JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
acquisitions of subsidiary companies by controlling shareholders. In practice, it is common to set up an independent special committee for such types of transactions. For other M&A transactions, the necessity of a spe- cial committee should be considered on a case-by- case basis, depending on factors such as the degree of conflict of interest, the need to supplement the independence of the board of directors, and the high necessity of providing explanations to the market. For example, in cases where the fairness of transac- tion terms is critical to shareholder interests, such as cash-out proposals, or when considering the adoption of defensive measures against a hostile bidder, it is understood that the establishment of a special com- mittee is meaningful. 9.3 Role of the Board The board of directors is expected not only to express their opinion regarding an acquisition proposal but also to actively engage in negotiations to ensure the shareholders’ interests. To maintain the board’s inde- pendence from the acquirer, a special committee may be established. Negotiations can be conducted by the board of directors/management based on recommen- dations from the special committee while, in some cases, the special committee is granted authority to directly negotiate with the potential bidder.
In the event of a going private transaction through a tender offer or statutory corporate reorganisation, shareholders who oppose the purchase price can exercise their appraisal right and file a petition with the court for a payment of fair price. For transactions between independent third parties, the court generally supports the agreed purchase price as fair value. On the other hand, for transactions involving structural conflicts of interest, such as MBOs and acquisitions of subsidiary companies by controlling shareholders, the court will examine whether measures to ensure fair- ness were exerted. If the court finds such measures It is practically common for the target company to retain its financial adviser (FA) and legal adviser (LA). If a special committee is established, the commit- tee may also use its own FA and LA. In transactions involving a conflict-of-interest issue, it is not rare to obtain a fairness opinion from an independent third- party valuation firm. However, unlike in some other jurisdictions, Japan does not have statutory regula- tions governing the issuers or issuance processes of fairness opinions. Also, it would be difficult to say that there is a well-established common understand- ing regarding the definition of “fairness” in fairness opinions or the procedures that should be followed in their issuance. As a result, further legal developments are needed to allow stakeholders of a target company to pursue remedies against third-party valuation firms that issue inappropriate fairness opinions. not taken, it will determine a fair price. 9.4 Independent Outside Advice
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