CHAPTER 3.1. TAKEOVER OFFERS
IC 23-2-3.1
Chapter 3.1. Takeover Offers
IC 23-2-3.1-0.5
Legislative finding; purpose
Sec. 0.5. (a) The general assembly finds that it is often difficultfor corporate shareholders to obtain sufficient information to makean informed and timely decision when faced with the questions ofaccepting or rejecting a takeover offer. Moreover, there haveemerged a number of practices which have resulted in shareholdersof Indiana corporations losing the benefits of takeover offers becausethey lacked the sophistication and ability to secure those benefits.These practices have included multiple proration pools, two-steptransactions and similar practices, and have resulted in relativelysmall shareholders losing both the advantages of the takeover offerand their equity positions in the corporation.
(b) By enacting this chapter, it is the intent and purpose of thegeneral assembly to provide for full and fair disclosure of all materialinformation concerning takeover offers to shareholders of Indianacorporations, so that the opportunity of each shareholder to make aninformed and well-reasoned investment decision may be secured. Itis also the purpose of the general assembly to protect shareholders ofIndiana corporations from being disadvantaged by those practicesdescribed in subsection (a). Finally, it is the purpose of the generalassembly to provide for adequate disclosure and that protection in amanner consistent with the Constitutions of the United States and ofIndiana.
As added by Acts 1981, P.L.215, SEC.1. Amended by P.L.242-1983,SEC.1.
IC 23-2-3.1-1
Definitions
Sec. 1. As used in this chapter:
"Affiliate" means any person controlling, controlled by, or underthe common control of another person.
"Beneficial owner of a security" means any person who, directlyor indirectly, has the power to vote or direct the voting of all or partof the voting rights of the security, or has the power to dispose of ordirect the disposition of the security.
"Commissioner" means the securities commissioner as defined inIC 23-19-1-2(4).
"Control" means possession, direct or indirect, of the power todirect or to cause the direction of the management and policies of aperson, through the ownership of voting securities, by contract otherthan a commercial contract for goods or nonmanagement services, orotherwise, unless that power is the result of an official position orcorporate office. The term includes "controlling", "controlled by",and "under common control with." Control is presumed to exist ifany person is the beneficial owner of ten percent (10%) or more ofany class of the voting securities of any other person. This
presumption may be rebutted only by a showing that control does notexist in fact, at a hearing pursuant to section 9 of this chapter.
"Equity security" means:
(1) any share or similar security carrying, at the time of thetakeover offer, the right to vote on any matter by virtue of thearticles of incorporation, bylaws, or governing instrument of thetarget company or the right to vote for directors or personsperforming substantially similar functions by operation of law;
(2) any security convertible into a security described insubdivision (1) or any warrant or right to purchase that security;or
(3) any other security which, for the protection of investors, isan equity security pursuant to a regulation of the commissioner.
"Offeror" means a person who makes or in any way participatesin making a takeover offer. The term includes all affiliates of thatperson and all persons who act jointly or in concert with that personfor the purpose of acquiring, holding, or disposing of, or exercisingany voting rights attached to, the equity securities of a targetcompany. It also includes the target company with respect toacquisitions of its own equity securities and with respect to periodsof time when it is controlled by or under common control with theofferor. It does not include a financial institution or broker-dealerloaning funds or extending credit to any offeror in the ordinarycourse of its business, or any accountant, attorney, financialinstitution, broker-dealer, newspaper or magazine of generalcirculation, consultant, or other person furnishing information,services, or advice to or performing ministerial or administrativeduties for an offeror and not otherwise participating in the takeoveroffer.
"Offeree" means a record or beneficial owner of equity securitiesof the class which an offeror acquires or offers to acquire inconnection with a takeover offer.
"Person" means an individual, corporation, limited liabilitycompany, association, partnership, trust, or other entity.
"Substantially equivalent terms" means terms under which the fairmarket value of the consideration offered any offeree of a class ofequity securities of the target company (determined on a per share ora per unit basis) are equal to the highest consideration offered inconnection with a takeover offer to any other offeree of that class(determined on a per share or per unit basis).
"Takeover offer" means an offer to acquire or an acquisition ofany equity security of a target company, pursuant to a tender offer orrequest or invitation for tenders, if, after the acquisition, the offeroris directly or indirectly a record or beneficial owner of more than tenpercent (10%) of any class of the outstanding equity securities of thetarget company.
