New York
Business Corporation Law
Article 16, NYBCL
Security Takeover Disclosure Act
Section
1600. Short title.
1601. Definitions.
1602. Disclosure requirement.
1603. Contents of registration statement.
1604. Enforcement.
1605. Violations; penalties.
1606. Administration.
1607. Prosecutions and immunity.
1608. Designation of secretary of state for service.
1609. Fraudulent, deceptive or manipulative practices.
1610. Exclusions.
1611. Validity; saving clause.
1612. Requirements for certain takeover bids.
1613. Private right of action.
S 1600. Short title.
This article shall be known as the security takeover disclosure act.
S 1601. Definitions.
As used in this article, the following terms shall have the following
meanings:
(a) "Takeover bid" means the acquisition of or offer to acquire by an
offeror from an offeree, pursuant to a tender offer or request or
invitation for tenders, any equity security of a target company, if
after acquisition thereof the offeror would, directly or indirectly, be
a beneficial owner of more than five percent of any class of the issued
and outstanding equity securities of such target company.
Such term does not include:
(1) Bids made by a dealer for his own account in the ordinary course
of his business of buying and selling such security;
(2) An offer to acquire such equity security solely in exchange for
other securities, or the acquisition of such equity security pursuant to
such offer, for the sole account of the offeror, in good faith and not
for the purpose of avoiding this section, and not involving any public
offering of such other securities within the meaning of section four of
title one of the "Securities Act of 1933", (48 Stat.77, 15 U.S.C. 77 d
(2)); as amended;
(3) Any other offer to acquire an equity security, or the acquisition
of such equity security pursuant to such offer, for the sole account of
the offeror, from not more than fifty offerees, in good faith and not
for the purpose of avoiding the provisions of this article;
(4) Any offer or class of offer where, prior to making the offer, the
offeror beneficially owns, directly or indirectly, a majority of the
voting equity securities of the target company;
(b) "Offeror" means a person who makes, or in any way participates or
aids in making, a takeover bid, and includes persons acting jointly or
in concert, or who intend to exercise jointly or in concert any voting
rights attached to the securities for which such takeover bid is made.
An "offeror" includes an issuer of securities whose securities are or
are to be the subject of a takeover bid whether or not the issuer, upon
acquisition, will become the beneficial owner of such securities. "An
offeror" does not include any bank or broker-dealer in securities
loaning funds to the offeror in the ordinary course of the business of
the bank or broker-dealer in securities and not otherwise participating
in the takeover bid, or any bank, broker-dealer in securities, attorney,
accountant or consultant furnishing information or advice to an offeror
and not otherwise participating in the takeover bid.
(c) "Offeree" means the beneficial owner, residing in this state, of
securities which an offeror acquires or offers to acquire in connection
with a takeover bid.
(d) "Target company" means a corporation, organized under the laws of
this state and having its principal executive offices or significant
business operations located within this state.
(e) "Equity security" means any stock, bond, or other obligation of a
target company, the holder of which has the right to vote for the
election of members of the board of directors, or those exercising a
similar function if the target company is not a corporation, of such
target company. Equity security includes any security convertible into
an equity security, and also includes any right, option or warrant to
purchase an equity security.
S 1602. Disclosure requirement.
(a) No offeror shall make a takeover bid unless as soon as practicable
on the date of commencement of the takeover bid he files with the
attorney general at his New York city office and delivers to the target
company at its principal executive offices a registration statement
containing the information required by section sixteen hundred three of
this article.
(b) An offeror shall make full and fair disclosure to offerees of the
material information set forth in the registration statement filed
pursuant to subdivision (a) of this section.
(c) No solicitation or recommendation to the offerees of a target
company to accept or reject a takeover bid shall be made by or on behalf
of an offeror or a target company unless at the time copies of such
solicitation or recommendation are first published, sent or given to
such offerees, the person making such solicitation or recommendation has
filed copies of the solicitation or recommendation with the attorney
general at his New York city office.
S 1603. Contents of registration statement.
