Rep. Tackey Chan files bill to expand control-share rules to closed-end funds

Representative Tackey Chan filed a bill, House No. 1112, on Jan. 16, 2025, seeking to amend Chapter 110D of the Massachusetts General Laws to revise the definition and treatment of "control share acquisitions," including new provisions specifically covering listed closed-end funds.

The bill would add a new category for "listed closed-end funds," specify smaller incremental voting-power thresholds for those funds, and add a statutory definition of the term tied to the federal Investment Company Act of 1940 (the "1940 Act"). The measure was submitted to the House and recorded as a petition to the House Committee on Financial Services.

If enacted as written, the amendment would insert a separate set of voting-power ranges for listed closed-end funds in subsection (c)(1) of Chapter 110D. For listed closed-end funds the bill sets two additional lower ranges (1/10 or more but less than 15/100 of voting power, and 15/100 or more but less than 1/5) while preserving the existing ranges that apply to all issuing public corporations (1/5 to less than 1/3; 1/3 to less than a majority; and a majority or more).

The bill also revises the exclusions to the definition of a control share acquisition in subsection (c)(2). It retains traditional carve-outs (for shares acquired before June 26, 1987; acquisitions pursuant to preexisting contracts; transfers by will or by descent; satisfaction of pledges; certain tender offers, mergers or consolidations; and direct purchases from the issuing corporation or a wholly-owned subsidiary) and adds a date specifically for listed closed-end funds (shares acquired before July 31, 2026 may be excluded in certain circumstances).

The proposal adds explicit statutory definitions: it defines "1940 Act" as the Investment Company Act of 1940 (15 U.S.C. ") and defines "listed closed-end fund" as an entity subject to chapter 182 that is registered under the 1940 Act as a closed-end management investment company and has equity securities listed on a national securities exchange or designated for trading on the NASDAQ.

The bill would also add a statutory carve-out in section 2 for issuing public corporations that are listed closed-end funds: subsection 2(f) states that paragraphs (a) through (d) of section 2 would not apply to listed closed-end funds and makes explicit that, for such funds, a person who acquires shares in a control share acquisition "shall have only such voting rights as are authorized pursuant to section five," except where the fund's directors (including a majority of independent directors as defined by the 1940 Act) adopt provisions in the fund's articles or by-laws approving or exempting the acquisition and find it in the fund's best interest.

Other technical changes in the filed text add cross-references to listed closed-end funds in sections 5, 6 and 7 of Chapter 110D and amend the initial paragraphs of section 1 to harmonize terminology.

The filing is an introduction of a statutory change; the document does not record any legislative action on the bill beyond its filing or any public testimony. The bill text itself identifies Representative Tackey Chan of Quincy as the petitioner and lists "Financial Services" as the committee reference. No committee hearings, votes, or enactment dates are contained in the submitted text.

The proposed changes would primarily affect listed closed-end funds, their sponsors, directors and shareholders, and could alter the way voting rights attach to significant acquisitions of fund shares under Massachusetts law. Because the bill modifies statutory definitions and voting-right consequences, its implementation would depend on the bill's progress through the legislative process and, potentially, on coordination with federal securities law and fund governance practices.

Next steps: House No. 1112 was filed on Jan. 16, 2025, and as noted on the filing cover was presented to the House and referred for consideration to the House Committee on Financial Services. The bill text itself does not set an effective date or indicate immediate regulatory changes.