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The Cabinet approved a set of bills Friday to update Japan’s corporate law, with one of them featuring a one-year delay for easing restrictions on foreign companies involved in mergers and acquisitions of Japanese firms.

The government wants the Diet to enact the package during the current session, which runs through June.

Under the M&A bill, foreign companies would be allowed to use their shares and cash or other assets as compensation in M&A deals. At present, they are only allowed to use the shares of companies established in Japan.

But the government decided to put the brakes on loosening M&A rules for a year to 2007 due to pressure from lawmakers in the ruling Liberal Democratic Party who are worried about an increase in hostile takeovers led by foreign entities. The worry was triggered by homegrown Internet firm Livedoor Co., whose hostile takeover bid for Nippon Broadcasting System Inc. is making LDP lawmakers nervous, even though it’s a Japanese company led by a Japanese.

The bill also provides for new measures to fend off hostile takeover bids.

One such measure is the poison pill. Another is a set of stricter rules for M&As under the memorandum of association that are designed to make it difficult for shareholders to approve hostile takeover bids, officials said.

The government is also planning a provision that would allow courts to reject shareholder complaints against a company if they are judged to be based on the shareholders’ personal interests.

The government plans to carry out the other bills in 2006, including one containing a measure that would eliminate the 10 million yen minimum capitalization requirement for joint-stock companies, thus making it possible to start a company with just 1 yen.

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