Appraising Japan's Appraisal Remedy

Abstract

Appraisal is making a comeback in Japan. Until recently, it was an underutilized and largely forgotten legal transplant introduced by the Americans during the Occupation Period (1945-1952). Following a major reform to Japan’s corporate law with the enactment of the Companies Act in 2005, however, appraisal has drawn considerable academic attention and produced an unprecedented wave of appraisal litigation in Japan – much of it involving listed companies. The spotlight is now on appraisal’s function as a check on managerial and controlling shareholder conduct – but why are shareholders turning to appraisal when they have other options? With a sophisticated concept of ‘fair value’ and litigated with unique ‘non-contentious’ procedures, Japan’s appraisal is thoroughly Japanese – and effective compared to other shareholder remedies in Japan’s Companies Act. The Japanese success with appraisal proves that appraisal can play a central role in modern corporate law and governance – at least within a certain corporate governance context. It is also a timely reminder that shareholder remedies need not (and probably should not) be unmodified American legal transplants, and that above all, local adaptations and context matter.