Newsletter
DOUBTS OVER DEFINITION OF CONTROL UNDER COMPANY LAW
In response to doubts as to when the presumption of a control relationship under the Company Law applies, the Ministry of Economic Affairs recently gave the following interpretation:
Article 369-3 of the Company Law provides that when a majority of the executive shareholders or directors of a company are concurrently executive shareholders or directors of another company, it is presumed that a relationship of control and subordination exists. If the total numbers of executive shareholderships or directorships in the controlled and controlling companies differ, a majority is calculated with reference to the larger number. Further, if directors are appointed in their capacity as representatives of juristic persons, concurrently refers to the representatives in their individual capacity. In other words, if a juristic person is a shareholder in both the controlled and the controlling company, but appoints two different natural persons as director to each, then the directorships are not concurrent.
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Article 369-3 also refers to companies where a majority of the total voting shares or total capital stock in each are held by the same shareholders. In this case too, a majority is calculated with reference to the larger total number of voting shares or total capital stock.