Saba Capital Management has asked a federal court to enforce a ruling that struck down a shareholder rights plan a closed-end fund re-instituted one business day after the first plan was struck down.
On April 2 Saba filed a motion asking that the U.S. District Court for the Southern District of New York strike down a “poison pill” shareholder protection plan approved by trustees overseeing the ASA Gold and Precious Metals Limited (NYSE: ASA) CEF despite a March 28 ruling from the court invalidating an almost identical plan.
On March 31 the fund announced the launch of a “limited-duration shareholder rights plan” that would last until July 29 or if a new board was not elected at a company shareholder meeting before that date.
The plan, is designed to stymie a Saba effort to replace “legacy” board members with its own candidates in an effort to either fire the current fund adviser and hire Saba in its place, or “change the stated investment objectives and fundamental nature of ASA,” according to a March 31 announcement from ASA.
Under the plan ASA will issue one voting right for every common share of ASA outstanding as of the end of April 9 to give every shareholder the right to vote in shareholder elections. Any attempt by a shareholder owning 15% or more of the fund would trigger requirements in the Shareholder Rights Plan that would allow the board to require that new shares be acquired for higher prices or traded for additional voting rights.
‘Poison pill’ strategies are one of the few activist defenses still available to CEF boards, following a string of court decisions that have categorically struck down many other approaches.
Saba, which currently holds approximately 17.18% of the fund’s outstanding common shares, won two seats on the fund’s four-person board during shareholder elections last April.
The fund rescinded a similar plan that it launched in December of 2024 following a Saba lawsuit that resulted in a March 28 ruling that it violated a requirement in the 1940 Investment Company Act that shareholder rights plans expire within 120 days of their issuance, according to ASA, which promised to appeal the decision.
“ASA’s blatant disregard for the law is outrageous,” according to an April 2 Saba release announcing the motion.
“The Court’s ruling invalidated ASA’s poison pill and confirmed that the Fund’s legacy directors — chair Mary Joan Hoene, director William Donovan and former directors Axel Merk and Bruce Hansen — broke the law by prioritizing their own entrenchment over shareholder rights,” Saba founder and CEO Boaz Weinstein said in an April 2 Saba release announcing its motion to invalidate the new shareholder plan as well. “ASA defied the ruling the very next business day by adopting an unlawful extension of their poison pill.”
“Legacy” board members have tried to work with Saba-sponsored members of the board, according to ASA court filings, but were unable to get the new directors to follow through on promises to shareholders that they would find ways to reduce the fund’s discount or negotiate changes in strategy that would satisfy both new and existing members of the board.
The fund, which was established in 1958, reports net assets of approximately $598.5m.
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