UT Soft Law Review

UT Soft Law Review No.2 2010menced). In such cases, it is likely that all shareholders acquiring stock after the recorddate, including those who are not the acquiring person, will incur unexpected losses. Inaddition, the value of the stock owned by shareholders as of the record date may also dropsignificantly. If the stock acquisition rights are subject to transfer restrictions, it is alsopossible that the shareholders cannot recover the portion of their investments correspondingto such drop in value. In this way the takeover causes unforeseen losses for shareholderswho are not acquiring persons.(There should be measures to prevent the abuse of power by the board of directors)There are also cases in which it is necessary for the board of directors to be given the discretionto redeem or terminate the stock acquisition rights, etc. in order to enable them tonegotiate with the acquiring person regarding the terms of the acquisition. Therefore, grantingthe board of directors this discretion cannot solely be considered to constitute a grosslyunfair method.However, if the structure of the stock acquisition rights, etc. issued as a takeover defenseis such that such rights cannot be redeemed and the discretion granted to the board of directorsis overbroad, allowing the board of directors to entrench themselves in office Supplement9 despite the fact that the takeover proposal better serves the shareholders’ best intereststhan the business plan of the board of directors, it is possible that they will be considered tobe grossly unfair methods.Accordingly, the fairness of the issuance of stock acquisition rights, etc. as a takeoverdefense can be enhanced by providing a mechanism to prevent the abuse of power by theboard of directors.(2) Methods to ensure the reasonableness of takeover defense measures and promoteacceptance by shareholders, investors and other interested partiesIn order to promote acceptance by shareholders, the investment community and otherinterested parties, it is crucial to increase the reasonableness of takeover defense measures inaccordance with the three principles presented in the Guidelines. In particular, in the case ofa takeover bid that would protect and increase corporate value and shareholder interests,there should be a mechanism in place that enables the board of directors to act as promptlyas possible to terminate defensive measures, without waiting for the judgment of the shareholders.To achieve this, in order to prevent the abuse of discretion by the board of directors, theremust be a mechanism whereby shareholders can express their own will regarding the takeoverdefense measures at the annual general meeting of stockholders, Supplement 5, 6 defensivemeasures should include provisions establishing objective criteria for the conditions on whichthe defensive measures would be terminated by the board of directors, or, importance should85