Richards Layton & Finger
 

A Baker's Dozen - 13 Defensive Takeover Measures Available to Closed-End Investment Companies Organized as Delaware Statutory Trusts

November 2010

Delaware statutory trusts have become increasingly popular for the organization of investment companies registered under the Investment Company Act of 1940, as amended (1940 Act).  In light of recent public discussion with respect to the use of defensive measures by closed-end funds to counteract takeover attempts, this article addresses some of the more common defensive measures that have been adopted by closed-end funds organized as Delaware statutory trusts and the permissibility of such measures under Delaware law. It also highlights some of the differences in the Delaware laws applicable to statutory trusts and laws applicable to Delaware corporations. The defensive measures discussed in this article are not the only ones available to Delaware statutory trusts, but simply some of the more common (for example, this article does not address defensive measures, such as shareholder rights plans (so-called “poison pills”), that, though they may be adopted by Delaware statutory trusts, may be of limited use to closed-end funds or have otherwise not been widely adopted by closed-end funds).