The Fiduciary Duties of Directors of the Companies Facing M&As in Delaware and Japan

Abstract

This paper studies the relationship between the Revlon duties and the principle of maximizing shareholders’ interests, and its position under the systems of Corporate Law, and then identifies the characteristics of relevant laws in Japan and Delaware. When considering the duties of directors of target companies regarding the fairness of the sale price, the right approach is to discuss how to deal with conflicts of interest and the final-period problem as issues specific to the sale of companies, rather than considering the issue based on deduction from the principle of maximizing shareholders’ interests.

There are two prominent features of relevant Japanese laws with respect to judicial examination of the duties of directors regarding the appropriateness of the sale price:

(1) respect for shareholders’ intentions and,

(2) the approach of paying attention to the price itself, rather than the process of mergers and acquisitions.

Among background factors is a consistency with related systems such as regulation on transactions involving conflicts of interest and regulation on issuance of new shares in Corporate Law. Therefore, in order to require revision of the duties of directors of target companies, it is necessary to present a package of reforms regarding relevant systems as a whole.

Keywords: corporate governance, mergers and acquisitions, duties of directors