"Target company" means an issuer of securities which isorganized under the laws of this state, has its principal place ofbusiness in this state, and has substantial assets in this state. Targetcompany does not include: (1) a financial institution subject to regulation by thedepartment of financial institutions under IC 28, if the takeoveroffer is subject to approval by the department of financialinstitutions;
(2) a corporation subject to regulation by the utility regulatorycommission under IC 8, if the takeover offer is subject toapproval of the commission; or
(3) a public utility, public utility holding company, bankholding company, or savings association subject to regulationby a federal agency, if the takeover offer is subject to theapproval by that federal agency.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.2; P.L.242-1983, SEC.2; P.L.23-1988, SEC.111;P.L.8-1993, SEC.311; P.L.79-1998, SEC.21; P.L.27-2007, SEC.13.
IC 23-2-3.1-2
Compliance with designated sections
Sec. 2. A person shall not make a takeover offer unless the offeris in compliance with sections 3, 4, 5.5, 6.5, 7, and 8 of this chapter.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.3; P.L.242-1983, SEC.3; P.L.229-1989, SEC.1.
IC 23-2-3.1-3
Statement; filing with commissioner; copy to target company
Sec. 3. Any offeror, before making a takeover offer, shall:
(1) file any required statements with the commissioner incompliance with sections 5 and 5.5 of this chapter; and
(2) not later than the filing date of the statements, deliver a copyof each statement to the president of the target company at itsprincipal office.
As added by Acts 1979, P.L.235, SEC.1. Amended by P.L.229-1989,SEC.2.
IC 23-2-3.1-4
Statement; consent to service of process; filing fee
Sec. 4. Each statement required under section 5 or 5.5 of thischapter must be accompanied by:
(1) a consent of the offeror to service of process specified inIC 23-19-6-11; and
(2) a filing fee of seven hundred fifty dollars ($750).
As added by Acts 1979, P.L.235, SEC.1. Amended by P.L.229-1989,SEC.3; P.L.27-2007, SEC.14.
IC 23-2-3.1-5
Contents of statement; document prepared under federal law
Sec. 5. (a) If the takeover offer is subject to any federal law,including the Securities Exchange Act of 1934 (15 U.S.C. 78), thestatement must consist of one (1) copy of each document required tobe filed with the Securities and Exchange Commission or any otherfederal agency. (b) If the takeover offer is not subject to any requirement offederal law, the statement must be filed on forms prescribed by thecommissioner and contain the following information:
(1) The identity of and material information concerning theofferor, including:
(A) if the offeror is a corporation:
(i) information concerning its organization, including theyear and jurisdiction of its organization;
(ii) a description of each class of its capital stock andlong-term debt;
(iii) a description of the business done by the offeror andits affiliates and any material changes of its businessduring the past three (3) years;
(iv) a description of the location and character of theprincipal properties of the offeror and its affiliates;
(v) a description of any material pending legal oradministrative proceedings in which the offeror or any ofits affiliates is a party;
(vi) the names of all directors and executive officers of theofferor and their material business activities andaffiliations during the past three (3) years; and
(vii) audited financial statements of the offeror and itsaffiliates for its three (3) most recent annual accountingperiods and interim financial statements for any currentperiod; and
(B) if the offeror is not a corporation:
(i) information concerning the background of the person,including the person's material business activities andaffiliations during the past three (3) years; and
(ii) a description of any material pending legal oradministrative proceeding in which the person is a party.
(2) The source and amount of funds or other consideration usedor to be used in acquiring any equity security, including:
(A) a statement describing any securities being offered inexchange for the equity securities of the target company; and
(B) if any part of the acquisition price is or will berepresented by borrowed funds or other consideration, adescription of the transaction and the names of all theparties.
(3) If the purpose of the acquisition is to gain control of thetarget company, a statement of any plans or proposals ornegotiations with respect to the acquisition which the offerorhas upon gaining control to:
(A) liquidate the target company;
(B) sell its assets;
(C) effect its merger or consolidation; or
(D) make any other major change in its business, corporatestructure, management or personnel.
(4) The number of shares or units of any equity security of thetarget company of which each offeror is the record or beneficial
owner or which the offeror has a right to acquire, directly orindirectly.
