The Williams Act denotes amendments to the Securities Exchange Act of 1934 passed in 1968 regarding public tender offers for cash purchase of shares or stocks of corporations. The legislation is known after its sponsor Senator Harrison A. Williams of New Jersey. The Williams Act now comprises Sections 13(d) and 14(d) of the Securities Exchange Act of 1934.
This law was passed in 1968 in the wake of a wave of unannounced takeovers and acquisitions that took corporate stockholders by surprise and shock and caught managers completely unawares. They were little prepared to face the challenges that they were confronted with in the turmoil.
This federal Act prescribes certain rules of acquisitions and tender offers.
This law requires the bidder making a tender offer for stock purchase, which is usually at 15 to 20 percent in excess of the current market price, to file with target company as well as with the Securities and Exchange Commission a statement of the purpose and terms of the offer, his own background, his source of funds for financing the offer and his plans for the target company including any contract or agreement concerning the same. This law mandates the bidder to offer the same price to all shareholders of the target company on such public tender offers.
The offer shall be open for at least 20 days and the selling shareholder must have at least 15 days to change his mind or back out.
The acquirer is required to furnish the same information through SEC filings within 10 days of acquiring 5% or more shares of the target company.
Copies of these disclosure statements must also be sent to each national securities exchange where the securities are traded, making the information available to shareholders and investors.
In order to check the abuses of cash tender offers, Congress had passed this Act in 1968, whose purpose is to ensure disclosure and transparency for the benefit of stockholders of the target company.
