Business Combination Act

R.I. Gen. Laws tit. 7, ch. 7-5.2

in effect

R.I. Gen. Laws § 7-5.2-1 Short title.

7-5.2-1. Short title. This chapter shall be known and may be cited as the “Business Combination Act of 1990”. P.L. 1990, ch. 138, § 1.

R.I. Gen. Laws § 7-5.2-2 Legislative findings.

7-5.2-2. Legislative findings. The general assembly finds and declares that: (1) The hostile takeover of publicly held domestic corporations by business combinations is generally not in the public interest; (2) A permissive statutory method should be established under which domestic, publicly owned corporations can have available methods to limit hostile takeovers; and (3) In determining whether a takeover, whether by way of tender offer or other acquisition proposal, is desirable, the board of directors of a domestic corporation can review and take into consideration any factors that affect the corporation’s employees, suppliers, creditors, customers, and the community in general. P.L. 1990, ch. 138, § 1.

R.I. Gen. Laws § 7-5.2-3 Definitions.

7-5.2-3. Definitions. As used in this chapter, unless the context requires otherwise, the term: (1) “Affiliate” means a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person. (2) “Announcement date”, when used in reference to any business combination, means the date of the first public announcement of the final, definitive proposal for the business combination. (3) “Associate”, when used to indicate a relationship with any person, means: (i) Any corporation or organization of which the person is a director, officer, or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of voting stock; (ii) Any trust or other estate in which the person has a substantial beneficial interest or as to which the person serves as trustee or in a similar fiduciary capacity; and (iii) Any relative or spouse of the person, or any relative of the spouse, who has the same residence as the person. (4) “Beneficial owner”, when used with respect to any stock, means a person who: (i) Individually, or with or through any of the person’s affiliates or associates, beneficially owns the stock, directly or indirectly; or (ii) Individually, or with or through any of the person’s affiliates or associates, has: (A) The right to acquire the stock, whether the right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, or understanding, whether or not in writing, or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise; provided, however, that a person is not deemed the beneficial owner of stock tendered pursuant to a tender or exchange offer made by the person’s affiliates or associates until the tendered stock is accepted for purchase or exchange; or (B) The right to vote the stock pursuant to any agreement, arrangement, or understanding, whether or not in writing; provided, however, that a person is not deemed the beneficial owner of any stock under this item if the agreement, arrangement, or understanding to vote the stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made in accordance with the applicable rules and regulations under the Exchange Act, 15 U.S.C. § 78a et seq., and is not then reportable on a Schedule 13D under the Exchange Act, or any comparable or successor report; or (C) Any agreement, arrangement, or understanding, whether or not in writing, for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in subsection (4)(ii)(B) of this section), or disposing of the stock with any other person who beneficially owns, or whose affiliate or associates beneficially own, directly or indirectly, the stock. (5) “Business combination”, when used in reference to any resident domestic corporation and any interested shareholder of the resident domestic corporation, means: (i) Any merger or consolidation of the resident domestic corporation or any subsidiary of the resident domestic corporation with: (A) The interested shareholder; or (B) Any other corporation, whether or not itself an interested shareholder of the resident domestic corporation, that is, or after the merger or consolidation would be, an affiliate or associate of the interested shareholder; (ii) Any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, except proportionately as a stockholder of the corporation, to or with the interested shareholder or any affiliate or associate of the interested shareholder, whether as a part of a dissolution or otherwise, of assets of the resident domestic corporation or any subsidiary of the resident domestic corporation: (A) Having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the assets, determined on a consolidated basis, of the resident domestic corporation; (B) Having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the outstanding stock of the resident domestic corporation; or (C) Representing ten percent (10%) or more of the earning power or net income, determined on a consolidated basis, of the resident domestic corporation; (iii)(A) Any transaction that results in the issuance or transfer by the resident domestic corporation, or by any