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Japanese government draws up new M&A regulations

The Japanese government is drawing up new rules designed to encourage more mergers and acquisitions by cutting taxes on no-cash deals and allow Japanese companies to sidestep U.S. filing requirements, the Nikkei Asian Review reported.

Takeovers usually involve companies using their own stock instead of cash. In such cases, shareholders are taxed on gains from relinquishing their stock. Lawmakers are considering a new rule that would allow shareholders to refrain from paying the tax until they cash in on any stock received in a deal.

In addition, under a revision approved by the cabinet on Feb. 9, companies can issue tender offers in a way that they would avoid burdensome paperwork in the U.S. Under U.S. rules, a company involved in a merger or acquisition is required to file Form F-4 in English if U.S. shareholders own more than 10% of the company. Translating the financial statements using U.S. accounting standards or International Financial Reporting Standards may take six months to a year. The U.S. Securities and Exchange Commission must also conduct a review, which takes three months, compounding the delay.

The U.S. said that these filing requirements are necessary due to the lack of clarity in Japan's regulatory environment.

Stock-based tender offers require existing shareholders to pay taxes when receiving stock from the purchaser. Eliminating the provision would allow Japanese companies to selectively target non-American shareholders, thus avoiding U.S filing requirements, the Nikkei Asian Review said.