Williams Act
Encyclopedia
The Williams Act refers to amendments to the Securities Exchange Act of 1934
enacted in 1968 regarding tender offer
s. The legislation was proposed by Senator Harrison A. Williams
of New Jersey.
The Williams Act of 1968 amended the Securities and Exchange Act of 1934 (15 U.S.C.A. § 78a et seq.) to require mandatory disclosure of information regarding cash tender offers. When an individual, group, or corporation seeks to acquire control of another corporation, it may make a tender offer. A tender offer is a proposal to buy shares of stock from the stockholders for cash or some type of corporate security of the acquiring company. Since the mid-1960s, cash tender offers for corporate takeovers have become favored over the traditional alternative, the proxy campaign
. A proxy campaign is an attempt to obtain the votes of enough shareholders to gain control of the corporation's board of directors.
Because of abuses with cash tender offers, Congress passed the Williams Act in 1968, whose purpose is to require full and fair disclosure for the benefit of stockholders, while at the same time providing the offeror and management equal opportunity to fairly present their cases.
The act requires any person who makes a cash tender offer (which is usually 15 to 20 percent in excess of the current market price) for a corporation, that is required to be registered under federal law, to disclose to the federal Securities and Exchange Commission (SEC) the source of the funds used in the offer, the purpose for which the offer is made, the plans the purchaser might have if successful, and any contracts or understandings concerning the target corporation.
Filing and public disclosures with the SEC are also required of anyone who acquires more than 5 percent of the outstanding shares of any class of a corporation subject to federal registration requirements. Copies of these disclosure statements must also be sent to each national securities exchange where the securities are traded, making the information available to shareholders and investors.
The law also imposes miscellaneous substantive restrictions on the mechanics of a cash tender offer, and it imposes a broad prohibition against the use of false, misleading, or incomplete statements in connection with a tender offer. The Williams Act gives the SEC the authority to institute enforcement lawsuits.
In recent years, as complicated forms of derivatives bearing upon, but not actually constituting, corporate stock have become common, interpretation of the Williams Act has become tricky. This development came to a head in 2008 over the railroad company CSX
.
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...
enacted in 1968 regarding tender offer
Tender offer
Tender offer is a corporate finance term denoting a type of takeover bid. The tender offer is a public, open offer or invitation by a prospective acquirer to all stockholders of a publicly traded corporation to tender their stock for sale at a specified price during a specified time, subject to...
s. The legislation was proposed by Senator Harrison A. Williams
Harrison A. Williams
Harrison Arlington "Pete" Williams, Jr. was a Democrat who represented New Jersey in both the United States House of Representatives and the United States Senate . Williams was convicted on May 1, 1981 for taking bribes in the Abscam sting operation, and resigned from the U.S. Senate in 1982...
of New Jersey.
The Williams Act of 1968 amended the Securities and Exchange Act of 1934 (15 U.S.C.A. § 78a et seq.) to require mandatory disclosure of information regarding cash tender offers. When an individual, group, or corporation seeks to acquire control of another corporation, it may make a tender offer. A tender offer is a proposal to buy shares of stock from the stockholders for cash or some type of corporate security of the acquiring company. Since the mid-1960s, cash tender offers for corporate takeovers have become favored over the traditional alternative, the proxy campaign
Proxy statement
A proxy statement is a statement required of a United States firm when soliciting shareholder votes. This statement is filed in advance of the annual meeting. The firm needs to file a proxy statement, otherwise known as a Form DEF 14A , with the U.S. Securities and Exchange Commission...
. A proxy campaign is an attempt to obtain the votes of enough shareholders to gain control of the corporation's board of directors.
Because of abuses with cash tender offers, Congress passed the Williams Act in 1968, whose purpose is to require full and fair disclosure for the benefit of stockholders, while at the same time providing the offeror and management equal opportunity to fairly present their cases.
The act requires any person who makes a cash tender offer (which is usually 15 to 20 percent in excess of the current market price) for a corporation, that is required to be registered under federal law, to disclose to the federal Securities and Exchange Commission (SEC) the source of the funds used in the offer, the purpose for which the offer is made, the plans the purchaser might have if successful, and any contracts or understandings concerning the target corporation.
Filing and public disclosures with the SEC are also required of anyone who acquires more than 5 percent of the outstanding shares of any class of a corporation subject to federal registration requirements. Copies of these disclosure statements must also be sent to each national securities exchange where the securities are traded, making the information available to shareholders and investors.
The law also imposes miscellaneous substantive restrictions on the mechanics of a cash tender offer, and it imposes a broad prohibition against the use of false, misleading, or incomplete statements in connection with a tender offer. The Williams Act gives the SEC the authority to institute enforcement lawsuits.
In recent years, as complicated forms of derivatives bearing upon, but not actually constituting, corporate stock have become common, interpretation of the Williams Act has become tricky. This development came to a head in 2008 over the railroad company CSX
CSX Corporation
CSX Corporation was formed in 1980 by the merger of Chessie System and Seaboard Coast Line Industries and eventually merged the various railroads owned by those predecessors into a single line that became known as CSX Transportation. Based in Richmond, Virginia, USA after the merger, in 2003...
.