subsidiary of the resident domestic corporation, of any stock of the resident domestic corporation or of the subsidiary to the interested shareholder, except: (I) Pursuant to the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the resident domestic corporation or any subsidiary which securities were outstanding prior to the time that the interested shareholder became such; (II) Pursuant to a dividend or distribution paid or made, or the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the resident domestic corporation or any subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the resident domestic corporation subsequent to the time the interested shareholder became such; (III) Pursuant to an exchange offer by the resident domestic corporation to purchase stock made on the same terms to all holders of the stock; or (IV) Any issuance or transfer of stock by the resident domestic corporation; (B) Provided, however, that in no case under subsections (5)(iii)(A)(I) — (IV) shall there be an increase in the interested shareholder’s proportionate share of the stock of any class or series of the resident domestic corporation or of the voting stock of the resident domestic corporation; (iv) The adoption of any plan or proposal for the liquidation or dissolution of the resident domestic corporation proposed by, or pursuant to, any agreement, arrangement, or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder; (v) Any reclassification of securities, including, without limitation, any stock split, stock dividend, or other distribution of stock in respect to stock, any reverse stock split, or recapitalization of the resident domestic corporation, any merger or consolidation of the resident domestic corporation with any subsidiary of the resident domestic corporation, or any other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, or pursuant to any agreement, arrangement, or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder, that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of voting stock or securities convertible into voting stock of the resident domestic corporation or any subsidiary of the resident domestic corporation that is directly or indirectly owned by the interested shareholder or any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments; or (vi) Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the resident domestic corporation, of any loans, advances, guarantees, pledges, or other financial assistance, benefits, any tax credits, or other tax advantages provided by or through the resident domestic corporation, except as expressly permitted in subsections (5)(i) through (5)(vi). (6) “Common stock” means any stock other than preferred stock. (7) “Consummation date”, with respect to any business combination, means the date of consummation of the business combination, or, in the case of a business combination as to which a shareholder vote is taken, the later of the business day prior to the vote or twenty (20) days prior to the date of consummation of the business combination. (8) “Control”, including the terms “controlling”, “controlled by”, and “under common control with”, means the possession, directly or indirectly, or the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person’s beneficial ownership of ten percent (10%) or more of a corporation’s outstanding voting stock creates a presumption that the person has control of the corporation. Notwithstanding what was previously stated, above, a person is not deemed to have control of a corporation if the person holds voting stock, in good faith and not for the purpose of circumventing this chapter, as an agent, bank, broker, nominee, custodian, or trustee for one or more beneficial owners who do not individually, or as a group, have control of the corporation. (9) “Exchange Act” means the Act of Congress known as the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., as it has been, and may subsequently be, amended. (10) “Interested shareholder”, when used in reference to any resident domestic corporation, means any person, other than the resident domestic corporation or any subsidiary of the resident domestic corporation or any employee benefit plan maintained by the resident domestic corporation, that: (i)(A) Is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the outstanding voting stock of the resident domestic corporation; or (B) Is an affiliate or associate of the resident domestic corporation and at any time within a five-year (5) period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the then-outstanding voting stock of the resident domestic corporation. (ii) The term “interested shareholder” does not include: (A) Any person who: (I) Owned shares in excess of the ten percent (10%) limitation stated in these provisions as of, or acquired the shares pursuant to a tender offer commenced prior to, July 3, 1990, or pursuant to an exchange offer announced prior to that date and commenced within ninety (90) days subsequently and continued to own shares in excess