JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
taining to shares may trigger disclosure if, upon exercise, they would result in excess of a 5% shareholding. However, holding equity deriva - tives that are cash-settled and do not transfer the right to acquire shares would not be likely to trigger disclosure. Under the amendments to the FIEA approved at the Diet on 15 May 2024 (see 3.2 Significant Changes to Takeover Law ), cash-settled derivatives will be subject to large- scale shareholding reporting obligations, if hold - ers of such derivatives have an intent to acquire subject shares from counterparties. According to the relevant current guidelines of the FSA, derivatives that transfer only economic profit/loss in relation to target shares, such as total return swaps, are generally not subject to disclosure. However, even holding such cash- settled equity derivatives may trigger disclo - sure, if a holder purchases long positions on the assumption that a dealer will acquire and hold matched shares to hedge its exposure. 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 participation in the management of the target company, and its management pol - icy and plans after the acquisition. Sharehold - ers must disclose in a large-scale shareholding report their purpose of holding the shares, such as any intention to make a proposal that would materially affect the issuer’s business (including a proposal of an acquisition or disposition of material assets, a large amount of borrowings, an appointment or dismissal of a representative director, a material change of board composi - tion, or a merger, company split or any other business combination).
The Takeover Guidelines provide that in a situ - ation such as where an acquirer attempts to acquire corporate control in a short period of time through open-market purchases, it is advisable for the acquirer to provide at least the same level of appropriate information to the capital markets and the target company as contained in a tender offer registration statement (as discussed in 3.2 Significant Changes to Takeover Law , open- market purchases will be subject to mandatory takeover obligations if the amendments to the FIEA become effective). The Guidelines also pro - vide that if an acquirer has a definite intention to conduct a tender offer subsequently, it is advis - able for the acquirer to provide information to the capital markets and the target company when purchasing the company’s shares in the market prior to its tender offer. 5. Negotiation Phase 5.1 Requirement to Disclose a Deal If a target company is a listed company, it must disclose the deal when the board approves the contemplated transaction. Typically, this approv - al 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 dis - close 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 man - datory 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 organisa - tions or personnel. For example, if the transac - tion might require the competition authorities to
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