Makiko Yamazaki

TOKYO, Reuters – Japan’s Supreme Court rejected a request by Tokyo Kikai Seisakusho Ltd to stop a takeover defense plan. This was a highly watched decision with implications for any future hostile bids for the country.

Japan’s decision to exclude an investor from the shareholder vote about whether to adopt a poison pills could be a landmark in Japan. It may make it easier for others to resist hostile takeovers with a similar strategy.

Tokyo Kikai now has the right to proceed with an issue for new shares which will dilute the top stake of Asia Development Capital, (ADC) – a move that was already approved by shareholders after a controversial vote.

Tokyo Kikai stated in a statement that “This is the last court judgment over (ADC)’s injunction request.” “We think this is a perfectly proper judgment.”

Asia Development Capital sought an injunction based on shareholder equality being infringed due to the actions taken by Tokyo Kikai shareholders to exclude them, as “interested parties”, from the vote on the poison pill plan.

Lower courts ruled that the actions were legal as they allowed other shareholders to decide if the acquisition was in their best interests.

Experts in governance say that they worry about the consequences of this court ruling, which could allow a board to deny the counting of votes from certain shareholders under certain circumstances.

Stephen Givens from Tokyo, who is a corporate lawyer, stated that this latest decision could “invite numerous litigations” regarding which shareholders may vote.

He added that “Who are the ‘interested shareholders in a vote about a poison pills is a question with no obvious answers.”

Tokyo Kikai said Wednesday that it will not use the tactic as ADC offered to reduce its share to 32.72%. Before making a formal decision, the maker of newspaper printing presses stated that they would examine ADC’s offer.

ADC had increased its stake to 40% quickly despite Tokyo Kikai warnings.

Japan’s stake holders with greater than 33% have the right to veto important board decisions. Sometimes, they even get de facto control.