The Tokyo Stock Exchange has compiled guidelines on defensive measures firms can take against hostile takeover bids, bourse officials said Thursday.
They aim to prevent excessive protection and include strict conditions under which poison pills can be used and effectively ban the issue of “golden shares,” or shares that give veto rights at shareholders’ meetings.
The document was sent out Thursday to companies listed on the bourse.
The guidelines are expected to be made formal TSE regulations by the end of the year, the exchange said, adding that violators could be punished with delisting.
The TSE’s announcement came as many companies are compiling defensive measures to be voted on at shareholders’ meetings in June.
Corporate managers have become increasingly concerned about company vulnerability, especially since the high-profile battle waged by Internet company Livedoor Co. and Fuji Television Network Inc. over Nippon Broadcasting System Inc.
“We are asking listed companies to consider the need for investor protection,” the exchange said. “There should not be defensive measures that will confuse the market.”
In its guidelines, the TSE said companies should disclose the full details of defensive strategies to investors and give explanations on their purposes and the conditions under which they would be used.
The TSE will not permit defense tactics that possibly could damage the interests of any investor not part of a hostile bid, according to the exchange.
The guidelines state that if new issue warrants are part of a firm’s defensive strategy, the company must specify that the warrants would only be issued at the time the firm faced a hostile takeover bid, bourse officials said. The clause cannot be left open to allow for new warrants to be issued at any other time, as it is a measure that puts any future shareholders at a disadvantage.
The exchange also said it will ban any measures that would override the will of shareholders, meaning steps that could not be overruled by a majority vote.
It is for this reason golden shares will not allowed, officials said.
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