Newsletter
SUBSIDIARY'S PURCHASE OF PARENT'S SHARES IS VOID
When the Company Act was last amended in 2001, a new provision was added that forbids a subordinate company from buying shares in its controlling company. In an interpretation dated 2 September 2004, citing the principle that leg-islation does not apply retroactively, the Ministry of Economic Affairs stated that this provision does not apply to shares acquired by a subordi-nate company in its controlling company prior to the amendment. Therefore, if a subsidiary ac-quired shares in its parent company before the amended law took effect, its acquisition of the shares is valid, and it may exercise its voting rights over such shares.
In an interpretation dated 26 January 2005, re-ferring to a 1983 judgment of the Supreme Court, the MOEA stated that the Company Act's ban on a subordinate company's purchasing shares in its controlling company is one of the statutory re-strictions on share purchase under the Act, and that it would appear that if this provision is vio-lated, the purchase is void, and therefore the subordinate company may not exercise the vot-ing rights attached to such shares.