JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
missal can be found to be invalid if it lacks objec - tively 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 under - take typical lay-offs after the consummation of an acquisition. 2.6 National Security Review As discussed in 2.3 Restrictions on Foreign Investments , certain foreign investments shall be subject to the national security review by the Japanese government. 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 Guide- lines” , 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 transactions involving conflicts of interest, as well as guidelines regarding practi - cal measures, including the establishment of an independent special committee. In connection with the foregoing developments, parties to transactions involving conflicts of interest have taken a more cautious approach to ensure procedural fairness in such transactions. In addition, in August 2023, METI published the “Guidelines for Corporate Takeovers” (the “Take- over 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 management 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 proposal is “bona fide offer” , and the board must then faithfully consider the proposal. If the board rejects such proposal, it should be accountable for its decision. These guidelines are discussed in more detail in 9.1 Hostile Tender Offers . Court Decisions on Defensive Measures Although there had been no court decisions on hostile takeover defensive measures since the late 2000s, courts ruled on the validity of defen - sive measures taken against hostile takeover attempts in four cases in 2021 and in one case in 2022. In these cases, the target company implemented poison pill type defensive meas - ures using stock options having a dilutive effect on the hostile acquirer’s voting rights. In three 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 injunc - tive relief. These cases are discussed in greater detail in 9. Defensive Measures . 3.2 Significant Changes to Takeover Law Until 2024, there had not been any significant changes to takeover law since it was amended in various ways in 2006. However, in light of recent hostile takeover attempts through market trans - actions, some scholars and practitioners began arguing the necessity to change takeover law and restrict market transactions that would have a coercive effect on general shareholders. The FSA established a working group in 2023 and conducted a comprehensive review of the takeo - ver regulations for the first time in 17 years. As a result, Amendments to the FIEA (the “2024 FIEA Amendments” ) were approved by the Diet on 15 May 2024 and will come into effect within two
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