(a) The registration statement required to be filed pursuant to
subdivision (a) of section sixteen hundred two of this article shall
include:
1. Copies of all prospectuses, brochures, advertisements, circulars,
letters, or other matter by means of which the offeror proposes to
disclose to offerees all information material to a decision to accept or
reject the offer;
2. The identity and background of all persons on whose behalf the
acquisition of any equity security of the target company has been or is
to be effected;
3. The exact title and number of shares outstanding of the class of
equity securities being sought, the number of such securities being
sought and the consideration being offered therefor;
4. The source and amount of funds or other consideration used or to be
used in acquiring any equity security, including a statement describing
any securities, other than the existing capital stock or long term debt
of the offeror, which are being offered in exchange for the equity
securities of the target company and also including copies of all loan
or credit agreements and letters of commitment used or to be used to
secure financing for the acquisition of any equity security of the
target company;
5. A statement of any plans or proposals which the offeror, upon
gaining control, may have to liquidate the target company, sell its
assets, effect a merger or consolidation of it, or make any other major
change in its business, corporate structure, management personnel, or
policies of employment;
6. The number of shares of any equity security of the target company
of which each offeror is beneficial or record owner or has a right to
acquire, directly or indirectly, together with the name and address of
each person defined in this section as an offeror;
7. Particulars as to any contracts, arrangements, or understandings to
which an offeror is party with respect to any equity security of the
target company, including without limitation transfers of any equity
security, joint ventures, loans or option arrangements, puts and calls,
guarantees of loan, guarantees against loss, guarantees of profits,
division of losses or profits, or the giving or withholding of proxies,
naming the persons with whom such contracts, arrangements, or
understandings have been entered into;
8. Complete information on the organization and operations of the
offeror, including without limitation the year of organization, form of
organization, jurisdiction in which it is organized, a description of
each class of the offeror`s capital stock and of its long term debt,
financial statements for the current period and for the three most
recent annual accounting periods, a description of pending legal
proceedings other than routine litigation to which the offeror or any of
its subsidiaries is a party or of which any of their property is the
subject, a brief description of the business done and projected by the
offeror and its subsidiaries and the general development of such
business over the past five years, the names of all directors and
executive officers together with biographical summaries of each for the
preceding three years to date;
9. A statement as to the potential impact, if any, of the offeror`s
plans or proposals on the residents of New York state, including any
material change in the location of the target company`s offices or
business activities within this state; any plant or facility relocation;
any plant or facility closings; any significant reduction in the
workforce at an individual plant or facility; any other material change
in the number, job classification, compensation, or other terms and
conditions of employment of persons employed by the target company in
this state; any material change in the relationships of the target
company with suppliers or customers within this state, or any other
material changes in the target company`s business, corporate structure,
management, personnel or activities which would have a substantial
impact on residents of this state;
10. Particulars as to any pension plans; profit sharing plans; savings
plans; educational opportunities; relocation adjustments; labor
relations records, including violations of the federal national labor
relations act, occupational safety and health act of 1970, fair labor
standards act, or employee retirement and income security act, as
amended, finally adjudicated or settled within five years of the
commencement of the takover bid; earnings and dividend growth; community
activities; and charitable, cultural, educational and civic
contributions of the offeror;
11. If the offeror is a natural person, information concerning his
identity and background, including without limitation financial
statements for the current and three preceding years, a description of
his business activities and affiliations during that time period, and a
description of any pending legal or administrative proceedings, other
than routine and immaterial litigation, to which the offeror is a party
or of which any of his property is the subject; and
12. If debt securities or preferred stock are either offered in the
takeover bid or used as a source of funds in making the takeover bid,
the investment rating, if any, by a generally recognized rating service
of such debt security or preferred stock.
(b) If any material change occurs in the facts set forth in the
registration statement required by subdivision (a) of section sixteen
hundred two of this article, the offeror who filed such statement shall
promptly notify the attorney general and the target company of such
change in writing or by telephone confirmed in writing and shall amend
the registration statement to reflect such change promptly but not later
than the date such change is first published, sent or given to offerees.
(c) The attorney general may permit the omission of any information
required by subdivision (a) of this section to be included in the
registration statement if he determines that such information is
immaterial or otherwise unnecessary for the protection of offerees.
S 1604. Enforcement.
(a) The attorney general may conduct such investigation as he deems
necessary concerning any takeover bid for the purpose of determining
compliance with the requirements of this article. As part of such
investigation the attorney general may require persons to file
statements in writing and under oath with his office, subpoena
witnesses, compel their attendance, examine them under oath and require
the production of books, records, documents and papers.
(b) In the event the attorney general determines that any person is
violating or about to violate any provision of this article, or any
order, rule or regulation issued pursuant thereto, he may seek, in a
court of competent jurisdiction, an injunction temporarily or
permanently barring that person from making or taking part in or
continuing a takeover bid or from taking up or paying for shares
tendered by offerees pursuant to a takeover bid, and the court may grant
the relief applied for or so much thereof as it may deem proper.
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Article 16, Continued . . .
