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Livedoor's audacious takeover bid for Nippon Broadcasting System Inc. (NBS) in 2005 precipitated a flurry of judicial, legislative, administrative, and management actions, which have strongly influenced thinking and practice related to corporate control in Japan. This chapter considers a number of statutory changes in the area of company law and securities regulations governing takeovers and analyses a series of judicial rulings, specifically involving Livedoor‐NBS and Steel Partners‐Bull‐Dog Sauce, and the contested use of poison pills and similar defense measures in these cases. It further looks at the recommendations and influence of the Corporate Value Study Group, before considering management responses. The chapter highlights a shift (as well as continuity) in perceptions about management control and legitimate defenses against takeovers, and predicts continued evolution, along a “Japanese” trajectory.

This chapter assesses change-of-control transactions and the use of the defensive tactic known as the poison pill, a governance tool that often puts boards, rather than shareholders, in charge of a corporation’s response to a takeover. Much as in the MVS context, this separation of ownership of the corporation from its control may invite conflicts of interest, here between boards and shareholders. The chapter then asks how shareholder-driven corporate governance (SCG) can and should inform regulation of this defensive tactic. It also considers management entrenchment theory and the shareholder-primacy norm in the context of changes of control. Both the normative and the positive aspects of SCG make it necessary to revisit the current legal balance between the interests of directors and the interests of target shareholders in takeovers.

A board of directors that attempts to defeat a hostile takeover attempt will try to raise the cost and lower the value of the shares the raider needs to complete the takeover. This can be achieved using binding contractual arrangements with the target’s customers, suppliers, and employees, that lower the value of the firm if it is acquired, but do not directly affect it otherwise. Boards resisting a hostile takeover will also issue carefully designed securities to the target’s bondholders and shareholders that have a similar effect. Ultimately, a target’s board can reconfigure the firm’s capital structure to defeat a takeover attempt. This chapter describes the tactics involved using the bitter takeover battle involving Carl Icahn and Lions Gate Entertainment.

This chapter considers legal strategies for addressing problems arising in control transactions (i.e., between a third party (the acquirer) and the company’s shareholders), and specifically corporate takeovers. The most obvious agency problem is between the target board and the target’s minority shareholders, the central issue being whether the bidder can make an offer to the target shareholders without the incumbent management’s consent. Solutions range from allocating this decision exclusively to the shareholders (the “board neutrality rule”), to designating it as a joint decision for incumbent management and shareholders (this follows from the possibility of adopting “poison pills” in U.S. corporate law). Additionally, target shareholders face high coordination costs in deciding how to respond. The most prominent solution to this problem is the European “mandatory bid rule,” which (in certain circumstances) requires extending an offer to all outstanding shareholders at a specific price. This rule has an obvious chilling effect, and a number of jurisdictions have accordingly weakened its strictness. Takeover regulation is a field where legal solutions differ significantly and most saliently between the two main takeover markets, the U.S. and the UK. However, it is suggested that in practice the two systems are closer than may appear at first sight.

This chapter reviews statutory and court-sanctioned private regulatory frameworks affecting the creation of private equity (PE) funds and their primary activity of corporate acquisitions. The chapter reviews U.S. legislation regulating securities, investment companies, and tender offers. It also examines state antitakeover legislation, state court decisions on hostile takeovers and “poison pill” defenses, as well as European Union directives on takeovers and alternative investment fund managers. The chapter concludes that regulation in the United States has shifted the balance of power in corporate acquisitions to incumbent management. Finally, the chapter examines the diametrically opposed ethical views of PE funds as investment entities that either (1) acquire and destroy corporations, harm communities, and eliminate employment or (2) enhance corporate value by rooting out corporate inefficiency, increasing employment, and enhancing community value.

This chapter explains why social enterprises have more difficulty gaining access to capital than conventional businesses do. It begins with the insight that law lends both for-profits and nonprofits the stability they need to raise capital; legal doctrine and enforcement mechanisms combine to reassure donors and investors that their contributions to standard businesses and charities will be well spent. Using the tools of game theory, the chapter then describes the more challenging assurance problem faced by social enterprise founders and investors. For either an entrepreneur or investor to commit capital to the venture, each must trust the other to remain faithful to both of its dual missions—and particularly to be willing to trade more social good for lower financial returns. The chapter concludes by describing why neither traditional for-profit and nonprofit law nor the first-generation of social enterprise law satisfactorily bridge this trust deficit.

Chapter 2 provides background information pertaining to the regulation of takeover bids, to clarify how political struggles surrounding shareholder rights elucidate the political dynamics of marketization. Four considerations motivated the case selection. First, the so-called market for corporate control cannot arise spontaneously and is prone to market failure, because corporate control is a fictitious good in need of commodification by means of market-enabling rules. Second, the rules governing this market are politically contentious because they have significant distributional implications. Third, struggles surrounding these rules pit different kinds of equally well-endowed profit-oriented opportunists against one another. Fourth, the process started a long time ago and played out differently in different countries, partly due to variation in the political salience of hostile bids.