The Diet on Wednesday enacted revisions to the Commercial Code aimed at facilitating corporate spinoffs as well as a law to protect workers and detailing the succession of labor contracts at the time of a spinoff.
The new rules are the latest changes to foster realignment in corporate sectors, following the 1997 lifting of a ban on holding companies and the introduction last year of a stock-swapping system that makes it easier for companies to fully acquire subsidiaries.
The revisions and the worker-protection legislation were approved by the House of Councilors, following their earlier passage through the House of Representatives.
Business circles expect the revisions to help major Japanese companies regroup and recover their international competitiveness.
The Mizuho Financial Group, to be created this fall by Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan, plans to take advantage of the new provisions during their integration process.
The revised code specifies two types of corporate breakup: the spinning off of a division into a new company and the takeover of a division by an existing company.
Companies will be allowed to split off parts of themselves after securing board approval and submitting spinoff plans, or written contracts in the case of takeovers, for approval at general shareholders’ meetings.
Shareholders opposed to the breakup will be allowed to demand that their stakes be bought and procedures for creditor protection were also created.
The other new law stipulates provisions to protect workers who suddenly find themselves at a spun-off company.
They state an employment contract will be included in the rights and duties specified in the spinoff plan or the takeover contract, and oblige management to consult with employees at least two weeks before shareholders’ meetings.