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June 21
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JOURNAL OF PROCEEDINGS
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34
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takeovers customarily generate much hostility between the
management of the "target" and that of the acquiring entity. In
such battles, the interests of the holders of the untendered
shares in the "target" corporation become irrelevant.
I believe that Maryland has a legitimate interest in
regulating the internal affairs of companies incorporated under
Maryland law in order to better protect resident shareholders.
Consequently, I support legislation such as House Bill 1030 and
urge that such legislation be enacted by the General Assembly.
House Bill 1030, the only bill now before me, is of such breadth
that some beneficial transactions unfortunately may be impeded by
its requirements. By requiring that certain corporate
transactions involving the owner of more than 10 percent of the
voting power of the outstanding voting stock of the corporation
be approved by a "supermajority" of the shareholders, House Bill
1030 may impede or prevent certain transactions which are
advantageous to corporations governed by Maryland law.
The public hearing which I conducted on this bill revealed
that several Maryland corporations believe that this bill will
seriously interrupt routine and beneficial corporate transactions
involving entities which hold substantial portions of the
corporation's stock. For example, American Motors Corporation
reported that Renault, the French automobile manufacturer, holds
a substantial block of American Motors stock which was acquired
in a mutually advantageous transaction. If the bill were signed,
future dealings with Renault would be jeopardized, including an
arrangement for the marketing of Jeep vehicles in France. A
similar situation exists with respect to Certain Teed Corporation
which enjoys a mutually beneficial relationship with Compagnie de
Saint Gobian, a French concern with whom Certain Teed has had a
wide variety of financial dealings. The scope of the bill is
further illustrated by the testimony of representatives of
Allegheny Beverage Corporation, who is about to enter into a
financial transaction which involves issuance of stock warrants
whose future value may be adversely affected by this bill.
Finally, a representative of the mutual fund industry, a
substantial number of whose members are incorporated in Maryland,
testified that those corporations would have operating
difficulties if the bill were to become law.
Although there are provisions of the bill which can be used
to exempt certain transactions and certain corporations from the
requirements of the bill, the scope of those exemptions is
uncertain in the opinion of the management of the corporations
whose representatives testified at the public hearing. Those
representatives predicted that, should the bill be signed into
law, they would have no choice but to recommend to their
respective boards of directors that the corporation be
re-incorporated in another State. I think that Maryland
corporations could be spared this inconvenience under the terms
of a bill that is carefully drafted to exempt transactions which
all agree should not be subject to extraordinary shareholder
approval.
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