (2022) were being carried out in district courts for civil first instance cases alone, and the progress in the use of IT in court procedures, etc. in other countries, mainly in Europe and the United States, efforts have been made in Japan to further promote IT.
In response to this, in October 2017, the “Committee on the ITization of Court Procedures, etc.”, whose members include lawyers and other legal experts, was established within the Cabinet Secretariat, and in its report the committee clarified the direction for realizing the “three e’s” to advance the digitalization of court procedures.
Specifically, the “three e’s” refer to 1) e-submission, 2) e-courtroom, and 3) e-case management.
1) “E-submission” refers to the consolidation of online submission of claims and evidence and electronic payment of fees. This will reduce the costs of submitting documents (postage, etc.) and storing them. 2) “E-court” refers to the use of IT tools for oral argument dates, proceedings to clarify issues, and witness examination dates.
This will reduce the time and financial costs of appearing at court dates. ③ “E-case management” means that case records can be accessed online at any time, and that it is possible to adjust dates and check the progress of cases online, thereby reducing the burden of storing court records and improving the transparency of court proceedings.
These operations are being implemented in stages, and proceedings to clarify issues through web conferences and electronic submission of preparatory documents are already widely used. However, various issues have been raised in advancing the digitalization of civil court procedures, such as building user systems, supporting IT literacy, and information security measures. By addressing these issues and promoting further digitalization in the future, it is expected that public access to justice will be improved and court procedures will be speeded up and enhanced.
In short, case management through Teams has become easier, and trials have become more substantial and faster. The issues and deadlines for each case have been made visible to both the court and the parties involved, so lawyers who cannot meet deadlines for issues or prepare proper documents will gradually be weeded out and selection will progress. It feels like the principles of the major revision of the Civil Procedure Act in 1996 have finally come to fruition.
-What impact does this have on your legal work?
The digitalization of court proceedings has brought about an amazing innovation in the way we lawyers work. In the past, we sometimes had to spend the whole day in local courts for oral arguments that took only five minutes, or pretrial proceedings and settlement hearings that took about 30 minutes, but now this almost never happens, and the amount of time wasted traveling has been dramatically reduced. We can now use the valuable time saved to do our real work.
In addition, the positive legacy gained in the past three years of COVID-19 is also significant. Remote work has become the norm, and the use of telephone, email, Zoom, and other methods has drastically reduced time and distance, making it possible to access each other face-to-face anytime, anywhere.
Obtaining legal information will become increasingly easy, and generative AI will revolutionize the way we do business.
From the perspective of business managers, I think it is important that we lawyers have become experts who can be easily accessed face-to-face, anytime, anywhere, without any delay. A lawyer’s job is not just to give legal advice. Lawyers with a lot of experience have the ability to utilize their experience, wisdom, and personal networks to coordinate matters in accordance with the needs of their clients, not only using their own wisdom but also bringing in other experts. We want lawyers to be useful as such “coordinators,” and we will continue to make further efforts to meet these expectations.
(Re-edited from “Weekly Topics” published in the August 29, 2024 issue of “TSR Information Nationwide Edition” published by Tokyo Shoko Research)