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Nissan updates governance code to address cross-shareholding

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Nissan Motor Co updated its corporate governance code, a month after the shock arrest and indictment of former chairman Carlos Ghosn brought differences with partner Renault SA out in the open after a two-decade partnership.

[PARIS] Nissan Motor Co updated its corporate governance code, a month after the shock arrest and indictment of former chairman Carlos Ghosn brought differences with partner Renault SA out in the open after a two-decade partnership.

As part of the new code, Nissan clarified its policy on cross-shareholdings, in which two companies hold stakes in each other. The board will examine whether the purpose of each such shareholding is appropriate and whether the benefits and risks cover the cost of capital.

A Nissan spokesman said on Wednesday the exchange filing on Christmas Day was routine and mandatory to comply with Japanese corporate governance code requirements. The deadline for such submissions was the end of the calendar year and therefore the timing of the release wasn't unusual.

"The policy itself has not changed in any way, and the clarification does not refer to alliance partners, but rather to the company's holdings in certain other listed companies," Nissan said. "Nissan is one of hundreds of listed companies in Japan issuing an update at this time in this manner."

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Nissan shares rose as much as 3.3 per cent in Tokyo Wednesday and were poised to close higher for the first time in eight trading sessions.

Renault is the largest shareholder in Nissan and the Asian company in return is the second-largest shareholder in the French carmaker. The two companies also have minority shareholdings in Germany's Daimler AG. Nissan said it also has minority cross-shareholding with other companies.

Nissan's exchange filing comes at a time when Renault asked the Japanese company to call a shareholder meeting to discuss corporate governance issues. Bloomberg News reported earlier that Nissan was shoring up cash to build its firepower amid tensions with Renault.

The move comes as the two long-time partners have differed over how they approach the issue of Ghosn's arrest. While Nissan immediately sacked the official as its chairman, Renault chose a different option by naming a deputy for the chief executive officer role he played at the French carmaker.

Renault couldn't be reached on Christmas Day holiday. A spokesman for the Renault-Nissan-Mitsubishi Motors Corp alliance didn't have a comment.

The Japanese carmaker holds a 15 per cent stake in Renault - with a market value of about US$2.8 billion - and no voting rights, a position that has been the source of tensions with the French company. Renault owns 43 per cent of Nissan, a stake worth almost US$14 billion. Acrimony between the two has exploded since the Nov 19 arrest of the bigger-than-life leader overseeing their alliance.

With regard to voting rights of cross-shareholdings, the new Nissan code says the company will consider "whether or not it leads to the improvement of mid to long term corporate value and shareholder interest and exercise our voting-rights properly". The previous version of the code in July didn't refer to the possibility of selling cross holdings.

"We will investigate including the option of sale of the shares when continued possession of the shares is judged to be inappropriate as a result of verification of the propriety of such cross-shareholdings," Nissan's code also said.

The fact that France owns a stake in Renault with voting rights has also been a source of tensions, with Ghosn saying in the past that a merger that was explored between the two would never happen as long as France remains a shareholder. Still, both Nissan, Renault and the French and Japanese governments have praised the carmaking alliance. Both companies have publicly said they weren't looking to reconsider its current structure.

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