Japan Update: M & A Trend Watch – Share delivery

Introduction

Previously, I explained the system design and points under the Companies Act regarding the shares delivery system newly established under the revised Companies Act that came into effect in March 2021 as “Share Delivery ①”. Is subject to the Financial Instruments and Exchange Act as well as the Companies Act. Therefore, this time, I would like to explain the points to keep in mind under the Financial Instruments and Exchange Act, which are problematic to apply when issuing shares, as “Share Delivery (2)”.
In the following,

• Financial Instruments and Exchange Act: “Financial Instruments and Exchange Act”
• Financial Instruments and Exchange Law Enforcement Ordinance: “Financial Instruments and Exchange Law Enforcement Ordinance”
• Cabinet Office Ordinance on Disclosure of Tender Offer of Share Certificates, etc. by Persons Other Than the Issuer: “Other Company’s Share Certificate Ordinance”

The abbreviation is used.

Application of Tender Offer Regulations, etc.

Stock issuance plans, separately, gold and it is assumed to be considered as a prerequisite for the tender offer regulation on the Commercial Code can be applied ^{Note 1} , Stock issuance parent company (company to the share issuance. Acquired company) shares by Purchases of share certificates, etc. issued by the delivery subsidiary (the company that issues the shares to be transferred by the share delivery parent company at the time of share delivery. The acquired company) are subject to various regulations such as compulsory tender offer.

Points to note when applying Tender Offer Regulations

Number of items to be purchased

Due to the Tender Offer Regulations, when purchasing share certificates, etc. outside the market where the ownership ratio of share certificates, etc. of the company submitting the securities report exceeds 1/3, in principle, the tender offer must be used. It is supposed to be (Article 27-2, Paragraph 1 of the Money Commercial Code).

On the other hand, as mentioned in the previous issue ( “Share Delivery ①” ) III 1. , Share Delivery is a system for making a Share Delivery Subsidiary a subsidiary, so the number of shares of the Share Delivery Subsidiary to be acquired is the majority of voting rights. (Article 774-3, Paragraph 2 of the Company Law), and the share delivery plan requires that the share delivery parent company set a lower limit on the number of shares of the share delivery subsidiary to be transferred at the time of share delivery (). Article 774-3, Paragraph 1, Item 2 of the same law). Therefore, a typical example of a share delivery subject to a tender offer is that a listed company has a lower limit of 50 planned purchases in order to make another listed company a subsidiary in consideration of its own shares. It is possible to do it as more than%.

Based on the above, the share delivery system cannot be used for a tender offer for the purpose of making the target company an equity-method affiliate, or for a tender offer for shares of a subsidiary that already has a majority of voting rights. Will be. On the other hand, it is not always necessary to set an upper limit on the number of planned purchases. However, if the maximum number of planned purchases is set, the maximum number of planned purchases will be set so that the Tender Offeror will acquire a majority of the voting rights of the target company if the Tender Offer is successful. You will have to keep it.

Uniformity of tender offer price

In the share delivery, the shares of the share delivery parent company must be included as consideration for the shares of the share delivery subsidiary acquired by the share delivery parent company (Article 774-3, Paragraph 1, Item 3 of the Company Law), but the share delivery parent company Other acquisitions by the Company may include stock acquisition rights, etc. of the share-delivery subsidiary. And, in that case, the content of the consideration can be other than stocks, for example, only money. On the other hand, in the tender offer, the price of the purchase, etc. is required to be the same for all applicant shareholders, etc. (Article 27-2, Paragraph 3 of the Gold Commercial Code, Article 8, Paragraph 3 of the Enforcement Ordinance of the Gold Commercial Code). ), The question is how to respond consistently to these demands.

Regarding this point, the situation is different, but when the tender offer targets multiple stock certificates of different types, the Tender Offer Price will differ depending on the type of share certificate, etc. Is believed to be planned ^{Note 2} . In addition, in order to be able to say that the tender offer price is uniform, it is necessary to recognize the uniformity of opportunities and the uniformity of results, but even the uniformity of results in the sense that the types of consideration match. Is understood to be unsolicited ^{Note 3} . Then, for example, it seems permissible to consider the shares of the share-delivery subsidiary acquired by the share-delivery parent company as the shares of the share-delivery parent company, while the consideration of stock acquisition rights, etc. of the share-delivery subsidiary is only money. increase.

Documents that need to be created

When conducting a tender offer using share delivery, documents such as the prescribed notice of the start of the tender offer and the tender offer notification form are required to carry out the tender offer, but if the parent company of the share delivery is a listed company. Is a securities because it is considered to have the nature of offering shares of the share delivery parent company, considering that the share delivery parent company, which is a listed company, delivers shares as consideration to the transferor of the shares of the share delivery subsidiary. It is necessary to prepare documents such as notification form and prospectus.

If it is necessary to prepare a securities registration statement as described above, Article 27-4 of the Money and Commerce Law requires the submission of a securities registration statement at the same time as the tender offer registration statement. It is understood that it is permissible to submit a securities registration statement before submitting the registration statement ^{Note 4} . Therefore, prior to the submission of the Tender Offer Registration Statement, the securities registration statement will be made at the same time as or before the press release regarding the start of the Tender Offer, which states that the shares of the share delivery parent company will be issued as consideration for the share delivery. It seems that by submitting the document, it will be possible to practically clear the problem of solicitation regulation before submitting the securities registration statement.

Attachments to the Tender Offer Notification Form

When the consideration for the Tender Offer is securities, etc., “a document sufficient to show the existence of the funds required for the Tender Offer (in the case where the consideration for the Tender Offer is the securities, etc.)” is attached. Where it is necessary to make a document (Article 13, Paragraph 1, Item 7 of the Tender Offer Ordinance of another company), in the case of share delivery, it is necessary to consider at least the shares of the share delivery parent company, so the above document must be attached. there is.

