Williams Act - Explained
What is the Williams Act?
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What is the Williams Act?
The Williams Act is a federal law that was enacted to protect investors from non statutory takeovers by corporate raiders that allow cash tender offers for already-owned stocks.
A corporate raider is a financier that makes hostile takeover bids for companies, so as to gain control over them or exchange them for a profit. The Williams Act was enacted in 1968, it contains federal laws on how offers can be acquired and/or tendered. This act was proposed by Harrison A. Williams. After is was passed, the act mandated that information about takeover bids are disclosed and filed to the Securities and Exchange Commissions (SEC). The disclosure must include every detail of a tender offer.
When Does the Williams Act Apply?
The Williams Act of 1968 contains provisions that stipulate the period of time in which a tender offer may be open and time constraints on shareholders' decision. A consistent wave of hostile and unannounced takeovers in the 1960s led to the enactment of Williams Act. This act give protection to investors and shareholders from the risks of unannounced takeovers. Aside from the enactment of this act, the United States legislators also amended the 1934 Securities Exchange Act to secure all parties involved in takeovers. The Williams Act mandates an entity making cash tender offer to make a full disclosure of the details of the offer. This is to protect shareholders and investors and to achieve transparency in cash tender offer. Over 50 years after the Williams Act was enacted, experts have begun to call for a review of the Act because it is high time the act is updated. One of the reasons for a call for a detailed review of the Act is its inefficiency in addressing hostile and coercive tender offers. Also, because trading companies have drastically evolved over the years, there is need to update the William Act. The evolution of shareholders with different trading dispositions from those of the corporate raiders is another reason to review the act.