Fund Directions - Donohue Hits Some Takeover Defenses

Donohue Hits Some Takeover Defenses

Andrew Donohue Closed-end fund boards need to be careful when employing certain tactics to fend off dissident shareholders, Andrew "Buddy" Donohue, director of the Securities and Exchange Commission's Division of Investment Management warned at a meeting of the Independent Directors Council last month. He cited several techniques to thwart takeovers that raised governance issues, even though they are permitted by state law.

Most notably, Donohue said the use of poison pill defenses, which put restrictions on the voting shares of dissident shareholders, raises questions under provisions of the Investment Company Act of 1940. "I submit that the adoption of a poison pill, or restricting the voting rights of a 'dissident' shareholder even where state law authorizes it, may be inconsistent with ...

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Donohue Hits Some Takeover Defenses