In June 2010, the Tokyo Stock Exchange (TSE) implemented a new regulation on transactions between a listed company and its controlling shareholder. The new regulation requires a listed company that is conducting a transaction with a controlling shareholder to obtain an opinion, from a person who has no interest in the controlling shareholder, that the transaction will not damage the interests of its minority shareholders.
In Japan, a number of listed companies have a controlling shareholder. According to the Corporate Governance White Paper 2009 published by the TSE, 380 out of 2,378 companies listed on the TSE, or about 16%, have controlling shareholders. A transaction between a listed company and its controlling shareholder involves a potential risk for the minority shareholders in that a conflict of interest exists and a controlling shareholder tends to exert undue influence on the company or its board to approve the transaction, the terms of...