How does the Appraisal Right with the Concept of the Fair Value Including Synergies Work?: Lessons from Japan

Abstract

This article presents how the appraisal right, with the concept of the fair value which includes synergies, has worked in Japanese corporate law. The appraisal right gives dissenting shareholders the ability to protect their interests. The Delaware courts calculate a fair value by excluding synergy effects in appraisal proceedings. One can criticise the exclusion of synergies because the petitioners of the appraisal right might receive less than the merger price. It would be interesting to analyse how the situation changes if the fair value includes synergies. Japanese corporate law gives a good illustration for this. The revision of the Companies Act of Japan in 2005 enhanced the role of the appraisal right by empowering the Court to include synergy value into the determination of fair value. However, Japan's Court developed the doctrine to use the deal price as a fair value with a relatively lax review of the fairness of the deal process. This has resulted in an unattractive situation for petitioners of appraisal remedies, because they rarely gain profits through the appraisal remedy. Empowering minorities in black letter law does not necessarily strengthen minority protection in reality.