JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
acquiring shares in a company in excess of a certain threshold. The threshold is generally set between 15% and 25%. Further, as described in 6.2 Mandatory Offer Thresh - old , after 1 May 2026, the effective date of the 2024 FIEA Amendments, an acquisition of shares of a listed company may be subject to the tender offer rules under the FIEA, which are triggered if a bidder will acquire more than 30% of the outstanding vot - ing rights of the target company through any type of transaction (ie, on- or off-market trading). 4.4 Dealings in Derivatives Dealings in derivatives are allowed in Japan. A bidder may purchase derivatives regarding shares in a target company to build an economic stake in that target company or hedge risks regarding its shares in the target company. 4.5 Filing/Reporting Obligations Equity derivatives may be subject to large-scale shareholding reporting obligations. Options pertaining to shares may trigger disclosure if, upon exercise, they would result in excess of a 5% shareholding. Holding equity derivatives that are cash-settled and do not transfer the right to acquire shares generally does not trigger disclosure. However, after 1 May 2026 (the effective date of the 2024 FIEA Amendments), cash-settled derivatives will be subject to large-scale shareholding reporting obligations, if holders of such derivatives have certain intentions, such as acquir - ing subject shares from counterparties or affecting the voting actions by counterparties holding subject shares. 4.6 Transparency Shareholders intending to implement a tender offer must disclose in a tender offer registration statement in detail the method of acquisition of control or partici - pation in the management of the target company, and its management policy and plans after the acquisition. After 1 May 2026 (the effective date of the 2024 FIEA Amendments), a shareholder holding 5% or more of voting rights must disclose in a large shareholding report in as much detail as possible any proposal it makes or plans to make that would cause a material
change to or materially affect the issuer’s business, including: • any proposal with respect to the appointment or dismissal of a representative director or executive officer; • certain share exchanges, mergers or company splits; • an acquisition or disposition of material business; or • an acquisition of voting rights by any third party that would result in such third party holding more than 50% of total voting rights of the issuer. In addition, a shareholder must disclose in a large- scale shareholding report in as much detail as possi - ble any decision to acquire shares that would increase its voting rights by 5% or more. Disclosure is also required where a shareholder is required to file a large- scale shareholding report or an amendment thereto due to an increase in shareholding and has a plan to acquire shares that would increase its voting rights by 5% or more within three months after the filing obligation arises. If a target company is a listed company, it must dis - close the deal when the board approves the contem - plated transaction. Typically, this approval is given on the day that a definitive agreement is to be signed by the target company and the disclosure is made on the same day. In general, there is no legal requirement to disclose the deal when the target company is first approached or when negotiations commence. A non-binding letter of intent is not often signed by the target company as it could trigger the mandatory disclosure requirement. In those cases where a non-binding letter of intent is signed and disclosure is made at an early stage, the purpose is often to allow the parties to discuss the deal openly with a wider group of relevant organi - sations or personnel. For example, if the transaction might require the competition authorities to conduct third-party hearings, the parties may prefer to disclose 5. Negotiation Phase 5.1 Requirement to Disclose a Deal
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