S 1605. Violations; penalties.
(a) Every person who willfully violates any provision of this article
shall be guilty of a class E felony; every person who willfully violates
any order, rule or regulation issued pursuant thereto, shall be guilty
of a class A misdemeanor.
(b) A violation of any provision of this article shall constitute a
fraudulent practice within the meaning of article twenty-three-A of the
general business law.
(c) Every person who violates any provision of this article shall be
subject to a civil penalty of one thousand dollars per violation if a
natural person or ten thousand dollars per violation if a corporation.
When the violation is the failure to file a registration statement as
required by subdivision (a) of section sixteen hundred two of this
article, the failure to file a solicitation or recommendation as
required by subdivision (c) of section sixteen hundred two of this
article, or the failure to amend such registration statement as required
by subdivision (b) of section sixteen hundred three of this article,
each business day of non-registration or failure to file a
recommendation or solicitation or failure to amend constitutes a
separate violation. The penalty imposed by this section shall be
cumulative and more than one penalty shall be recoverable in the same
action in any court of competent jurisdiction.
S 1606. Administration.
(a) This article shall be administered by the attorney general and
employees designated by him within the department of law. The attorney
general is hereby empowered to promulgate, alter, amend or revoke rules
and regulations necessary to carry out the purposes of this article.
(b) The attorney general may establish fees for the filing of any
registration statement, not to exceed two thousand five hundred dollars,
to recover the costs of administering this article. Such fees may vary
according to the maximum consideration payable by the offeror for the
securities which are the subject of the takeover bid.
S 1607. Prosecutions and immunity.
(a) The attorney general may prosecute every person charged with the
commission of a criminal offense arising from the violation of any
provision of this article. In all such proceedings, the attorney general
may appear in person or by his deputy before any court of record or any
grand jury and exercise all the powers and perform all the duties in
respect of such actions or proceedings which the district attorney would
otherwise be authorized or required to exercise or perform; or the
attorney general may in his discretion transmit evidence, proof and
information as to such offense to the district attorney of the county or
counties in which the alleged violation has occurred, and every district
attorney to whom such evidence, proof and information is so transmitted
shall forthwith proceed to prosecute any corporation, company,
association, or officer, manager or agent thereof, or any firm or person
charged with such violation. In any such proceeding, wherein the
attorney general has appeared either in person or by deputy, the
district attorney shall only exercise such powers and perform such
duties as are required of him by the attorney general or the deputy
attorney general so appearing.
(b) Upon any investigation before the attorney general or his deputy
or other officer designated by him, or in any criminal proceeding before
any court, magistrate or grand jury, pursuant to or for a violation of
any of the provisions of this article, the attorney general, his deputy
or other officer designated by him, or the court, magistrate or grand
jury, may confer immunity in accordance with the provisions of section
50.20 of the criminal procedure law.
S 1608. Designation of secretary of state for service.
(a) Every nonresident offeror, whether or not such offeror has filed a
registration statement, except a foreign corporation which has appointed
and keeps a resident agent in this state, shall be deemed to have
appointed the secretary of state as his agent upon whom may be served
any lawful process, authorized by this article, with the same effect as
though served upon the offeror personally.
(b) Service of process pursuant to this section shall be accomplished
by leaving a copy of the process in the office of the secretary of
state, but it shall not be effective unless notice of the service and a
copy of the process is sent by certified or registered mail to the
nonresident offeror served, at his last known address.
S 1609. Fraudulent, deceptive or manipulative practices.
(a) No person shall make any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they are
made, not misleading, or engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any takeover bid or
any solicitation of offerees in opposition to or in favor of any such
takeover bid.
(b) It shall constitute a violation of this article for any person who
is in possession of material information relating to any takeover bid,
which information he knows or has reason to know is nonpublic, which he
acquired either before or after the commencement of the takeover bid,
and which he knows or has reason to know has been acquired directly or
indirectly from an offeror, a target company, or any officer, director,
partner or employee or any other person acting on behalf of the offeror
or target company, to purchase or sell or cause to be purchased or sold,
within or from this state, any securities sought or to be sought by such
takeover bid or any securities convertible into or exhangeable for any
such securities or any option or right to obtain or to dispose of any
such securities.
(c) Fraudulent, deceptive or manipulative acts or practices include
without limitation those acts and practices proscribed by rules and
regulations which the attorney general is hereby empowered to adopt,
promulgate, amend and rescind as is necessary to carry out the
provisions of this section.
S 1610. Exclusions.
