Japan Moves to Cap Director Liability as M&A and Investment Concerns Grow

Japan’s government is moving to revise the Companies Act to place a cap on damages liability for corporate executives. The proposal is intended to ease situations in which executives hesitate over major management decisions, such as mergers and acquisitions (M&A) or facility investment, because of the risk of large compensation claims from shareholder-derivative lawsuits. Under the current framework, directors may face substantial liability if they are judged to have caused losses to the company. The government is reviewing a direction that would set liability limits, reduce excessive legal risk for management, and limit the chilling effect on corporate decision-making. The debate is expected to focus on how to balance corporate governance with management accountability. Source: mk.co.kr