The Ministry of Economy, Trade and Industry (METI) plans to study companies’ defense measures against hostile takeover attempts, aiming to provide them more options to guard against takeover bids. METI will set up a study group with experts, lawyers and the persons from the relevant area this month to make the proposal of rational defense measures next spring. This proposal will be discussed at the government toward revisions to the Commercial Code, the Securities and Exchange Law, and Tax Law etc regarding this issue.
With the unwinding of cross-shareholderings and development of scheme that facilitate corporate realignment such as demerger, corporate takeovers have become active in Japan. The plan discussed within the government to grant foreign companies the right to acquire companies via share-exchanges also urge them to establish the defensive measures soon. By means of share-exchange, bidders can easily takeover the company without preparing a large amount of cash.
METI will study current legal framework in Japan to examine issues that are particularly far behind the U.S. Some of the issues to be studied include a measure allowing targeted firms to issue new shares subscription rights to shareholders in order to reduce the stake by the bidder. This method, known as the poison pill strategy in the U.S., has never been used in Japan because it may violate the Commercial Code stipulating equality of all shareholders.
METI will also examine a shareholding plan for employees, known as “ESOP” in U.S., which allow the employees to be owners of stock in that company at the companies’ expense. The introduction of ESOP needs to be considered with the revision of the taxation system.