Japanese industrial conglomerate Toshiba Corp.'s general shareholders' meeting last year was not conducted in a fair manner, a group of lawyers concluded Thursday after an investigation requested by some foreign shareholders.

The lawyers said in a report that Toshiba sought assistance from the government in an effort to block proposals from foreign activist investors, taking advantage of a revised domestic law designed to protect national security.

Toshiba has faced off with foreign activist shareholders like Singapore-based fund Effissimo Capital Management Pte. Ltd. over management and governance.

Questions about the July 2020 shareholders' meeting were raised after revelations that shareholder services provider Sumitomo Mitsui Trust Bank mistakenly omitted some mail-in votes.

Toshiba planned to "prevent" investors such as Effissimo from exercising their rights to make proposals and vote in the general shareholders' meeting in July 2020, the report said.

"We judge that the shareholders' meeting was not run in a fair manner," the lawyers said in the over 100-page report.

The influence of foreign investors has grown in recent years as Toshiba has accepted investment from abroad to overcome its financial struggles.

Effissimo, a major shareholder with an over 10 percent stake in Toshiba, submitted a proposal for the appointment of three outside directors but it did not secure approval at the general shareholders' meeting.

Leading up to the meeting, Toshiba, in cooperation with the industry ministry, urged Effissimo to drop the proposal -- a potentially illegal act.

The Japanese company's actions "directly or indirectly had an undue influence on shareholders," the lawyers said.

According to the report, it is "presumed" that then Toshiba CEO Nobuaki Kurumatani met with then Chief Cabinet Secretary Yoshihide Suga, who is now Japan's prime minister, over breakfast to explain Toshiba's situation regarding foreign investors.

Kurumatani implicitly admitted that he had attended the breakfast but said in an interview conducted by the lawyers that he had no recollection of a "position document" compiled by a Toshiba executive, the report said.

The document stated that urgent and strong government support was required to ensure that the revised Foreign Exchange and Foreign Trade Control Law was applied effectively

At the general shareholders' meeting last year, support for Kurumatani dwindled to 57.96 percent from 99.43 percent a year earlier.

Toshiba said in a statement in English it "will carefully review this investigation report and plans to announce its comments towards this investigation result at a later date."

Toshiba is among the Japanese companies viewed as important on national security grounds as the conglomerate's businesses include defense equipment, infrastructure and nuclear power.

The revised law is aimed at limiting foreign investment to protect national security.

The probe was conducted after the approval at an extraordinary meeting in March of a proposal by Effissimo calling for a fresh investigation into whether the July 2020 shareholders' meeting was conducted fairly.

The development was seen as a rare victory for shareholder activism.

Kurumatani abruptly stepped down in April amid a management rift over a proposal by British private equity firm CVC Capital Partners to take Toshiba private.

The plan, seen as an attempt to shield Toshiba from growing activist shareholder pressure, sparked speculation that Kurumatani, who previously served as head of CVC's Japan unit, had sought to protect himself.

Toshiba's general shareholders' meeting is slated for June 25.

==Kyodo

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