{"id":12776,"date":"2023-10-06T09:20:22","date_gmt":"2023-10-06T09:20:22","guid":{"rendered":"https:\/\/vila.es\/?p=12776"},"modified":"2023-10-20T07:58:33","modified_gmt":"2023-10-20T07:58:33","slug":"corporate-takeovers-new-guidelines-in-japan","status":"publish","type":"post","link":"https:\/\/vila.es\/en\/corporate\/corporate-takeovers-new-guidelines-in-japan\/","title":{"rendered":"CORPORATE TAKEOVERS, NEW GUIDELINES IN JAPAN"},"content":{"rendered":"

ES<\/a><\/span>|EN|\u65e5\u672c\u8a9e<\/a><\/span><\/strong><\/p>\n

On 31st<\/sup> August \u00a02023, Japan’s Ministry of Economy, Trade and Industry (“METI”) released its Guidelines for Corporate Takeovers -Enhancing Corporate Value and Securing Shareholders\u2019 Interests- (“the Guidelines”).<\/p>\n

The number and value of M&A transactions in Japan are said to have been increasing in recent years. More and more foreign companies are considering acquiring Japanese companies. It is important for the acquirers to understand the Japanese rules in order to ensure that the acquisition takes place correctly.<\/p>\n

In the\u00a0 following, we will refer to those issues contained in the Guidelines that may be useful for acquiring companies. In addition, we will refer to the \u00a0period of time which may be granted to the entity whose shares are to be acquired in order to consider the acquisition proposal in order to consider the proposed acquisition, as well as to the prevention of acts that affect shareholder decision-making.<\/p>\n

I. Scope and binding power of the Guidelines <\/strong><\/p>\n

The Guidelines primarily address transactions in which an acquiring company acquires corporate control of a listed company by acquiring its shares.<\/p>\n

Unlike laws and regulations, the Guidelines are not binding on any party. However, they are referred to by directors, lawyers, judges, and other practitioners involved in corporate M&A, and they are naturally a standard to be referred to in the event of a legal dispute.<\/p>\n

II. Principles of the Guidelines<\/strong><\/p>\n

According to the Guidelines, there are three principles, that should be respected in acquisitions of the management control of listed companies:<\/p>\n

(1) Principle of Corporate Value and Shareholders\u2019 Common Interests,<\/p>\n

(2) Principle of Shareholders\u2019 Intent, and<\/p>\n

(3) Principle of Transparency. In the Guidelines, these three principles are used to explain the policies for each party in a corporate takeover.<\/p>\n

III. Code of Conduct regarding Acquisition Proposals<\/strong><\/p>\n

Upon receipt of an acquisition proposal to acquire corporate control of the corresponding company, the recipient company should promptly submit or report such matter to the board of directors.<\/p>\n

Whether an acquisition proposal should be submitted to the board of directors shall be judged objectively and follow the established procedure. In this regard, the Guidelines state that it should:<\/p>\n

– Be in written form rather than oral form<\/p>\n

– Identify the acquiring party rather than maintain anonymity<\/p>\n

– Include the purchase price and timing of the acquisition<\/p>\n

– Specify the terms and conditions of the acquisition proposal<\/p>\n

– Demonstrate the credibility of the acquiring party, for example its track record as an acquiring party and its financial strength.<\/p>\n

Therefore, the acquiring party should also make an acquisition proposal that meets the above factors.<\/p>\n

In addition, the Guidelines establish what are the indicators for determining that an acquisition proposal does not constitute a “bona fide offer”:<\/p>\n

(a) When the acquisition proposal does not specify the details of the purchase price and key transaction terms.<\/p>\n

(b) When \u00a0the acquisition proposal does not indicate the management strategy after acquiring corporate control.<\/p>\n

(c) When the acquisition proposal is made for the purpose of raising the purchase price of other parties, in situations where there are other competing bidders.<\/p>\n

(d) When acquisition proposal is made by competitors for a purpose such as gaining confidential information.<\/p>\n

(e) When acquisition proposal without appropriate financing to carry out the acquisition transaction.<\/p>\n

(f) When acquisition proposal is objectively unlikely to succeed due to the low probability of satisfying the conditions for acquisition, such as regulatory permits and approvals.<\/p>\n

(g) When acquisition proposal aims to obtain controlling interest in situations where the controlling shareholder is known to have no intent of selling its controlling shares to a third party.<\/p>\n

Following the Guidelines, it is expected that the board of directors of the acquired company, when considering the proposal received \u201cbona fide\u201d (in terms of the Guidelines: \u201csincere manner\u201d), obtain additional information from the acquiring party about the acquisition proposal, and should consider the appropriateness of the acquisition from the perspective of whether the acquisition will contribute to enhancing corporate value of the companies, with a focus on the post-acquisition management strategy, the appropriateness of the purchase price and other transaction terms, the acquiring party\u2019s financial resources, track record and management capabilities, and the feasibility of successful completion of the acquisition.<\/p>\n

IV. Acquisition of Shares and Disclosure of Information by an Acquiring Party<\/strong><\/p>\n

According to the Cabinet Office Ordinance on Disclosure of the Status of Large Volume Holding of Share Certificates, etc., any person who holds more than 5% of the share certificates, etc. of a listed company must submit a Large-Scale Shareholding Report. This report will contain information on the large volume holders and the acquisition of share certificates and other securities.<\/p>\n

In addition, the Financial Instruments and Exchange Act establishes a take-over bid system under which the obligation to make a tender offer accompanied by disclosure of information on the purpose of the purchase, management policies, etc. arises when a company acquires the shares, etc. of a listed company, etc. under certain conditions, as followings:<\/p>\n