The current barriers to corporate takeovers in Japan: Do the UK Takeover Code and the EU Takeover Directive offer a solution?

Abstract

There is a common perception that the Japanese takeover market excludes foreign companies. However, this is not because Japanese takeover law has been designed to protect target companies. Comparing Japanese takeover law with the UK Takeover Code and the European Takeover Directive, considered as competitive models, this thematic and content-based investigation reveals that Japan does not have overt anti-takeover legislation. There is no stake-building control to alert a target company; there is no provision against virtual bids; post-bid undertaking is not legally binding on the bidder; the equivalent of the mandatory bid under the UK Takeover Code and the EU Directive is set at a much higher level so making it less costly for a bidder to obtain corporate control; there is no price control to protect minority shareholders. Yet the traditional symbiotic relationship between management and shareholders through cross-shareholdings and shareholder perks remains a major obstacle to a successful unsolicited takeover. Measures under Abe’s economic reform of three arrows have been introduced to increase the success of unsolicited takeover bids by reducing cross-shareholdings through tax incentive measures and increasing board independence through a soft-law based governance code. These are unlikely to have a major impact on removing the existing obstacles. Adopting the UK Takeover Code or the EU Takeover Directive would not cure the problem and would more likely entrench the existing situation.