In this regard, if it is necessary for the parent company to pass the approval resolution of the general meeting of shareholders, it is conceivable to attach a copy of the minutes of the general meeting of shareholders. , As “a document that can confirm that a general meeting of shareholders is unnecessary”, (i) the delivery of shares on a scale below a certain standard stipulated in Article 816-4, Paragraph 1 of the Companies Act, and (ii) Based on Article 816-4, Paragraph 2 of the Companies Act, a document in the name of the representative of the Tender Offeror is attached to prove that he / she has not been notified by the shareholders holding a certain number of shares that he / she opposes the issuance of the shares. Therefore, in practice, it is considered that the relevant document in the name of the representative of the stock delivery parent company will be attached to the Tender Offer Notification Form.

Extension of tender offer period

The maximum tender offer period is 60 business days under the Gold Commercial Code (Article 27-2, Paragraph 2 of the Gold Commercial Code, Article 8, Paragraph 1 of the Gold Commercial Code Enforcement Ordinance). By submitting, the tender offer period may be extended by law (Article 27-8, Paragraph 8 of the Gold Commercial Code), and as a result, it may exceed 60 business days (Article 27 of the Gold Commercial Code). 6 Paragraph 1, Item 4, Gold Commercial Code Enforcement Ordinance, Article 13, Paragraph 2, Item 2 (b). However, since the effective date of share issuance can be changed only within three months from the initial effective date under the Companies Act (Article 816-9, No. 2 of the Companies Act). Item), it should be noted that it must be ensured that the effective date of the share issuance cannot be changed in response to the extension of the Tender Offer Period.

Cancellation of share issuance, etc.

Under the Companies Act, share issuance can be suspended until the time when it becomes effective, as with other organizational restructurings under the Companies Act (Article 774-11, Paragraph 5, Item 2 of the Companies Act). .. In addition, it is assumed that the share delivery will not take effect due to the various procedures that should be taken before the share delivery takes effect under the Companies Act. However, the Tender Offer cannot be withdrawn in principle, and the Tender Offer can only be withdrawn after the announcement of the start of the Tender Offer if there is a fact that falls under the statutory reason for withdrawal. The reasons do not include the suspension of the share issuance (Article 27-11, Paragraph 1 of the Gold Commercial Code, Article 14 of the Gold Commercial Code Enforcement Ordinance). Therefore, if the share issuance did not take effect, but the tender offer could not be withdrawn, the tender offer could not be settled and there is a risk of violating the settlement obligation. You need to be careful about.

Relationship with Insider Trading Regulations

In the share delivery system, the share delivery parent company takes over the shares of the share delivery subsidiary in order to make the share delivery subsidiary a subsidiary, and delivers the shares of the share delivery parent company in consideration. The share exchange system is the acquired company. From the fact that is a wholly owned subsidiary, it can be called a “partial share exchange”. Therefore, based on the idea that insider trading regulations should be disciplined in the same way, the decision to issue shares (or to stop the announced share issuance) at the share delivery parent company is under the Commercial Code. It was regarded as an important fact subject to insider trading regulations (Article 166, Paragraph 2, Item 1 Nu, Item 5 C, Item 12 E of the Gold Commercial Code). In addition, the decision to acquire shares (Article 166, Paragraph 2, Item 1 of the Gold Commercial Law, Article 28, Item 2 of the Enforcement Ordinance of the Gold Commercial Law) that accompanies the transfer of a subsidiary is an important fact that is subject to insider trading restrictions on the shares of the parent company. In addition, the fact that the stock delivery parent company conducts (or cancels) the tender offer (Article 167, Paragraph 2 of the Money Commerce Law) is an important fact that is subject to insider trading restrictions on the shares of the stock delivery subsidiary.
In addition, stock purchase, etc. (Article 166, Paragraph 6, Item 3 of the Gold Commercial Code, Article 167, Paragraph 5, Item 3) based on the share purchase request (Article 816-6, Paragraph 1 of the Companies Act) of the opposite shareholder related to the share delivery, and shares in the share delivery Delivery The delivery of shares of the parent company and the receipt of the delivery (Article 166, Paragraph 6, Item 11 of the Money Commercial Code, Article 167, Paragraph 5, Item 13) have been added to the exemption from insider trading regulations.

In this way, when delivering shares, it is considered that insider information may be generated at the share delivery parent company and the share delivery subsidiary, and the insider transaction regulations are applied to the acquisition of each share, thereby the share delivery parent company. It should be noted that there will be restrictions on the buying and selling of shares and the shares of the stock delivery subsidiary.

[note]

1.Toshinori Takebayashi et al. “Commentary on the Companies Act Revised in the First Year of Reiwa [VII]” Shunkan Shoji Homu No. 2228 (2020) Page 7 [ ↩ ]

2.Shiro Orai, “Summary of Partial Amendments to Cabinet Order and Cabinet Office Ordinance on Review of Tender Offer System,” edited by Naohiko Matsuo, “Explanation of Financial Instruments and Exchange Act and Related Government Ordinances,” Separate Volume, Shoji Homu No. 318 (2008), p. 111 [ ↩ ]

3.Hidenori Mitsui = Ichiro Tsuchimoto, “Detailed Tender Offer System / Mass Ownership Reporting System Q & A” (Commercial Law, 2011), pp. 49-50 [ ↩ ]

4.Public Comments Answers from the Financial Services Agency “Q & A on Tender Offer for Share Certificates, etc.” (July 1, 2011) [ ↩ ]

Published for Business & Law LLC by Shigeki Tatsuno

By Anderson Mori Tomotsune, Japan, a Transatlantic Law International Affiliated Firm. 

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