of the percent limitation or would have but for action taken by the resident domestic corporation; or (II) Acquired the shares from a person described in subsection (10)(ii)(A)(I) by gift, inheritance, or in a transaction in which no consideration was exchanged; or (B) Any person whose ownership of shares in excess of the ten percent (10%) limitation stated above is the result of action taken solely by the resident domestic corporation. However, the person becomes an interested shareholder if he or she subsequently acquires additional shares of voting stock of the resident domestic corporation, except as a result of further corporate action not caused, directly or indirectly, by the person. (iii) For the purpose of determining whether a person is an interested shareholder, the number of shares of voting stock of the resident domestic corporation deemed outstanding includes shares deemed beneficially owned by the person through application of subsection (4) of this section but does not include any other unissued shares of voting stock of the resident domestic corporation that are issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise. (11) “Market value”, when used in reference to stock or property of any resident domestic corporation, means: (i) In the case of stock, the highest closing sale price during the thirty-day (30) period immediately preceding the date in question of a share of stock on the composite tape for stocks listed on the New York Stock Exchange, or, if the stock is not quoted on the composite tape or if the stock is not listed on the exchange, on the principal United States securities exchange registered under the Exchange Act on which the stock is listed, or, if the stock is not listed on any exchange, the highest closing bid quotation with respect to a share of the stock during the thirty-day (30) period preceding the date in question on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if no quotations are available, the fair market value on the date in question of a share of the stock as determined in good faith by the board of directors of the resident domestic corporation; and (ii) In the case of property other than cash or stock, the fair market value of the property on the date in question as determined in good faith by the board of directors of the resident domestic corporation. (12) “Preferred stock” means any class or series of stock of a resident domestic corporation that under the bylaws or articles of incorporation of the resident domestic corporation is entitled to receive payment of dividends prior to any payment of dividends on some other class or series of stock, or is entitled in the event of any voluntary liquidation, dissolution, or winding up of the resident domestic corporation to receive payment or distribution of a preferential amount before any payments or distributions are received by some other class or series of stock. (13) “Resident domestic corporation” means an issuer of voting stock that: (i) Is organized under the laws of this state; and (ii) Either (A) has its principal executive offices and significant business operations located in this state; or (B) has, alone or in combination with one or more of its subsidiaries, at least two hundred fifty (250) employees or twenty-five percent (25%) of the total number of all employees of itself and the subsidiaries employed primarily within the state; and (iii) Has at least five percent (5%) of its voting stock owned beneficially by residents of this state or at least five percent (5%) of its shareholders are residents of this state. For purposes of this subsection, the residence of a partnership, unincorporated association, trust, or similar organization is the principal office of the organization. (iv) No resident domestic corporation that is organized under the laws of this state ceases to be a resident domestic corporation by reason of events occurring or actions taken while the resident domestic corporation is subject to the provisions of this section. (14) “Stock” means: (i) Any stock or similar security, any certificate of interest, any participation in any profit-sharing agreement, any voting trust certificate, or any certificate of deposit for stock; and (ii) Any security convertible, with or without consideration, into stock, or any warrant, call, or other option or privilege of buying stock without being bound to do so, or any other security carrying any right to acquire, subscribe to, or purchase stock. (15) “Stock acquisition date”, with respect to any person and any resident domestic corporation, means the date that the person first becomes an interested shareholder of the resident domestic corporation. (16) “Subsidiary” of any person means any other corporation of which a majority of the voting stock is owned, directly or indirectly, by the person. (17) “Voting stock” means shares of capital stock of a corporation entitled to vote generally in the election of directors. P.L. 1990, ch. 138, § 1; P.L. 1991, ch. 422, § 1; P.L. 2018, ch. 346, § 4.

