Issues Raised by the Tokyo Machinery Case and a Proposal for a New J-Pill

June 28, 2022

Published in Shoji Homu, the leading business law journal in Japan, this article analyzes problematic aspects of a recent, controversial Japanese Supreme Court decision on the approval by a vote of the majority-of-the-minority shareholders (known as "MoM") of a "poison pill" defense against an activist shareholder. The coauthors point out that MoM was borrowed from Delaware corporate law, where it is used in a very different context, and highlight MoM's potential for abuse by target company management in Japan’s prevailing corporate governance environment.

They conclude by proposing a new form of a poison pill for Japanese companies that protects shareholders against structurally coercive bids and is consistent with existing Japanese judicial doctrine requiring shareholder approval of defensive measures, while simultaneously promoting all cash, all shares tender offers to improve economic returns to shareholders.

Title in Japanese: "Tokyo kikai seisakusho jiken ga teikishita mondai to shin J-Pill no teian"