JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
years thereafter (the precise date of coming into effect has not yet been determined). After the 2024 FIEA Amendments come into effect, stake - building in the market will be subject to manda - tory takeover obligations to ensure transparency in change of control transactions. The 2024 FIEA Amendments will also abolish the Rapid Buy- Up Rule (for details of the Rapid Buy-Up Rule, please refer to 6.2 Mandatory Offer Threshold ) and lower the mandatory tender offer thresholds from one third to 30%. The relevant ordinances to the 2024 FIEA Amendments have yet to be promulgated by the FSA, but will be important in order to understand the practical implications of the 2024 FIEA Amendments. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies A bidder who is not willing to wage an unsolic - ited takeover usually avoids building a stake as “toehold” before launching an offer in Japan. In Japan, the building of a toehold without notice to target management is viewed as negatively affecting management’s willingness to accept an acquisition offer and lowers chances of a suc - cessful 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 share - holders. 4.2 Material Shareholding Disclosure Threshold A shareholder is required under the FIEA to file a large-scale shareholding report with the rel - evant local finance bureau within five business days after its shareholding ratio in a listed com - pany exceeds 5%. When calculating the share - holding 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 acquiring 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 increases 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 regu - larly as part of their business and satisfy cer - tain 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 Meas- ures , some Japanese listed companies have adopted takeover defence measures that prevent an acquirer from acquiring shares in a company in excess of a certain threshold. The threshold is generally set between 20% and 30%. Further, as described in 6.2 Mandatory Offer Threshold , an acquisition of shares of a listed company may be subject to the tender offer rules under the FIEA, which currently prohibit a bidder from acquiring more than one third of the voting rights of the target company through off- market trading or off-floor 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 econom - ic 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 per -
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