State Takeover Laws: Shareholder Protection, the Constitution, and the Delaware Approach

Kevin J. Fay, State Takeover Laws: Shareholder Protection, the Constitution, and the Delaware Approach, 24 Gonz. L. Rev. 249 (1988).

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When the Williams Act was enacted in 1968, it was not the first governmental regulation of merger and acquisitions activity; Virginia had enacted a takeover law several months before the Williams Act was enacted. Since that time, there have been successive waves of attempts by states to supplement the federal regulation of the Williams Act to correct abuses not addressed by the federal statute. These state takeover laws are commonly described as belonging to one of several “generations,” depending on whether they were enacted after (and in reaction to) two decisions of the United States Supreme Court. In Edgar v. MITE Corp., the Supreme Court held the Illinois Business Takeover Act (a “first generation” statute) to be unconstitutional on grounds that it was preempted by the Williams Act and violated the dormant commerce clause. In reaction to the Court’s holding, various states enacted a variety of “second generation” statutes, by and large designed to meet the constitutional criteria set forth in the Edgar opinion. In CTS Corp. v. Dynamics Corp. of America, the Court upheld the validity of one of these second generation statutes, the Control Share Acquisitions Chapter of the Indiana Business Corporation Law. . . . Read More

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