Japan: large holdings rule amendments

This snapshot highlights some of the changes to expect in Japan’s major shareholding regime

Background

• Since June 2023, the Working Group on Tender Offer Rule and Large Shareholding Reporting Rule of the Financial System Council has been discussing upcoming changes to the substantial shareholding disclosure rules
• In May 2024, amending legislation was passed which accepted various points of recommendation from the Working Group report
• Amendments related to the Large Shareholding Reporting System will be effective within two years from the date of their announcement and are expected to come into effect before May 2026
• Detail in the form of Ordinance or Cabinet Orders is to follow so these rules are not yet fully developed
• 1/3 rule (mandatory bid) reduction to 30% in Takeovers is also under amendment

Joint holders

• Concert parties who have an agreement regarding voting or other rights can be currently treated as joint holders
• The working group was concerned this may unnecessarily stifle collaborative engagement  
• The amendments will create an exemption to aggregation rules but, conditions will need to be met: 
  • Type 1 FIBO holder
  • Ad-hoc agreements only
  • The agreement is not for material proposals 

Material proposals

• If FIBOs wish to use the special reporting system, one condition is that they do not make material proposals
• The Working Group report suggests that for clarity that the interpretation of material proposals should relate directly to proposals where corporate control is the purpose
• Proposals not relating directly to corporate control will be considered based on related facts

Cash-settled derivatives

• Not generally part of the Japanese major shareholding rules
• The current rules do indicate that facts are important – e.g. rights to voting, or control intent
• Amendments will address the treatment of entering into types of equity derivative transactions where the purpose of the transaction may then result in disclosure – details are to follow in Cabinet Orders / Ordinance