UT Soft Law Review

UT Soft Law Review No.2 2010type and number of shares they hold, but since individual shareholders’ interests are normallyinconceivable without an ongoing and thriving company, if there is a risk that the acquisitionof management control by a particular shareholder would damage the company’s corporatevalue, such as by interfering with the company’s survival or growth, or would harm thecompany’s interests or the common interests of shareholders, discriminatory treatment ofsaid shareholder aimed at preventing such acquisition cannot be immediately construed as aviolation of the intent of said principal unless said treatment is unreasonable and contrary tothe shareholder equal treatment principle. Further, the question of whether the acquisition ofmanagement control by a particular shareholder damages the company’s corporate value andharms the corporate interest or the common interests of shareholders should be decided bythe shareholder themselves, to whom the company’s interests ultimately would inure, andthat decision should be respected unless the shareholders’ meeting was procedurally unfair,the facts upon which the decision was predicated prove to be nonexistent or false, or arethere is some other important fault that renders the decision unjustified. This concludes mybrief presentation.The Current Practices: Especially “prior warning type” DefenseFujita: Thank you very much. Now, with the information on these judicial precedentspresented, what was made clear about legal restrictions on takeover defense measures incurrent judicial precedents in Japan? Also, is there any important issue which is not madeclear yet? We would like your brief comment, Professor Tanaka.Tanaka: The past judicial precedents emphasize on respecting the shareholders’ will, and,as a result, they clearly separate the defense measure implemented by the board of directors’own decision from the defense measure implemented by the shareholders’ approval. In theNippon Broadcasting System Case, the board of directors made a substantial decision that thehostile takeover in question would damage the corporate value and implemented the defensemeasure (issued a large amount of new stock option) to stop the acquisition itself. In thiscase, as Professor Yamada explained, the defense measure is regarded as legitimate only inextremely exceptional cases. Even when the board of directors implement the defensemeasure by its own decision, however, if the board of directors does not decide on the meritof the takeover by itself, such as saying“this acquisition will damage the corporate value, sowe must stop it,” but instead, it implements the defense measure only for the purpose ofproviding necessary information or appropriate time for shareholders to make the decision,leaving the final decision whether or not to accept the acquisition offer up to shareholders,then the board of directors is allowed to implement the defense measure within a suitabledegree. This is the ruling of Japan Engineering Consultants Case.What about the defense measure implemented by the approval of the shareholders’meeting? The Bull-Dog Source Case falls into this category, and in this case, at least if most ofthe shareholders except the acquirer are in favor for the defense measure, even the defense44