Newsletter
DIVERSIFICATION OF SHARE SWAP
The Company Act provides that after a company is established, it may issue new shares to give as consideration for the acquisition of shares of another company. According to an interpretation issued by the Ministry of Economic Affairs on 23 March 2005, “shares of another company” includes outstanding shares of the other com-pany, shares newly issued by the other company, and long-term investments held by the other company. Among these, “outstanding shares of the other company” may include both shares held by the other company, and shares held by its shareholders. Based on this ruling, the types of share swap permissible under the Company Act in future will be highly diverse.
In another interpretation dated 3 February 2005, on the questions of whether an issuance of new shares for the purposes of a share swap has to exceed a certain percentage of the company’s previously issued shares, and whether the acqui-sition of shares of the other company has to be related to the acquiring company’s own business, the MOEA clearly stated that the Company Act imposes no restrictions in these regards, and therefore, these matters may be decided by the companies themselves.