N.Y. Banking Law § 519: Acquisition of control of investment companies

§ 519. Acquisition of control of investment companies. 1. Subject to

such regulations as the superintendent may prescribe, prior to the

acquisition of control of an investment company by means of the

acquisition of the capital stock or equity interests in such investment

company or in any company which directly or indirectly controls such

investment company, the acquiring company shall make written application

to the superintendent for permission to acquire such control. Such

application shall be in such form and shall contain such information as

the superintendent may require and such applicant, at the time of making

such application, shall pay to the superintendent an investigation fee

as prescribed pursuant to section eighteen-a of this chapter.

The superintendent shall disapprove the proposed exercise of control

of an investment company if, after notice to and an opportunity to be

heard by the applicant and such investment company, he finds the

acquisition of control therein contrary to law or determines that

disapproval is reasonably necessary to protect the interests of the

people of this state. In making such determination, the superintendent

shall only consider (a) whether the character, responsibility and

general fitness of the company which seeks to control such investment

company are such as to command confidence and warrant belief that the

business of such investment company will be honestly and efficiently

conducted in a manner consistent with the public interest, the interests

of depositors and creditors of such investment company, and (b) whether

the exercise of control may impair the safe and sound conduct of the

business of such investment company, the conservation of its assets or

public confidence in its business. Unless the superintendent shall have

denied such application in writing within ninety days of the filing

thereof, or shall have advised the applicant in writing before the

expiration of ninety days of his determination to extend such period an

additional sixty days, such application shall be deemed approved.

As used in this subdivision one, the term "control" means the

possession, directly or indirectly, of the power to direct or cause the

direction of the management and policies of a person, whether by means

of the ownership of the voting stock or equity interests of such person

or of one or more persons controlling such person, by means of a

contractual arrangement, or otherwise. Control shall be presumed to

exist if any company, directly or indirectly, owns, controls or holds

with the power to vote ten per centum or more of the voting stock of any

investment company or of any company which owns, controls or holds with

power to vote ten per centum or more of the voting stock of such

investment company, but no person shall be deemed to control an

investment company solely by reason of his being an officer or director

of such investment company. The superintendent may in his discretion,

upon the application of an investment company or any company which,

directly or indirectly, owns, controls or holds with power to vote or

seeks to own, control or hold with power to vote any voting stock of

such investment company, determine whether or not the ownership, control

or holding of such voting stock constitutes or would constitute control

of such investment company for purposes of this section.

The provisions of this subdivision shall not apply to (1) a company

which has submitted a plan of acquisition to the superintendent pursuant

to subdivision two of this section or (2) any action taken pursuant to

article thirteen of this chapter.

2. Any company, whether or not it is in control of the business of an

investment company as provided in subdivision one of this section, which

desires to acquire all, or substantially all of the capital stock of an

investment company shall, together with such investment company, submit

in duplicate to the superintendent a written plan of acquisition of such

stock together with such other information as the superintendent may

determine. Such plan shall be in form satisfactory to the

superintendent, shall specify each investment company the stock of which

is to be acquired by the company and shall prescribe the terms and

conditions of the acquisition and the mode of carrying it into effect,

including the manner of exchanging the shares of the investment company

for shares or other securities or cash of the company. Any such plan may

provide for the payment of cash in lieu of the issuance of fractional

shares of the company.

At the time of submission to the superintendent of the written plan of

acquisition of stock, an investigation fee as prescribed pursuant to

section eighteen-a of this chapter shall be paid to the superintendent.

There shall be submitted, in duplicate, to the superintendent with the

plan of acquisition of stock, a certificate of the president or

secretary of the company, certifying that such plan has been approved by

the board of directors or other governing body of his company by a

majority vote of all the members thereof, and a certificate of the

president, secretary or cashier of the investment company, the

acquisition of all the capital stock of which is provided for,

certifying that such plan has been approved by the board of directors of

his corporation by a majority vote of all the members thereof, and that

such plan was thereafter submitted to the stockholders of such

corporation at a meeting thereof held upon notice of at least fifteen

days, specifying the time, place and object of such meeting and

addressed to each stockholder at the address appearing upon the books of

the corporation and published at least once a week for two successive

weeks in one newspaper in the county in which such corporation has its

principal place of business and that such plan has been approved at such

meeting by the vote of the stockholders owning at least two-thirds in

amount of the stock of such corporation.

The superintendent shall approve or disapprove of a proposed plan of

acquisition within one hundred twenty days after the submission of such

plan of acquisition to him, and in determining whether or not to approve

any such plan the superintendent shall take into consideration the

declaration of policy contained in section ten of this chapter. If the

superintendent shall approve such plan of acquisition, the

superintendent shall file the plan, together with such certificates and

the original of the approval of the superintendent, in the office of the

superintendent. Upon such filing in the office of the superintendent the

plan, and the acquisitions provided for therein, shall become effective,

unless a later date is specified in the plan, in which event the plan

and such acquisitions shall become effective upon such later date.

Any stockholder of any such corporation, entitled to vote on such plan

of acquisition, who does not assent thereto shall, subject to and by

complying with section six thousand twenty-two of this chapter, have the

right to receive payment of the fair value of his shares and the other

rights and benefits provided by such section.

The provisions of this subdivision shall not apply to any action taken

pursuant to article thirteen of this chapter.

3. For a period of six months from the date of qualification thereof

and for such additional period of time as the superintendent may

prescribe in writing, the provisions of this section shall not apply to

a transfer of control by operation of law to the legal representative,

as hereinafter defined, of one who has control of an investment company.

Thereafter, such legal representative shall comply with the provisions

of subdivision one of this section. The provisions of subdivision one of

this section shall be applicable to an application made under such

section by a legal representative.

The term "legal representative," for the purposes of this section,

shall mean one duly appointed by a court of competent jurisdiction to

act as executor, administrator, trustee, committee, conservator or

receiver, including one who succeeds a legal representative and one

acting in an ancillary capacity thereto in accordance with the

provisions of such court appointment.

4. For purposes of this section the term "company" shall be given the

same meaning as is contained in its definition in section one hundred

forty-one of this chapter.

5. Notwithstanding the provisions of subdivision three of section

two-a of this chapter, when applying this section to limited liability

investment companies, the term "capital stock" shall mean the equity

interest of a member as set forth in the company's articles of

organization or, in the absence of such a provision, the equity interest

represented by a member's right to a proportionate share of the profits

of the company.