(5) Information as to any contracts, arrangements,understandings, or negotiations with any person concerning anyequity security of the target company, including:
(A) transfers of any equity security, joint ventures, loan oroption arrangements, puts and calls, guarantees of loan,guarantees against loss, guarantees of profits, division oflosses or profits; or
(B) the giving or withholding of proxies;
naming the persons with whom those contracts, arrangements, orunderstandings have been entered into.
(6) Information as to any contracts, arrangements,understandings, or negotiations, with any officer, director,administrator, manager, executive employee, or record orbeneficial owner of equity securities of the target company withrespect to the tender of any equity securities of the targetcompany, the purchase by the offeror of any equity securitiesowned by that person otherwise than pursuant to the takeoveroffer, the retention of any person in the person's presentposition or in any other management position or with respect tothat person giving or withholding a favorable recommendationto the takeover offer.
(7) A description of the provisions made or to be made forproviding all material information concerning the takeover offerto the offerees, including a description of the proposed takeoveroffer in the form proposed to be published or sent the offereesinitially disclosing the takeover offer.
(8) Any other information which the commissioner prescribesby rule.
(c) In addition to information required under subsection (a) or (b),a statement filed under this section must include the followinginformation:
(1) A description of any contract between the offeror and agovernment (other than the United States, a state of the UnitedStates, a commonwealth or possession of the United States, agovernment in free association with the United States, or apolitical subdivision of a state) executed during the three (3)years preceding the date of the filing of the statement.
(2) A description of any subsidy received by the offeror from agoverment described in subdivision (1) during the three (3)years preceding the date of the filing of the statement.
(3) A list of any offices or appointments held under agovernment described in subdivision (1) by the offeror if theofferor is an individual, or by a member of the board ofdirectors or principal officer if the offeror is a corporation.
As added by Acts 1979, P.L.235, SEC.1. Amended by P.L.229-1989,SEC.4.
IC 23-2-3.1-5.5 Definitions; application of section
Sec. 5.5. (a) The definitions in IC 23-1-20 apply to this section,except to the extent of any conflict with section 1 of this chapter.
(b) This section applies to:
(1) a foreign corporation incorporated under a law other thanthe law of the United States or any state of the United States (asdefined in IC 1-1-4-1); or
(2) a person who is not a citizen of the United States.
(c) This section does not apply to the initiation of a new businessin Indiana by a person subject to this section.
(d) Notwithstanding any other provision of this title, a personsubject to this section may not make a takeover offer unless theperson files a statement with the commissioner under this subsection.
(e) The statement filed under subsection (d) must state thefollowing:
(1) The financial sources to be used by the person in thetakeover offer.
(2) The proposed consummation date of the takeover.
As added by P.L.229-1989, SEC.5.
IC 23-2-3.1-6
Repealed
(Repealed by Acts 1981, P.L.215, SEC.11.)
IC 23-2-3.1-6.5
Terms of offer; requisites; number of offerees
Sec. 6.5. No takeover offer may be made which is not made to allofferees holding the same class of equity securities of the targetcompany on substantially equivalent terms. A takeover offer topurchase less than any or all equity securities of the same class of theoutstanding equity securities of the target company is not consideredas having been made to all offerees of that class on substantiallyequivalent terms if the pro rata portion of equity securities of thatclass tendered by any offeree which will be accepted by the offeroris not equal to the highest pro rata portion of equity securities of thatclass tendered by any other offeree which will be accepted by theofferor. A takeover offer permitting offerees to elect to receive one(1) or more differing kinds of consideration is not considered ashaving been made to all offerees holding the same class of equitysecurities of the target company on substantially equivalent terms ifproration occurs and the pro rata share of any one (1) or morediffering kinds of consideration which is allocable to any offeree isnot equal to the highest pro rata share allocable to any other offeree.
As added by P.L.242-1983, SEC.4.
IC 23-2-3.1-7
Hearing; findings and order; notices; expenses; right to appear;insurance companies
Sec. 7. (a) A hearing shall be held at any time within twenty (20)business days after the required statements under sections 5 and 5.5
of this chapter are filed. If, following the hearing, and within twenty(20) business days after a statement is filed, the commissioner findsby a preponderance of the evidence that:
(1) the takeover statement fails to provide full and fairdisclosure to the offerees of all material information concerningthe takeover offer; or
(2) the takeover offer is not made to all offerees of the sameclass of equity securities of the target company on substantiallyequivalent terms; the commissioner shall by order prohibit thepurchase of shares tendered in response to the takeover offer orcondition purchase upon changes or modifications.
