Document Type

Article

Publication Date

1983

Abstract

The recent submission to Congress of several proposed amendments to the Williams Act has again made tender offer regulation a controversial subject. Professor DeMott believes that the debate about regulatory reform can benefit from a comparative study of Britih and American tender offer rcgulation. She finds the British system instructive in three important respects. First, the British system specifically indentifies different kinds of transactions that resemble tender offers and regulates those transactions according to the hazards they create for investors. Unlike the American system, which imposes a single set of highly complex regulations only if a transaction qualifies as a tender offer under nebulous judicial definitions, the British system recognizes that certain acquisitions of a small percentage of a corporation's shares, while appropriately subject to some regulation, need not trigger application of the full panoply of rules. The author also notes that the bright line rules uscd by the British to define regulated transactions facilitate financial and legal planning and promote an orderly market for corporate control. Second, by enforcing a more rigorous view of fair and equal treatment of target shareholders than does the American system, the British system may discourage takeover attempts and bidding contests that benefit shareholders. For instance, the British require that a purchaser of thirty percent of target stock offer to buy out remaining shareholders at tihe highest price it paid for the stock. In the author's view, such a protective rule may be too costly: it may also be unnecessary in the United States, where minority shareholders may enjoy appraisal rights and may bring deritative suits against management more easily than their British counterparts. Third, by requiring that target management provide shareholders with an independent appraisal of each tender offer and obtain the sharcholders' approval before engaging in defensive maneuvers that might defeat the offer, the British system provides a moderate solution to the problem of managerial conflicts of interest caused by hostile takeover efforts. Recognizing that some defensive role for target management may be appropriate. Professor Delfott argues that the British approach may be preferable to current proposals that defensive tactics be prohibited.

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