U.S. Court Clarifies: Shareholders Acting in Concert May Not Be a “Group”; Contrast with English Law “Concert Parties” Approach

more+
less-

Second Circuit’s July 2011 Opinion: CSX Corp. v. The Children’s Investment Fund Management

Whether two or more shareholders have formed a group under Section 13(d) of the U.S. Securities Exchange Act of 1934 (“Exchange Act”) has always been a difficult, and well litigated, question. A shareholder or group that owns more than 5% of a public company’s shares must file publicly a Schedule 13D disclosing its affiliates and its intentions with respect to the company. Making an agreement or taking concerted action may transform individual shareholders into a group, forcing them to tip their hand publicly sooner than they would like. Because poison pill agreements borrow the definition of beneficial ownership from Rule 13d-3, the formation of a group may also have economic consequences in addition to public disclosure requirements. A determination that several shareholders constitute a group, with each shareholder beneficially owning each other’s shares, could cause them to cross the ownership threshold under a poison pill, catastrophically reducing the value of their shares.

Shareholder concern about unintentionally forming a group has chilled communications among large holders of shares in U.S. public companies. U.S. and English law both address this subject, but with important differences.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

more+
less-

Dechert LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×