2010 Pennsylvania Code
Title 15 - CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
Chapter 25 - Registered Corporations
2561 - Application and effect of subchapter.

                               SUBCHAPTER G
                        CONTROL-SHARE ACQUISITIONS

     Sec.
     2561.  Application and effect of subchapter.
     2562.  Definitions.
     2563.  Acquiring person safe harbor.
     2564.  Voting rights of shares acquired in a control-share
            acquisition.
     2565.  Procedure for establishing voting rights of control
            shares.
     2566.  Information statement of acquiring person.
     2567.  Redemption.
     2568.  Board determinations.

        Enactment.  Subchapter G was added April 27, 1990, P.L.129,
     No.36, effective immediately.
        Cross References.  Subchapter G is referred to in sections
     1715, 1903, 1924, 1953, 2575, 2581 of this title.
     § 2561.  Application and effect of subchapter.
        (a)  General rule.--Except as otherwise provided in this
     section, this subchapter shall apply to every registered
     corporation.
        (b)  Exceptions.--This subchapter shall not apply to any
     control-share acquisition:
            (1)  Of a registered corporation described in section
        2502(1)(ii) or (2) (relating to registered corporation
        status).
            (2)  Of a corporation:
                (i)  the bylaws of which explicitly provide that this
            subchapter shall not be applicable to the corporation by
            amendment adopted by the board of directors on or before
            July 26, 1990, in the case of a corporation:
                    (A)  which on April 27, 1990, was a registered
                corporation described in section 2502(1)(i); and
                    (B)  did not on that date have outstanding one or
                more classes or series of preference shares entitled,
                upon the occurrence of a default in the payment of
                dividends or another similar contingency, to elect a
                majority of the members of the board of directors (a
                bylaw adopted on or before July 26, 1990, by a
                corporation excluded from the scope of this
                subparagraph by this clause shall be ineffective
                unless ratified under subparagraph (ii));
                (ii)  the bylaws of which explicitly provide that
            this subchapter shall not be applicable to the
            corporation by amendment ratified by the board of
            directors on or after December 19, 1990, and on or before
            March 19, 1991, in the case of a corporation:
                    (A)  which on April 27, 1990, was a registered
                corporation described in section 2502(1)(i);
                    (B)  which on that date had outstanding one or
                more classes or series of preference shares entitled,
                upon the occurrence of a default in the payment of
                dividends or another similar contingency, to elect a
                majority of the members of the board of directors;
                and
                    (C)  the bylaws of which on that date contained a
                provision described in subparagraph (i); or
                (iii)  in any other case, the articles of which
            explicitly provide that this subchapter shall not be
            applicable to the corporation by a provision included in
            the original articles, or by an articles amendment
            adopted at any time while it is a corporation other than
            a registered corporation described in section 2502(1)(i)
            or on or before 90 days after the corporation first
            becomes a registered corporation described in section
            2502(1)(i).
            (3)  Consummated before October 17, 1989.
            (4)  Consummated pursuant to contractual rights or
        obligations existing before:
                (i)  October 17, 1989, in the case of a corporation
            which was a registered corporation described in section
            2502(1)(i) on that date; or
                (ii)  in any other case, the date this subchapter
            becomes applicable to the corporation.
            (5)  Consummated:
                (i)  Pursuant to a gift, devise, bequest or otherwise
            through the laws of inheritance or descent.
                (ii)  By a settlor to a trustee under the terms of a
            family, testamentary or charitable trust.
                (iii)  By a trustee to a trust beneficiary or a
            trustee to a successor trustee under the terms of, or the
            addition, withdrawal or demise of a beneficiary or
            beneficiaries of, a family, testamentary or charitable
            trust.
                (iv)  Pursuant to the appointment of a guardian or
            custodian.
                (v)  Pursuant to a transfer from one spouse to
            another by reason of separation or divorce or pursuant to
            community property laws or other similar laws of any
            jurisdiction.
                (vi)  Pursuant to the satisfaction of a pledge or
            other security interest created in good faith and not for
            the purpose of circumventing this subchapter.
                (vii)  Pursuant to a merger, consolidation or plan of
            share exchange effected in compliance with the provisions
            of this chapter if the corporation is a party to the
            agreement of merger, consolidation or plan of share