(b) At least five (5) days notice shall be given to the targetcompany, the offeror, and such other persons as the commissionermay designate that a hearing will be held under this section.
(c) The expenses, including the cost of transcripts, of all hearingsheld under this section shall be borne by the offeror. As security forthe payment of the expenses, the offeror shall file with thecommissioner an acceptable bond or other deposit in an amountdetermined by the commissioner.
(d) The target company, the offeror, any offeree, and any otherperson whose interests may be affected have the right to appear atany hearing held pursuant to this chapter and to become a party to theproceeding. Each such person has the right to present evidence,examine and cross-examine witnesses, offer oral written argumentsand, in connection with the proceeding may conduct discoveryproceedings in the manner provided in the Indiana Rules of TrialProcedure. The commissioner may employ any sanction or powergranted courts in the Indiana Rules of Trial Procedure, excluding thepower of contempt, to enforce the commissioner's discovery rulingsor orders.
(e) In the case of a takeover offer subject to the approval of theinsurance commissioner, the offeror within five (5) days after thestatement is filed shall mail a notice to all offerees of the targetcompany advising the offerees of the general terms and conditions ofthe takeover offer and the date of the hearing at which they mayappear. No shares shall be tendered, or purchased by the offeror,until after approval by both the securities commissioner and theinsurance commissioner. All expenses of notifying the offerees shallbe borne by the offeror.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.4; P.L.242-1983, SEC.5; P.L.229-1989, SEC.6.
IC 23-2-3.1-8
Purchase of shares; prohibition
Sec. 8. No shares shall be purchased or paid for pursuant to atakeover offer within the first twenty (20) business days after theoffer is made. No shares shall be purchased or paid for in violationof any order of the commissioner.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.5.
IC 23-2-3.1-8.4
Subsequent acquisition of equity securities by offeror; equivalentterms; limitation
Sec. 8.4. No offeror may acquire in any manner any equitysecurity of any class of a target company at any time within two (2)years following the conclusion of a takeover offer with respect tothat class, including but not limited to acquisitions made bypurchase, exchange, merger, consolidation, partial or completeliquidation, redemption, reverse stock split, and any otherrecapitalization or reorganization, unless the holder of that equitysecurity is also afforded, at the time of that acquisition, a reasonableopportunity to dispose of that security to the offeror uponsubstantially equivalent terms.
As added by P.L.242-1983, SEC.6.
IC 23-2-3.1-8.5
Statements of material fact; omissions; false or misleadingstatements; fraudulent, deceptive, or manipulative acts
Sec. 8.5. In connection with any takeover offer, or any solicitationof offerees in opposition to or in favor of any takeover offer, it isunlawful for any person to make any untrue statement of a materialfact or to omit to state any material fact necessary in order to makethe statements made, in the light of the circumstances under whichthey are made, not misleading, or to engage in any fraudulent,deceptive, or manipulative acts or practices.
As added by Acts 1981, P.L.215, SEC.6.
IC 23-2-3.1-8.6
Exempt acquisitions; notice and hearing to precede order
Sec. 8.6. (a) The provisions of sections 2 through 7 of this chapterdo not apply to the following:
(1) An acquisition by an offeror, if the instant transaction andall acquisitions of equity securities of the same class during thepreceding twelve (12) months by the offeror or any of itsaffiliates do not exceed two percent (2%) of that class.
(2) An acquisition of equity securities of a target companyhaving seventy-five (75) or fewer holders of record of equitysecurities at the time of the takeover offer.
(3) An acquisition determined by order of the commissioner tobe a takeover offer that is not made for the purpose of, and nothaving the effect of, changing or influencing the control of atarget company.
(b) An order may only be adopted under subsection (a)(3) of thissection after a hearing. Not less than five (5) business days' notice ofa hearing must be given to the target company, the offeror, and suchother persons as the commissioner may designate.
(c) The burden of establishing entitlement to any exemption is onthe offeror.
As added by Acts 1981, P.L.215, SEC.7. Amended by P.L.242-1983,SEC.7.
