JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
approval of shareholders ( Makino Milling Machine case). In that case, the target company, which was subject to an unsolicited tender offer, implemented a poison pill that had been introduced and designed solely to secure a reasonable period of time to seek counteroffers from third parties. The poison pill was structured so that it would be withdrawn if the offeror delayed the launch of the tender offer for approxi - mately one month. The court held that, if securing additional time could result in a superior counteroffer from a third party, it would serve common interests of shareholders. On the other hand, there was a case where the court granted a provisional injunction against poison pill type defensive measures involving an allotment of stock options, even though implementation thereof was approved at a shareholders’ meeting. The court determined that they were not reasonable as measures to protect the common interests of the shareholders, given the board’s arbitral broad determination of the scope of “acquirers” and unreasonable conditions for the acquirers to withdraw their takeover attempts to avoid the potential dilution ( Mitsuboshi case in 2022). As to the pre-warning type of defensive measures (see 9.3 Common Defensive Measures ) that have been approved at a shareholders’ meeting before a tender offer is commenced, the court upheld the implemen - tation thereof (ie, the allotment of stock options) by resolution of the board of directors (without a share - holder resolution) where the acquirer did not comply with the procedures set out in the defensive measures ( Nippo case in 2021). 9.3 Common Defensive Measures The most common takeover defensive measures (takeover response policies) adopted by Japanese listed companies before a hostile acquirer emerges are the pre-warning type of defensive measures. A company sets and publicly discloses (warns) a pro - cedure with which a would-be acquirer has to comply before starting an acquisition. Under the procedure, the acquirer has to provide the board of directors with information regarding the acquirer and its acquisition plan, and ensure the directors have time to consider the plan and prepare alternatives, and for sharehold -
ers to consider which plan is in shareholders’ inter - ests. If the company determines, based on a recommen - dation of an independent committee established by the board, that the bidder has not complied with the procedures set by the company, or that the proposed acquisition would cause clear harm to the corporate value and common interests of shareholders, it would allot stock options as countermeasures to all share - holders without contribution that are only exercisable by, or callable for new shares by the company with respect to, those shareholders other than the acquirer, resulting in a dilution of the shareholding ratio of the acquirer. In most cases, it is provided that the board of directors may also confirm shareholders’ intentions concerning an allotment of such options by convening a shareholders’ meeting. However, the number of companies adopting these types of measures has been decreasing due to oppo - sition by institutional investors. While 567 listed com - panies had adopted the measures as of 2009, they were adopted by 236 listed companies as of July 2025. There have also been cases where, after a specific acquirer appears, takeover defensive measures are adopted by listed companies in response to a particu - lar acquirer. In those cases, similar types of takeover defensive measures are generally used. 9.4 Directors’ Duties As discussed in 8. Duties of Directors , directors have a duty of care as a good manager and a duty of loy - alty to a company, and the business judgement rule is generally available for directors’ decisions in Japan. Laws and court precedents do not clearly provide that an intermediate or heightened level of review apply to directors’ decisions where they implement defensive measures. 9.5 Directors’ Ability to “Just Say No” While there is no case law in Japan addressing the “Just Say No” defence, there is no rule per se that pro - hibits directors from simply refusing to negotiate and rejecting outright a hostile takeover attempt. However, the directors are required to make such decision in
691 CHAMBERS.COM
Powered by FlippingBook