SENATE BILL REPORT

SB 6475

BYSenators Newhouse, Halsan, Vognild, Hayner, McMullen, Madsen, Sellar and Nelson

Changing provisions relating to corporate takeovers.

Senate Committee on Law & Justice

Senate Hearing Date(s):January 21, 1988; January 29, 1988

Majority Report:  That Substitute Senate Bill No. 6475 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Pullen, Chairman; McCaslin, Vice Chairman; Hayner, Madsen, Newhouse.

Minority Report:  Do not pass.

      Signed by Senator Niemi.

Senate Staff:Dick Armstrong (786-7460)

                  January 30, 1988

AS REPORTED BY COMMITTEE ON LAW & JUSTICE, JANUARY 29, 1988

BACKGROUND:

In 1987 the Legislature was called into a special session to address the threat of a hostile corporate takeover attempt on a major corporation in the state.

The legislation passed in 1987 does not provide any statutory protection from hostile takeover attempts for most domestic corporations and foreign corporations which have significant business contacts with the state.

The corporate anti-takeover legislation has a termination date of December 31, 1988, in order to allow the Legislature time to address the issues of corporate anti-takeover legislation in a comprehensive manner.

SUMMARY:

The December 31, 1988 termination date of the corporate anti- takeover act of 1987 is deleted from the statutes.

The threshold criteria for application of the corporate anti- takeover statute to domestic and foreign corporations are modified.  The corporate anti-takeover statute applies to domestic corporations which have their principal executive office in the state and either a majority of employees are residents of the state or more than 1,000 residents of the state are employed by the corporation.

The corporate anti-takeover statute applies to foreign corporations if:  (1) the principal executive office is located in the state; (2) more than 10 percent of the shareholders reside in the state, or more than 10 percent of the shares are owned by state residents, or 1,000 or more shareholders reside in the state; (3) a majority of employees are residents of the state or the corporation employees 1,000 state residents; and (4) a majority of the corporation's tangible assets are located in the state or more than $50 million of tangible assets are located in the state.

The prohibition on a corporation and/or its subsidiaries terminating 5 percent or more of its employees after a takeover attempt is modified.  The prohibition applies only for a five year period following the acquisition date and the term "termination" does not include death, disability, voluntary retirement, transfer, resignation or leave of absence.

EFFECT OF PROPOSED SUBSTITUTE:

A "grandfather clause" has been added to ensure that the bill does not apply to existing corporations which may have shareholders who qualify as an acquiring person under the act.  The act also does not apply to persons who acquire shares by gift or inheritance.  The term "termination" does not include a transfer of employees among subsidiaries of the target corporation.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Dan Wolfe, SAFECO; Evelyn Sroufe, Perkins, Coie law firm