Hostile M&A and the Poison Pill in Japan: A Judicial Perspective

Abstract

The Court of Chancery and the Delaware Supreme Court in the early 1980s faced a complex public policy question. It was a question on which the legislative branch of our government had offered no meaningful guidance. The stakes were very high, as a particular judicial answer to this policy question might have large, yet uncertain, effects on new innovations in the market for corporate control. In a period of such great uncertainty, and with so little guidance on vital policy issues from the other branches of government, the Delaware Courts developed the common law of corporations with respect to takeovers in a gradual, incremental manner. The courts took measured steps to allow for adjustments and changes in direction. Japan’s judiciary may soon face a situation similar to the one faced by the Court of Chancery in the early 1980s. The introduction of the poison pill as a takeover defense will most likely create tension within the business, legal, and investment communities, requiring the courts of Japan to resolve that tension. This article posits some of Delaware’s experience in responding and adapting to the poison pill that will hopefully prove helpful as Japan embarks down this path.