            exchange.
                (viii)  Pursuant to a transfer from a person who
            beneficially owns voting shares of the corporation that
            would entitle the holder thereof to cast at least 20% of
            the votes that all shareholders would be entitled to cast
            in an election of directors of the corporation and who
            acquired beneficial ownership of such shares prior to
            October 17, 1989.
                (ix)  By the corporation or any of its subsidiaries.
                (x)  By any savings, stock ownership, stock option or
            other benefit plan of the corporation or any of its
            subsidiaries, or by any fiduciary with respect to any
            such plan when acting in such capacity.
                (xi)  By a person engaged in business as an
            underwriter of securities who acquires the shares
            directly from the corporation or an affiliate or
            associate of the corporation through his participation in
            good faith in a firm commitment underwriting registered
            under the Securities Act of 1933.
                (xii)  Or commenced by a person who first became an
            acquiring person:
                    (A)  after April 27, 1990; and
                    (B)  (I)  at a time when this subchapter was or
                    is not applicable to the corporation; or
                        (II)  on or before ten business days after
                    the first public announcement by the corporation
                    that this subchapter is applicable to the
                    corporation, if this subchapter was not
                    applicable to the corporation on July 27, 1990.
        (c)  Effect of distributions.--For purposes of this
     subchapter, voting shares of a corporation acquired by a holder
     as a result of a stock split, stock dividend or other similar
     distribution by a corporation of voting shares issued by the
     corporation and not involving a sale of such voting shares shall
     be deemed to have been acquired by the holder in the same
     transaction (at the same time, in the same manner and from the
     same person) in which the holder acquired the shares with
     respect to which such voting shares were subsequently
     distributed by the corporation.
        (d)  Status of certain shares and effect of formation of
     group on status.--
            (1)  No share over which voting power, or of which
        beneficial ownership, was or is acquired by the acquiring
        person in or in connection with a control-share acquisition
        described in subsection (b) shall be deemed to be a control
        share.
            (2)  In the case of affiliate, disinterested or existing
        shares, the acquisition of a beneficial ownership interest in
        a voting share by a group shall not, by itself, affect the
        status of an affiliate, disinterested or existing share, as
        such, if and so long as the person who had beneficial
        ownership of the share immediately prior to the acquisition
        of the beneficial ownership interest in the share by the
        group (or a direct or indirect transferee from the person to
        the extent such shares were acquired by the transferee solely
        pursuant to a transfer or series of transfers under
        subsection (b)(5)(i) through (vi)):
                (i)  is a participant in the group; and
                (ii)  continues to have at least the same voting and
            dispositive power over the share as the person had
            immediately prior to the acquisition of the beneficial
            ownership interest in the share by the group.
            (3)  Voting shares which are beneficially owned by a
        person described in paragraph (1), (2) or (3) of the
        definition of "affiliate shares" in section 2562 (relating to
        definitions) shall continue to be deemed affiliate shares,
        notwithstanding paragraph (2) of this subsection or the fact
        that such shares are also beneficially owned by a group.
            (4)  No share of a corporation over which voting power,
        or of which beneficial ownership, was or is acquired by the
        acquiring person after April 27, 1990, at a time when this
        subchapter was or is not applicable to the corporation shall
        be deemed to be a control share.
        (e)  Application of duties.--The duty of the board of
     directors, committees of the board and individual directors
     under section 2565 (relating to procedure for establishing
     voting rights of control shares) is solely to the corporation
     and may be enforced directly by the corporation or may be
     enforced by a shareholder, as such, by an action in the right of
     the corporation, and may not be enforced directly by a
     shareholder or by any other person or group.
     (Dec. 19, 1990, P.L.834, No.198, eff. imd.)

        1990 Amendment.  Act 198 amended subsecs. (b)(2) and (e) and
     added subsecs. (b)(5)(xi) and (xii) and (d)(4).
        Liability of Directors.  Section 8(b) of Act 36 provided that
     a director shall not be held liable for taking or omitting to
     take any action permitted by section 2561(b)(2), it being the
     intention of Act 36 that any such director may exercise absolute
     discretion in taking or omitting to take any such action.
        Cross References.  Section 2561 is referred to in sections
     2562, 2564, 2581 of this title.