The Take-Over Bid by Private Agreement: The Follow-Up Offer Obligation

The acquisition of control of a public corporation by the private purchase of shares from a controlling shareholder' or a control group has been one of the most controversial issues in corporate and securities law and has been the subject of a continuing debate. 2 The purchase of corporate control raises the fundamental issue of the extent to which a controlling shareholder should be permitted to dispose of his shares at a premium without sharing the premium with minority shareholders. Securities law in the United States does not require equal treatment where control is acquired by private agreement, 3 but some American jurisprudence holds, as a matter of corporate law, that majority shareholders who sell effective control of a corporation at a premium are under a duty to share the premium with the remaining minority shareholders, essentially on the ground that majority shareholders owe a fiduciary duty to the minority.