JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
8.2 Prospectus Requirements In the case of a stock-for-stock M&A where the acquir- er’s shares are issued as consideration, the acquirer must file a securities registration statement (or a secu- rities notification if the value of the issued shares is less than JPY100 million). The waiting period for the secu- rities registration statement is, in principle, 15 days after filing. If the target company is a listed company on the Tokyo Stock Exchange, the shares provided as consideration will be distributed to the shareholders of such listed company, which will require a technical listing for the shares to become listed. In this case, a preliminary review by the TSE is necessary prior to the issuance of the shares. Additionally, the acquirer will be subject to the continuous disclosure obliga- tion, such as annual securities reports, under the FIEA and the TSE listing regulations. However, as we have ever seen few precedents of a stock-for-stock M&A in which a foreign company issues its shares to be listed on the TSE, the feasibility of such transaction scheme will need to be carefully examined. 8.3 Producing Financial Statements When conducting a statutory corporate reorganisation (eg, a merger), the parties must prepare certain pre- closing disclosure documents to provide information to their stakeholders, such as shareholders and credi- tors. These pre-closing disclosures must include the financial statements of the parties. However, a foreign corporation cannot be party to a statutory corporate reorganisation but may issue its shares as consid- eration in certain transactions, such as a triangular merger. In the case of the acquisition of the business or shares of a non-listed company without statutory corporate reorganisation activities, there is generally no requirement for public disclosure of the acquirer’s financial statements. When acquiring shares of a listed company, regard- less of whether the consideration is cash or shares, the acquiring company must disclose its financial statements in the tender offer registration statement. If the tender offeror is a foreign company, these financial statements do not need to be prepared in accordance with IFRS or Japanese GAAP but can be prepared in accordance with the GAAP of its own jurisdiction, provided that the differences in such accounting prin- ciples are explained. If the acquirer is a newly estab-
lished special purpose company (SPC) created for the tender offer, it may not have finished its first fiscal year, in which case the financial statements do not need to be disclosed in the registration statement. 8.4 Disclosure of Transaction Documents Under the Companies Act of Japan, a statutory organ- isational restructuring generally requires the approval of the statutory agreement or plan at a shareholders’ meeting and prior disclosure of the information as to such transaction including the contents of the statuto- ry agreement or plan. In practice, a separate definitive agreement is often executed as well as a simple-form statutory agreement or plan. However, it is not com- mon practice to disclose the entire contents of such separate definitive agreements. In the case of share acquisitions through a tender offer, a summary of the key terms of material agree- ments relating to the transaction must be disclosed. For provisions that are critical to shareholders’ deci- sions (such as conditions precedent to the transac- tion, fiduciary-out clauses and other deal protection provisions), the local financial bureau requests a cer- tain level of disclosure. Under the Companies Act of Japan, directors have a duty of care and a duty of loyalty to the company. When directors make a business judgement, the court will not find a violation of the duty of care as long as (i) there are no unreasonable errors due to negligence in the process of recognising relevant facts that form the basis of their decisions and (ii) the reasoning process and the contents of the decision-making based on those facts are not significantly unreasonable. This rule is called the “business judgement rule”, which is generally applicable to decisions in relation to M&A transactions. 9.2 Special or Ad Hoc Committees In the Fair M&A Guidelines provided by METI in 2019, it is recommended to establish a special committee to ensure the fairness of transactions that involve structural conflicts of interest, such as MBOs and 9. Duties of Directors 9.1 Principal Directors’ Duties
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