Utah Control Shares Acquisitions Act
| Jurisdiction | Utah,United States |
| Citation | Vol. 20 No. 7 Pg. 17 |
| Pages | 17 |
| Publication year | 2007 |
Vol. 20, No. 7, 17. Utah Control Shares Acquisitions Act
Utah Bar Journal
Vol. 20, No. 7
November/December 2007
Vol. 20, No. 7
November/December 2007
Utah Control Shares Acquisitions Act
Utah Control Shares Acquisitions
Act
by Brad R. Jacobsen
Utah's Control Shares Acquisitions Act (Utah Code Ann
§ 61-6-1 et seq. "Control Shares
Act") provides stringent rules governing takeovers of
certain qualifying Utah corporations. The Control Shares Act
is governed by numerous defined terms that must be carefully
reviewed. The Control Shares Act denies voting rights to any
person or entity ("acquiring person") that acquires
"control shares" of a Utah "issuing public
corporation" (not necessarily an SEC public company) in
a "control share acquisition." The acquiring
person's voting rights may only be restored if
shareholders holding a majority of shares that are not
"interested shares" elect to restore those voting
rights
A Utah corporation is subject to the Control Shares Act only
when it is an issuing public corporation that is the target
of a control share acquisition. An "issuing public
corporation" is a corporation, other than a depository
institution, that is organized under Utah law and that has
(a) 100 or more shareholders; (b) its principal place of
business, its principal office, or substantial assets within
the state; and (c) (i) more than 10% of its shareholders
resident in the state; (ii) more than 10% of its shares owned
by Utah residents; or (iii) 10,000 shareholders resident in
the state. See Utah Code Ann. § 61-6-5(1). A
"control share acquisition" is the acquisition,
directly or indirectly, by any person of ownership of issued
and outstanding control shares. See id. at §
61-6-3(1)(a)(i). Mergers and share exchanges are generally
exempted. "Control shares" are those that, but for
operation of the Control Shares Act, would bring the
acquiring person's voting power within any of the
following three ranges: (a) 20% to 331/3%; (b) 331/3% to 50%;
or (c) 50% or more. See id.§ 61-6-2(1). The
corporation's directors or shareholders may elect to
exempt the corporation's stock from the Control Shares
Act by adopting a provision to that effect in the articles of
incorporation or in the corporate bylaws. See id. at §
61-6-6.
In fact, when faced with a cooperative board that favors a
particular control share acquisition, a board (through the
exercise of the board's appropriate fiduciary duties)
will often adopt appropriate bylaw revisions to exempt the
corporation from the Control Share Act prior to the
consummation of the applicable control share acquisition.
Absent board cooperation, however, the restrictions imposed
by the Control Share Act are almost insurmountable.
Voting on Control Share Rights
...
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