Financial Committee, provides tailored guidelines on shareholder activities for institutional investors

The Financial Services Agency clarified the scope of proactive shareholder activities that institutional investors can undertake to enhance corporate value, which are unrelated to “influence over management rights.” This move responds to previous requests from institutional investors due to legal uncertainties.

The measure includes explanations of the “5% Rule” reporting system in the Capital Markets Act. This system requires reporting to the FSA and stock exchanges when holdings in listed companies exceed 5% or when changes exceed 1%. However, for activities not aimed at influencing management rights, simplified reporting procedures are provided.

The FSA listed specific examples of activities that do not aim to influence management rights. For instance, requesting early disclosure of proposals or asking for explanations at shareholder meetings are unrelated to management influence. Additionally, activities such as stock buybacks and cancellations mandated by recent amendments to the Companies Act, or executing stock holding and disposal plans approved at shareholder meetings, are also interpreted as unrelated to management rights.

The FSA also stated that activities like requesting explanations of dividend policies or executive compensation do not constitute efforts to influence management rights. These guidelines are expected to encourage institutional investors to actively engage in activities aimed at increasing shareholder value during corporate dialogues.

The FSA plans to revise the “Code of Responsible Management” in the first half of this year and simultaneously improve the related legal interpretation compilation. These changes aim to strengthen the role of institutional investors and achieve synchronized growth in corporate and shareholder value.