JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
In addition, in August 2023, METI published the “Guidelines for Corporate Takeovers” (the “Takeover Guidelines”) to present principles and best practices to develop fair rules regarding M&A transactions in Japan. The Takeover Guidelines provide a code of conduct of relevant parties including directors of a target company in cases of unsolicited offers and competing offers. The Guidelines require the manage - ment who receive any unsolicited acquisition proposal to put the proposal on the agenda of a board meeting or otherwise report it to the board as long as the pro - posal is a “bona fide offer”, and the board must then faithfully consider the proposal. If the board rejects such proposal, it should be accountable for its deci - sion. These guidelines are discussed in more detail in 9.1 Hostile Tender Offers . Considering the changes in the market practice after the publication of the Takeover Guidelines, METI is conducting follow-up research and considering addi - tional measures to increase awareness of market par - ticipants regarding the legislative intent of the Takeo - ver Guidelines. Court Decisions on Defensive Measures Although there had been no court decisions on hos - tile takeover defensive measures since the late 2000s, courts ruled on the validity of defensive measures taken against hostile takeover attempts in four cases in 2021, and in one case in each of 2022 and 2025. In these cases, the target company implemented poi - son pill type defensive measures using stock options having a dilutive effect on the hostile acquirer’s vot - ing rights. In four of the cases, the courts ultimately refused to grant injunctive relief in favour of the hostile acquirers, whereas in the Japan Asia Group case and in the Mitsuboshi case, the court granted injunctive relief. These cases are discussed in greater detail in 9. Defensive Measures . 3.2 Significant Changes to Takeover Law In light of recent hostile takeover attempts through market transactions as well as changes in the mar - ket environment, amendments to the FIEA (the “2024 FIEA Amendments”) were approved by the Diet on 15 May 2024, becoming effective on 1 May 2026. Due to the 2024 FIEA Amendments, stakebuilding in the mar - ket is now subject to mandatory takeover obligations
to ensure transparency in change of control transac - tions. The 2024 FIEA Amendments also abolished the Rapid Buy-Up Rule (for details of the Rapid Buy-Up Rule, please refer to 6.2 Mandatory Offer Threshold ) and lowered the mandatory tender offer thresholds from one third to 30%. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies A bidder who is not willing to wage an unsolicited takeover usually avoids building a stake as a “toe - hold” before launching an offer in Japan. In Japan, the building of a toehold without notice to target manage - ment is viewed as negatively affecting management’s willingness to accept an acquisition offer and lowers chances of a successful friendly takeover. Should a bidder decide to build a toehold, it would purchase the shares on the market or through a private transaction with one or a limited number of principal shareholders. 4.2 Material Shareholding Disclosure Threshold A shareholder is required under the FIEA to file a large-scale shareholding report with the relevant local finance bureau within five business days after its shareholding ratio in a listed company exceeds 5%. When calculating the shareholding ratio, the shares held by a joint holder are aggregated. A joint holder includes certain affiliates and another shareholder with whom a shareholder has agreed on jointly acquir - ing or transferring shares in a target company, or on jointly exercising the voting rights or other rights as a shareholder of the target company. After filing the report, if the shareholding ratio increas - es or decreases by 1% or more, an amendment to the report must be filed within five business days from that increase or decrease. Financial institutions that trade securities regularly as part of their business and satis - fy certain requirements under the FIEA are required to file the report only twice a month (the “special report”). 4.3 Hurdles to Stakebuilding As described in 9.3 Common Defensive Measures , some Japanese listed companies have adopted take - over defence measures that prevent an acquirer from
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