Delaware Enacts Protections for Closed-End Fund and Business Development Company Investors
At the end of July, Delaware Governor John Carney signed into law amendments (Control Share Statute) to the Delaware Statutory Trust Act (DSTA) which apply to all registered closed-end funds (CEFs) and business development companies (BDCs) that are organized as Delaware statutory trusts and have a class of equity securities listed on a national securities exchange. The Delaware Control Share Statute defines “control beneficial interests” through a series of voting power thresholds and once a threshold is triggered, the acquiring person’s ability to vote its shares that are in excess of that threshold is conditioned upon receiving either the approval of two-thirds of all the votes cast by the other beneficial owners or an exemption from this requirement by the board of trustees. Control share statutes generally serve as a defense against concentrated minority shareholders by imposing additional requirements on any person who either directly or indirectly, acquires ownership or the power to direct the vote of the “control shares.” The amendments had an effective date of August 1, 2022.
Click here for a detailed summary of Delaware’s Control Share Statute from Skadden, Arps, Slate, Meagher, & Flom.