This article shall not apply when:
(a) The offeror or the target company is a public utility or a public
utility holding company as defined in section two of the "Public Utility
Holding Company Act of 1935," (49 Stat.803, 15 U.S.C. 79), as amended,
and the takeover bid is subject to approval by the appropriate federal
agency as provided in such act;
(b) The offeror or the target company is a bank or a bank holding
company as subject to the "Bank Holding Company Act of 1956," (70 Stat.
133, 12 U.S.C. 1841), and subsequent amendments thereto, and the
takeover bid is subject to approval by the appropriate federal agency as
provided in such act;
(c) The offeror or the target company is a savings and loan holding
company as defined in section two of the "Savings and Loan Holding
Company Amendments of 1967," (82 Stat. 5, 12 U.S.C. 1730A), as amended,
and the takeover bid is subject to approval by the appropriate federal
agency as provided in such act;
(d) The offeror and the target company are banks and the offer is part
of a merger transaction subject to approval by appropriate federal or
state supervisory authorities.
S 1611. Validity; saving clause.
In the event any provision or application of this article shall be
held illegal or invalid for any reason, such holding shall not affect
the legality or validity of any other provision or application thereof.
S 1612. Requirements for certain takeover bids.
If the takeover bid is not subject to the requirements of section
14(d) of the Securities Exchange Act of 1934, 15 U.S.C. S 78n(d), the
following additional requirements shall apply to the takeover bid:
(a) The takeover bid shall be made on the same terms to all offerees
holding the same class or series of securities.
(b) The period of time within which equity securities may be deposited
pursuant to a takeover bid shall not be less than thirty business days.
(c) Equity securities deposited pursuant to a takeover bid may be
withdrawn at any time until the expiration of thirty business days after
the commencement of the takeover bid and at any time after the
expiration of sixty-five days from the commencement of the takeover bid,
if the shares have not been purchased, and until the expiration of ten
business days following the date of commencement of another offeror`s
takeover bid for the same equity securities if the shares have not been
purchased and if the bidder has received notice or otherwise has
knowledge of the commencement of such takeover bid.
(d) Where a takeover bid is made for less than all the outstanding
equity securities of a class and where a greater number of such
securities is deposited pursuant thereto than the offeror is bound or
willing to take up and pay for, the securities taken up and paid for by
the offeror shall be taken up and paid for as nearly as possible on a
pro rata basis, disregarding fractions, according to the number of
securities deposited by each shareholder.
(e) Where an offeror increases the consideration offered in a takeover
bid, the offeror shall pay the increased consideration for all equity
securities accepted, whether such securities have been accepted by the
offeror before or after the increase in consideration.
(f) (1) Within ten days of the filing of a registration statement as
required by section sixteen hundred two of this article the attorney
general may schedule a public hearing or hearings or conduct such
investigation as he deems necessary concerning any takeover bid for the
purpose of determining compliance with the requirements of this article;
(2) Any such hearing or investigation shall be declared by order of
the attorney general;
(3) Any initial hearing shall commence within twenty days of the
filing of a registration statement.
(g) In the event the attorney general shall schedule a public hearing
or otherwise conduct an investigation pursuant to subdivision (f) of
this section, the attorney general may also, in his discretion, issue an
order staying the offeror from purchasing or paying for any shares
tendered in response to its takeover bid at any time prior to such
purchasing or paying for shares tendered. Every person shall comply with
every such order.
(h) In the event the attorney general shall issue a stay payment order
pursuant to subdivision (g) of this section, the attorney general shall,
no later than thirty days from the issuance of such stay payment order,
issue an order containing his findings of fact and conclusions of law.
(i) Any stay payment order issued by the attorney general pursuant to
subdivision (g) of this section shall automatically expire within sixty
days from its issuance except where the attorney general has in his
order containing findings of fact and conclusions of law conditioned the
purchase and payment for shares tendered upon changes or modifications
in the registration statement, in which event any stay payment order
shall be vacated by the attorney general after he is satisfied that such
changes or modifications have been publicly disseminated to offerees.
(j) The attorney general may apply, on notice to the offeror and the
target company, to a court of competent jurisdiction, and such court may
grant an application, for good cause, to extend any of the time periods
set forth in this section if an extension is necessary for the
protection of offerees.
S 1613. Private right of action.
Any offeree whose equity securities are the subject of a takeover bid
and who has been injured by any violation of this article may bring an
action in his or her own name to enjoin such unlawful act or practice
and to recover actual damages together with reasonable attorney fees in
the event the offeree is successful.
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