R.I. Gen. Laws § 7-5.2-4 Approval of acquisitions.

7-5.2-4. Approval of acquisitions. (a) Notwithstanding anything contained in this chapter to the contrary, except the provisions of § 7-5.2-5, no resident domestic corporation shall engage in any business combination with any interested shareholder of the resident domestic corporation for a period of five (5) years following the interested shareholder’s stock acquisition date unless the business combination or the purchase of stock made by the interested shareholder on the interested shareholder’s stock acquisition date is approved by the board of directors of the resident domestic corporation prior to the interested shareholder’s stock acquisition date. (b) Notwithstanding anything contained in this chapter to the contrary, except the provisions of subsection (a) and § 7-5.2-5, no resident domestic corporation shall engage at any time in any business combination with any interested shareholder of the resident domestic corporation other than a business combination specified in any one of subsections (b)(1), (b)(2), or (b)(3): (1) A business combination approved by the board of directors of the resident domestic corporation prior to the interested shareholder’s stock acquisition date, or where the purchase of stock made by the interested shareholder on the interested shareholder’s stock acquisition date had been approved by the board of directors of the resident domestic corporation prior to the interested shareholder’s stock acquisition date; (2) A business combination approved by the affirmative vote of the holders of two-thirds (⅔) of the outstanding voting stock not beneficially owned by the interested shareholder or any affiliate or associate of the interested shareholder at a meeting called for that purpose no earlier than five (5) years after the interested shareholder’s stock acquisition date; (3) A business combination that meets all of the following conditions: (i) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding shares of common stock of the resident domestic corporation in the business combination is at least equal to the higher of the following: (A) The highest per-share price paid by the interested shareholder at a time when the interested shareholder was the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding voting stock of the resident domestic corporation, for any shares of common stock of the same class or series acquired by it within the five-year (5) period immediately prior to the announcement date concerning the business combination, or within the five-year (5) period immediately prior to, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher; plus, in either case, interest compounded annually from the earliest date on which the highest per-share acquisition price was paid through the consummation date at the rate for one-year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per share of common stock since the earliest date, up to the amount of the interest; and (B) The market value per share of common stock on the announcement date with respect to the business combination or on the interested shareholder’s stock acquisition date, whichever is higher, plus interest compounded annually from the date through the consummation date at the rate for one-year United States treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per share of common stock since the date, up to the amount of the interest; (ii) The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding shares of any class or series of stock, other than common stock, of the resident domestic corporation is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired any shares of the class or series of stock: (A) The highest per-share price paid by the interested shareholder at a time when he or she was the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding voting stock of the resident domestic corporation, for any shares of the class or series of stock acquired by it within the five-year (5) period immediately prior to the announcement date with respect to the business combination, or within the five-year (5) period immediately prior to, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher; plus, in either case, interest compounded annually from the earliest date on which the highest per-share acquisition price was paid through the consummation date at the rate for one-year United States treasury obligations from time to time in effect; less the aggregate amount of any cash dividend paid, and the market value of any dividends paid other than in cash, per share of the class or series of stock since the earliest date, up to the amount of the interest; (B) The highest preferential amount per share to which the holders of shares of the class or series of stock are entitled in the event of any voluntary liquidation, dissolution, or winding up of the resident domestic corporation, plus the aggregate amount of any dividends declared or due to which the holders are entitled prior to payment of dividends on some other class or series of stock (unless the aggregate amount of the dividends is included in the preferential amount); and (C) The market value per share of the class or series of stock on the announcement date with respect to the business combination or on the interested shareholder’s stock acquisition date, whichever is higher; plus interest compounded annually from the date through the consummation date at the rate for one-year United States treasury obligations from time to time in effect; less the aggregate amount of any cash dividends paid, and the market value of any dividends paid other than in cash, per share of the class or series of stock since the date, up to the amount of the interest; (iii) The consideration to be received by holders of a particular class or series of outstanding stock, including common stock, of the resident domestic corporation in the business combination is in cash or in the same form as the interested shareholder has used to acquire the largest number of shares of the class or series of stock previously acquired by it, and the consideration shall be distributed promptly; (iv) The holders of all outstanding shares of stock of the resident domestic corporation not beneficially owned by the interested shareholder immediately prior to the consummation of the business combination are entitled to receive in the business combination cash or other consideration for the shares in compliance with subsections (b)(3)(i) through (b)(3)(iii); (v) After the interested shareholder’s stock acquisition date and prior to the consummation date of the business combination, the interested shareholder has not become the beneficial owner of any additional shares of voting stock of the resident domestic corporation except: (A) As part of the transaction that resulted in the interested shareholder becoming an interested shareholder; (B) By virtue of proportionate stock splits, stock dividends, or other distributions of stock in respect of stock not constituting a business combination under § 7-5.2-3(5)(v); (C) Through a business combination meeting all of the conditions of this section; or (D) Through purchase by the interested shareholder at any price which, if the price had been paid in an otherwise permissible business combination the announcement date and consummation date of which were the date of the purchase, would have satisfied the requirements of subsections (b)(3)(i) through (b)(3)(iii) of this section. P.L. 1990, ch. 138, § 1; P.L. 1991, ch. 422, § 1.

