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H.B. 353
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CONTROL SHARES ACQUISITION
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2000 GENERAL SESSION
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STATE OF UTAH
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Sponsor: John E. Swallow
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AN ACT RELATING TO CONTROL SHARES ACQUISITIONS; CLARIFYING THE
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DEFINITION OF CONTROL SHARES; AND MAKING TECHNICAL CHANGES.
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This act affects sections of Utah Code Annotated 1953 as follows:
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AMENDS:
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61-6-2, as last amended by Chapter 268, Laws of Utah 1995
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61-6-3, as last amended by Chapter 268, Laws of Utah 1995
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61-6-5, as enacted by Chapter 2, Laws of Utah 1987, First Special Session
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Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
61-6-2
is amended to read:
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61-6-2. "Control shares" defined.
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(1) (a) As used in this chapter, "control shares" means shares that except for this chapter
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would have voting power with respect to shares of an issuing public corporation that, when added
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to all other shares of the issuing public corporation owned by a person or in respect to which that
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person may exercise or direct the exercise of voting power, would entitle that person, immediately
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after acquisition of the shares (directly or indirectly, alone or as a part of a group), to exercise or
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direct the exercise of the voting power, including voting power pursuant to a revocable proxy, of
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the issuing public corporation in the election of directors within any of the following ranges of
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voting power:
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[(1)] (i) 1/5 or more but less than 1/3 of all voting power;
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[(2)] (ii) 1/3 or more but less than a majority of all voting power; or
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[(3)] (iii) a majority or more of all voting power.
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(b) Shares entitling a person, immediately after acquisition of the shares (directly or
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indirectly, including pursuant to a revocable proxy or as part of a group), to exercise or direct the
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exercise of less than 1/5 of all voting power of the issuing public corporation in the election of
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directors shall not be control shares, even if acquired in a control share acquisition. Shares cease
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to be control shares upon their transfer to a person who is not an affiliate of the transferor or an
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affiliate or member of a group with which the applicable control share acquisition was made,
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except to the extent the shares become control shares as a result of their acquisition by the
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transferee.
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Section 2.
Section
61-6-3
is amended to read:
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61-6-3. Control share acquisition defined.
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(1) (a) As used in this chapter, "control share acquisition" means:
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(i) the acquisition, directly or indirectly, by any person of ownership of issued and
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outstanding control shares; or
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(ii) the acquisition of power to direct the exercise of voting power with respect to issued
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and outstanding control shares, including the acquisition of voting power pursuant to a revocable
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proxy except as provided in Subsection (1)(b).
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(b) "Control share acquisition" does not mean the acquisition of voting power pursuant to
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a revocable proxy if the revocable proxy is solicited by the issuing public corporation or the board
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of directors of the issuing public corporation in connection with shareholders' meetings or actions
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of the issuing public corporation.
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(2) For purposes of this section, shares acquired within 90 days or shares acquired pursuant
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to a plan to make a control share acquisition are considered to have been acquired in the same
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acquisition.
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(3) For purposes of this section, a person who acquires shares in the ordinary course of
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business for the benefit of others in good faith and not for the purpose of circumventing this
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chapter has voting power only of shares in respect of which that person would be able to exercise
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or direct the exercise of votes without further instruction from others.
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(4) The acquisition of any shares of an issuing public corporation does not constitute a
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control share acquisition if the acquisition is consummated in any of the following circumstances:
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(a) before May 29, 1987;
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(b) pursuant to a contract existing before May 29, 1987;
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(c) pursuant to the laws of descent and distribution;
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(d) pursuant to the satisfaction of a pledge or other security interest created in good faith
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and not for the purpose of circumventing this chapter;
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(e) pursuant to a direct issue by or transfer from the issuing public corporation of its own
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shares, except that shares issued or transferred upon the conversion of a convertible security or
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upon exercising an option, warrant, or other right to purchase shares constitutes a control share
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acquisition unless the convertible security, option, warrant, or other right was acquired directly
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from the issuing public corporation by the acquiring person; or
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(f) pursuant to a merger or plan of share exchange effected in compliance with Title 16,
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Chapter 10a, Part 11, Merger and Share Exchange, or Title 16, Chapter 10a, Part 12, Sale of
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Property, if the issuing public corporation is a party to the agreement of merger or plan of share
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exchange.
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(5) (a) The acquisition of shares of an issuing public corporation in good faith and not for
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the purpose of circumventing this chapter does not constitute a control share acquisition if the
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acquisition of shares is by or from:
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(i) any person whose voting rights had previously been authorized by shareholders in
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compliance with this chapter; or
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(ii) any person whose previous acquisition of shares of an issuing public corporation would
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have constituted a control share acquisition were it not for Subsection (4).
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(b) Subsection (5)(a) does not apply if the acquisition entitles any person (directly or
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indirectly, alone or as part of a group) to exercise or direct the exercise of voting power of the
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corporation in the election of directors in excess of the range of the voting power otherwise
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authorized.
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Section 3.
Section
61-6-5
is amended to read:
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61-6-5. "Issuing public corporation" defined.
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(1) As used in this chapter, "issuing public corporation" means a corporation organized
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under the laws of this state other than a depository institution that has:
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(a) 100 or more shareholders;
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(b) its principal place of business, its principal office, or substantial assets within the state;
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and
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(c) (i) more than 10% of its shareholders resident in the state;
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(ii) more than 10% of its shares owned by Utah residents; or
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(iii) 10,000 shareholders resident in the state.
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(2) The residence of a shareholder is presumed to be the address appearing in the records
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of the corporation.
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(3) Shares held by banks or other depository institutions (except as trustee or guardian),
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brokers, or nominees shall be disregarded for purposes of calculating the percentages or numbers
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described in this section.
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(4) As used in this chapter, "depository institution" means a depository institution or a
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depository holding company subject to the jurisdiction of the Utah Department of Financial
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Institutions.
Legislative Review Note
as of 2-4-00 9:13 AM
A limited legal review of this legislation raises no obvious constitutional or statutory concerns.