IC 23-2-3.1-9
Administration of chapter; regulations; immunity
Sec. 9. (a) This chapter shall be administered by the secretary ofstate of Indiana by and through the commissioner, who may exerciseall powers granted to the commissioner under IC 23-19.
(b) Subject to the approval of the secretary of state, thecommissioner may promulgate regulations necessary to carry out thepurposes of this chapter under IC 4-22-2.
(c) Neither the secretary of state, nor the securities commissioner,nor any employee of the securities division, shall be liable in theirindividual capacity, except to the state of Indiana, for any act doneor omitted in connection with the performance of their respectiveduties under the provisions of this chapter.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.8; P.L.27-2007, SEC.15.
IC 23-2-3.1-10
Cease and desist orders; injunctions; subpoenas; production ofbooks and papers
Sec. 10. (a) Whenever it appears to the commissioner that anyperson has engaged or is about to engage in any act or practiceconstituting a violation of any provision of this chapter or anyregulation or order adopted under this chapter, the commissioner mayinvestigate and issue orders and notices, including ex parte cease anddesist orders without notice. In addition to all other remedies, he maybring an action in any circuit or superior court in the name and onbehalf of the state of Indiana against any person or personsparticipating in or about to participate in a violation of this chapterto enjoin those persons from continuing or doing any act in violationof this chapter or to enforce compliance with this chapter. In anycourt proceedings, the commissioner may apply for and on dueshowing be entitled to have issued the court's subpoena requiring:
(1) the appearance of any defendant or his employees or agentsto testify and give evidence concerning the acts or conduct orthings complained of; or
(2) the production of documents, books and records;
as may appear necessary for the hearing of the petition.
(b) Whenever any person has engaged or is about to engage in anyact or practice constituting a violation of this chapter or anyregulation or order adopted under this chapter, the offeror, targetcompany or any record or beneficial owner of an equity security ofthe target company may bring an action in the circuit or superiorcourt of the county where the target company has its principal officeor Marion County to enjoin that person from continuing or doing anyact in violation of this chapter or to enforce compliance with thischapter.
(c) Upon a proper showing, the court may grant a permanent orpreliminary injunction or temporary restraining order or may orderrescission of any sales, tenders for sale, purchases or tenders forpurchase of equity securities determined to be unlawful under this
chapter or any regulation or order of the commissioner. The courtmay not require the commissioner to post a bond.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.9.
IC 23-2-3.1-11
Appeal; notice; transcript; disposition on appeal
Sec. 11. An appeal may be taken by any offeror, target company,or other party to any proceeding before the commissioner from anyfinal order of the commissioner to the court of appeals for errors oflaw under the same terms and conditions as govern appeals inordinary civil actions, except as otherwise provided in this section.An assignment of errors that the decision, ruling, or order of thecommissioner is contrary to law is sufficient to present both thesufficiency of the facts found to sustain the decision, ruling, or order,and the sufficiency of the evidence to sustain the findings of factsupon which it was rendered. Within twenty (20) days from the entryof an order, the commissioner shall be served with a written noticeof the appeal which states the grounds upon which a reversal of thefinal order is sought and with a demand in writing for a certifiedtranscript of the record and of all papers on file in the commissioner'soffice affecting or relating to that order. The commissioner shallwithin twenty (20) days after service of the notice of appeal make,certify, and deliver to the appellant the transcript. The appellantshall, within five (5) days after the receipt of the transcript, file thetranscript and a copy of the notice of appeal with the clerk of thecourt. The notice of appeal shall stand as the appellant's assignmentof errors. If the order of the commissioner is reversed, the court shalldirect the commissioner's further action in the matter, including themaking and entering of any order and the conditions, limitations, orrestrictions to be contained in the order. However, the commissioneris not barred from later revoking or altering the order for any propercause which may later accrue or be discovered. If the order isaffirmed, the appellant may file a new disclosure statement afterthirty (30) days from the ruling of the court of appeals if thedisclosure statement is not otherwise barred or limited. The appealdoes not suspend the operation of the order appealed from during thependency of the appeal unless upon proper order of the court.
As added by Acts 1979, P.L.235, SEC.1. Amended by Acts 1981,P.L.215, SEC.10; P.L.3-1989, SEC.138.