TOB and 5% disclosure: FSA publishes draft regs and guidelines [March ’25]

On 14 March 2025, the Financial Services Agency (FSA) published draft amendments to the regulations and guidelines relating to takeovers and stakebuilding in publicly listed companies.

These amendments are in response to the amendments to the primary legislation, the Financial Instruments and Exchange Act (FIEA), which were approved by the Diet in May 2024.

The FIEA amendments approved in May 2024 included the following:

Changes to TOB Rules (in Japan, tender offers are commonly referred to as ‘TOB’ (takeover bids)): The amendment broadens the scope of transactions that trigger the obligation to adhere to the stringent tender offer procedures.

• First, the amended FIEA lowers the threshold for triggering the mandatory TOB requirement from 33.34% to 30%.
• Second, it also removes the distinction between on-market and off-market purchases. Currently, an acquirer can purchase an unlimited number of shares on the market without triggering the mandatory TOB requirement, unless those purchases are combined with certain off-market transactions. This distinction will disappear when the amendments take effect.

Changes to Large Shareholding Report Rules: Large Shareholding Reports are documents that must be filed by shareholders owning more than 5% of a publicly listed company. ( Large Shareholding Reports (the 5% Rule))

• The regulations require shareholders who are acting in concert to aggregate their shareholdings and reflect them in the reports.
• The amendment clarifies that institutional investors will not be considered as acting in concert for the purposes of these reports solely because they enter into a one-time agreement to vote for or against a specific agenda item at a particular shareholder meeting of a company. However, if the parties include any non-institutional investor or if they intend to present a material proposal to the shareholders’ meeting or to the board, this exemption will not apply. This amendment aims to eliminate ambiguity and promote active shareholder engagement. ( See recent post on revisions to Stewardship Code to encourage “collaborative engagement”)

The drafts of the subordinate regulations and guidelines published by the FSA on 14 March 2025 also include revisions to the forms for TOBs and Large Shareholding Reports, as well as related guidelines. These revisions require additional disclosures from both the bidder and the target company in TOBs, as well as large shareholders of listed companies.

The FSA will accept public comments until 5:00 PM (JST) on Sunday, 13 April 2025. The effective date of the amendments to the FIEA and the subordinate regulations and guidelines has yet to be announced.