JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
Both exemptions are conditioned on compliance with the conditions with respect to passive investments. Under the blanket exemption, foreign investors are exempted from the prior notification requirement. Under the regular exemption, foreign investors are exempted from the prior notification requirement for investments in a company engaging in the restricted businesses other than the core sectors that relate to national security listed in the public notice, and if for - eign investors being eligible for the regular exemption comply with the heightened conditions with respect to passive investments, the threshold is increased from 1% to 10% even for investments in a company engag - ing in such core sectors. There are also some restrictions on the holding of shares by a foreign investor in a company engaging in certain types of businesses, such as airline and broadcasting businesses. 2.4 Antitrust Regulations The Anti-Monopoly Act prohibits any acquisition that substantially restrains competition in a particular field of trade or that would be conducted by using unfair trade practices. Potential acquisitions that would exceed certain thresholds require prior notification to the JFTC. In particular, if a company with domestic sales (aggre - gated with domestic sales of its group companies) of more than JPY20 billion intends to acquire shares in a target company with domestic sales (aggregated with domestic sales of its subsidiaries) of more than JPY5 billion and that acquisition results in holding more than 20% or 50% of the voting rights in the target com - pany, the acquiring company must file prior notifica - tion of the plan of acquisition at least 30 days prior to the closing of acquisition (the waiting period may be shortened if the permission of the JFTC is obtained). If the JFTC determines, during this 30-day period (the first phase review), that a more extensive review is necessary, it proceeds to a second phase review. This review is up to 120 days from the prior notification or 90 days from the acceptance by the JFTC of all information that it requests the acquiring company to provide, whichever is the later.
If the JFTC determines that an acquisition violates the Anti-Monopoly Act, the JFTC may order the party to take measures to eliminate the antitrust concerns, including a disposition of shares and assets. Similar filing requirements and subsequent procedures pursu - ant to the Anti-Monopoly Act apply to other means of acquisition of a target company or its business, such as a merger, company split, share transfer and busi - ness/asset transfer. 2.5 Labour Law Regulations The Japanese labour law regulations of primary con - cern to an acquirer are restrictions on the ability of an employer to terminate employment agreements. An “at-will” employment agreement is not legally permit - ted in Japan. Rather, a dismissal can be found to be invalid if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms under the Labour Contracts Act. Therefore, an acquirer should be aware that it may be difficult to undertake typical lay-offs after the consummation of an acquisition. 2.6 National Security Review As discussed in 2.3 Restrictions on Foreign Invest- ments , certain foreign investments shall be subject to the national security review by the Japanese govern - ment. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments A Series of Guidelines Published by METI In June 2019, METI issued the “Fair M&A Guidelines”, which replaced the prior MBO guidelines issued in September 2007 and set out basic principles that should be observed to ensure fairness in M&A trans - actions involving conflicts of interest, as well as guidelines regarding practical measures, including the establishment of an independent special committee. In connection with the foregoing developments, par - ties to transactions involving conflicts of interest have taken a more cautious approach to ensure procedural fairness in such transactions.
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