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6 Bus. Law. Update 1 (1985-1986)

handle is hein.journals/buslwme6 and id is 1 raw text is: THE BSNS       LAWER
Congress Responds to Hostile Tender Offers

The increased pace of hostile tender of-
fers against even the largest publicly-
held corporations has generated intense
national publicity and increasing criti-
cism of the participants in these contests
for corporate control. During the last
session of Congress this public criticism
led to a plethora of legislative proposals
designed to substantially expand federal
regulatory control over participants in
tender offers.
Tender offers for securities of
publicly-held companies are presently
regulated by the Securities and Ex-
change Commission under the 1968
Williams Act amendments to the Secur-
ities Exchange Act of 1934. The regula-
tion imposes disclosure requirements
and antifraud prohibitions on partici-
pants in tender offers and gives the SEC
rulemaking power over certain aspects
of the tender offer process. The Williams
Act, however, purports to be neutral on
the desirability of hostile tender offers.
Its avowed purpose is to protect public
shareholders without interfering either
with the activities of tender offerors or
the ability of target companies to defend
themselves against hostile tender offers.
The renewed congessional focus
Congress renewed its interest in tender
offers in 1984 in response to the highly
publicized tactics of target company
managements in defending against hos-
tile tender offers - tactics with such
colorful labels as greenmail, .... golden
parachutes, poison pills, and the
Pac Man defense. These tactics
created concern that managements of
target companies were seeking to per-
petuate corporate control by adopting
defensive tactics that injured their com-
panies and unjustly enriched corporate
raiders and professional arbitrageurs to
the detriment of public investors. Initial
1984 legislative proposals sought to im-

pose federal controls over target com-
pany responses to hostile tender offers
 Prohibiting greenmail transactions
(in which target companies buy out
hostile tender offerors at a pre-
mium above market price) except
with shareholder approval or
where accompanied by equivalent
offers to all shareholders.
* Prohibiting golden parachute em-
ployment arrangements which
provide officers and directors of
target companies with substan-
tially increased severance pay-
ments in the event of employment
termination as a result of a suc-
cessful hostile tender offer.
* Prohibiting poison pill tactics
whereby target companies defend
against hostile tender offers by is-
suing large amounts of new securi-
ties or options to friendly third
parties or existing shareholders.
Continued on page 2

Septermibr/October 1985
Volume 6 Number 1
Secion of Corporaton,
Banking and Business Law   /A
From the Section
Section publications and programs have
been quite effective in informing our
Section members about the activities of
the Section and its committees in areas of
substantive law. Little has been pub-
lished, however, about the workings of
the Section itself. This article will sum-
marize some current Section policies and
procedures that may interest Section
members, particularly active committee
Publication costs of The Business Lawyer
comprise approximately 50 percent of
our Section budget thus our dues are
tied closely to the costs of this publica-
tion. Although Section dues have in-
creased in recent years, they remain at
the relatively low level of $20. This low
dues structure clearly results from the
Section's unique and long standing pol-
icy that, with limited exceptions,
Continued on page 3

The Section's Ad Hoc Working Group takes the lead
on tax reform.                                      4
U.S. payment systems law moves in new
directions.                                         5
Proposals for South African sanctions proliferate.  6
This month we spotlight the Committee on Savings


Drug and chemical exports to the EEC face new
import requirements and multinational controls.   -   7


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