JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
the accounting standards of its home country or any other country in each case with the specific approval from the Minister for Financial Services of Japan. 7.4 Transaction Documents Disclosure of transaction documents in full is not required for a tender offer. If there are any agree - ments between the bidder and a target company or its officers in relation to the tender offer itself or a disposal of material assets after the ten - der offer, the material terms of such agreements must be described in the tender offer registration statement. For a business combination, the Companies Act requires parties to the business combina - tion to prepare an agreement providing for stat - utorily required matters. A statutorily required agreement such as a merger agreement, share exchange agreement or company split agree - ment must be disclosed in full. However, in prac - tice, such an agreement only addresses the mat - ters required by law and is thus very short. In many cases, the parties to a business combi - nation enter into another agreement to provide in detail the terms of the business combination, in which case, only the material terms of such an agreement need to be disclosed in the security registration statement (if the filing of the security registration statement is required as previously discussed) and the press release pursuant to the stock exchange regulations (if the party is a listed company).
ager, and a duty of loyalty to the company and, indirectly, to the shareholders of the company. Except for violations of law or situations involv - ing a conflict of interest, the business judgement rule generally applies in determining whether directors have breached their duties. Under the business judgement rule in Japan, directors are not held accountable for their decisions unless the directors were careless and failed to recog - nise relevant facts in making their decisions or the process of the decision-making or the sub - stance of the decisions was particularly unrea - sonable or inappropriate. There have not been many judicial precedents addressing directors’ duties in M&A transac - tions. However, as far as M&A transactions without any conflicts of interest are concerned, it is understood by M&A practitioners that the business judgement rule generally applies to directors in M&A transactions and there are a few judicial precedents confirming such under - standing. 8.2 Special or Ad Hoc Committees Use of an independent ad hoc special com - mittee in M&A transactions involving conflicts of interest has become common in Japan. In almost all cases of management buyouts, and in many recent going-private transactions by a controlling shareholder for cash consideration, boards of directors of the target company have established an ad hoc special committee to review the transaction. Even where there is no inherent conflict of interest, it is now more com - mon to see a listed target company establish a special committee, among other things, in a going-private transaction. In recognition of the importance of ensuring fair procedures in M&A transactions, the Fair M&A
8. Duties of Directors 8.1 Principal Directors’ Duties
Under the Companies Act, as a general princi - ple, directors owe a duty of care as a good man -
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