JAPAN Law and Practice Contributed by: Akira Matsushita and Hideki Ben, Mori Hamada
• posting white papers or relevant information on websites prepared by the activist shareholders for the campaigns; • placing web advertisements; • disseminating letters to shareholders; • providing information through the media; and • holding sessions for other shareholders. Activist shareholders acquire shares in a target compa- ny to have influence on the management of the target company; however, building a large stake in the target company is not necessarily required, as the activist shareholders may have influence on the management, even with a small stake, by asking other sharehold- ers to support their demands. Activist shareholders may also submit shareholder proposals and engage in proxy solicitations with respect to general sharehold- ers’ meetings. Some aggressive activist shareholders use the court processes, including the enjoinment of directors’ illegal acts or derivative actions (see 10.2 Remedies Against the Directors ). Furthermore, in the last few years, the number of unsolicited tender offers conducted by activist shareholders has rapidly increased. As discussed in detail in 11.2 Aims of Shareholder Activism , agenda items commonly demanded by activist shareholders include: • improving capital efficiency, including the buyback of shares, increasing dividends and divestiture of non-core businesses and assets; • business strategies, such as the conduct of M&A transactions; • replacement or nomination of directors; • improving corporate governance; and • addressing the inappropriate nature of terms and conditions of announced M&A transactions. 11.4 Recent Trends No particular industries or sectors have been spe- cifically targeted by activist shareholders in Japan. Small-cap or mid-cap companies (ie, companies whose market capitalisation is under JPY100 billion) are more frequently targeted by activist sharehold- ers because it is easier for them to have a stronger influence over these companies by building larger stakes in such companies. However, some large-
cap companies whose market capitalisation is more than JPY1 trillion have also been targeted by activ- ist shareholders, as more shareholders have become supportive of activist shareholders and, as a result, activist shareholders may gain the ability to influence such target companies when in possession of a small shareholding. 11.5 Most Active Shareholder Groups Hedge funds are the most active shareholder activists in Japan. Both Japan-based hedge funds and foreign- based hedge funds (such as those from the USA, the UK, Hong Kong and Singapore) actively engage in shareholder activism. In addition, domestic and for- eign institutional investors have recently become more aligned with activist shareholders in their actions. 11.6 Proportion of Activist Demands Met The number of cases in which shareholder activist demands were met in full or in part has increased in the past few years, although such activist demands would historically not have obtained support from other shareholders in Japan. In recent years, there have been a number of cases of companies accepting the elections of directors rec- ommended by activist shareholders pursuant to set- tlement agreements with the activist shareholders. For example, in 2019, Olympus Corporation nominated a partner of ValueAct, the US-based activist fund, as a director in accordance with an agreement with Val- ueAct. After the election, Olympus divested its digital camera business in 2020 and scientific solutions busi- ness in 2022 to private equity funds. In 2022, Toshiba Corporation entered into settlement agreements with two of its shareholders, Farallon Capital Management and Elliott Advisors, and accepted the nomination of the employees of such shareholders as directors on the board slate to be voted on at the annual share - holders’ meeting. There are several cases in which activist shareholders obtained board seats through contests. For example, in February 2023, Oasis Management (a Hong Kong- based activist fund) demanded that Fujitech call an extraordinary shareholders’ meeting, and submit- ted shareholder proposals to dismiss five incumbent directors and elect six directors designated by Oasis
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