A majority of shareholders in Toshiba Corp. approved a proposal by one of the largest stockholders at an extraordinary meeting on Thursday that an investigation be launched into whether the general shareholders' meeting held in July was fairly conducted, despite opposition from the management.

It is very rare that a stockholder's proposal is approved at a shareholders' meeting for a listed Japanese company, and the decision highlights the pressure Toshiba is under from overseas investment funds that hold large stakes in the company.

The extraordinary shareholders' meeting was convened at the request of Effissimo Capital Management Pte. Ltd. and Chinook Holdings Ltd.

Effissimo, which owns a 9.9 percent stake in Toshiba, wants the new investigation to be conducted by lawyers it nominated.

At the general shareholders' meeting last year, a small portion of voting forms, equivalent to 1.3 percent of the total ballot, were deemed invalid due to failures of Sumitomo Mitsui Trust Bank, which handled the mail-in votes on behalf of Toshiba.

Toshiba opposed the proposal from Effissimo, saying the voting results were not affected by the error.

Effissimo also demanded another issue arising from last year's meeting be investigated. The company claims an advisor to Japan's Ministry of Economy, Trade and Industry had pressurized a U.S. fund that indirectly invested in Toshiba not to exert its voting rights at the meeting.

Toshiba denies the allegation, maintaining it has never had a relationship with the advisor.

However, Thursday's decision means three lawyers designated by the Singapore-based fund will probe the legitimacy of the meeting.

Meanwhile, Chinook's proposal that all operating cash flow through March 2026 be provided to shareholders through dividends or the buyback of shares was voted down.

As of May 2020, a total of 62.6 percent of Toshiba's shares were held by foreign institutions including investment funds, as a result of a 600 billion yen ($5.5 billion) third-party allocation of new shares to 60 overseas investment funds in December 2017 in a bid to bolster its finance and remain listed on the Tokyo Stock Exchange.

Toshiba has been stepping up turnaround efforts following an accounting fraud scandal that came to light in 2015, and the bankruptcy of its U.S. nuclear power plant subsidiary Westinghouse Electric Co. in 2017.

In 2018, Toshiba sold its former chip-making subsidiary to a consortium led by U.S. private equity fund Bain Capital for about 2 trillion yen as part of its restructuring efforts.

==Kyodo

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