The intensity of minority shareholder activism against the corporate governance aspects of listed Japanese buyouts in recent weeks highlights loopholes in the M&A guidelines that were introduced last year by the Ministry of Economy, Trade and Industry (Meti), lawyers said.
Meti’s guidelines, which were developed to protect minority shareholders’ interests, particularly in deals involving conflicts of interest, allow deal parties to “cherry pick” from a menu of measures designed to ensure the fairness of a transaction, said two lawyers familiar with corporate governance.
The root of the problem in Japan is the absence of effective court appraisal reviews. Japanese courts do not look at the sale process thoroughly and have a tendency to blindly accept a bidder or an independent committee’s valuation analysis without questioning, said one of the lawyers.
In comparison, US courts have a long history of scrutinizing sales processes, particularly in non-arm’s-length transactions, as part of their approach to determining fair value, said another lawyer who has knowledge of the US approach.
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by Norie Hata in Tokyo