R.I. Gen. Laws § 7-5.2-5 Exemptions.

7-5.2-5. Exemptions. The provisions of this chapter do not apply: (1) To any business combination of a resident domestic corporation that does not have a class of voting stock registered with the Securities and Exchange Commission pursuant to § 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, unless the articles of incorporation provide otherwise; (2) To any business combination of a resident domestic corporation whose articles of incorporation have been amended to provide that the resident domestic corporation is subject to the provisions of this chapter, that did not have a class of voting stock registered with the Securities and Exchange Commission pursuant to § 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, on the effective date of the amendment, and that is a business combination with an interested shareholder whose stock acquisition date is prior to the effective date of the amendment; (3) To any business combination of a resident domestic corporation: (i) The original articles of incorporation of which contain a provision expressly electing not to be governed by this chapter; (ii) That adopts an amendment to the resident domestic corporation’s bylaws prior to March 31, 1991, expressly electing not to be governed by this chapter; or (iii) That adopts an amendment to the resident domestic corporation’s articles of incorporation, approved by the affirmative vote of the holders, other than interested shareholders and their affiliates and associates, of two-thirds (⅔) of the outstanding voting stock of the resident domestic corporation, excluding the voting stock of interested shareholders and their affiliates and associates, expressly electing not to be governed by this chapter, provided that the amendment to the articles of incorporation is not effective until twelve (12) months after the vote of the resident domestic corporation’s shareholders and does not apply to any business combination of the resident domestic corporation with an interested shareholder whose stock acquisition date is on or prior to the effective date of the amendment; or (4) To any business combination of a resident domestic corporation with an interested shareholder of the resident domestic corporation that became an interested shareholder inadvertently, if the interested shareholder: (i) As soon as practicable, divests itself of a sufficient amount of the voting stock of the resident domestic corporation that it no longer is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the outstanding voting stock of the resident domestic corporation; and (ii) Would not at any time within the five-year (5) period preceding the announcement date with respect to the business combination have been an interested shareholder but for the inadvertent acquisition. P.L. 1990, ch. 138, § 1; P.L. 1991, ch. 422, § 1; P.L. 2018, ch. 346, § 4.

R.I. Gen. Laws § 7-5.2-6 Effect of invalidity of part of this chapter.

7-5.2-6. Effect of invalidity of part of this chapter. If a court of competent jurisdiction adjudges to be invalid or unconstitutional any clause, sentence, paragraph, section, or part of this chapter, the judgment or decree does not affect, impair, invalidate, or nullify the remainder of this chapter, but the effect of the judgment is confined to the clause, sentence, paragraph, section, or part of this chapter adjudged to be invalid or unconstitutional. P.L. 1990, ch. 138, § 1.

R.I. Gen. Laws § 7-5.2-7 Validation of rights plans.

7-5.2-7. Validation of rights plans. The terms and conditions of rights or options issued by a corporation, including those outstanding on the effective date of this section, may include, without limitation, restrictions or conditions that preclude or limit the exercise, transfer, receipt, or holding of the rights or options by any person or persons owning or offering to acquire a specified number or percentage of the outstanding stock of the corporation, or any transferee or transferees of any person or persons, or that invalidate or void the rights or options held by any person or persons or any transferee or transferees. P.L. 1990, ch. 138, § 1.

R.I. Gen. Laws § 7-5.2-8 Duties in response to acquisition proposals.

7-5.2-8. Duties in response to acquisition proposals. (a) In discharging the duties of their respective positions with respect to any proposed business combination, as defined in § 7-5.2-3, the board of directors, committees of the board, individual directors, and individual officers may, in considering the best interest of the corporation, in addition to considering the effects on shareholders, consider any of the following: (1) The effect on the corporation’s employees, suppliers, creditors, and customers; (2) The effect on the communities in which the corporation operates; (3) The long-term as well as short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation. (b) On the basis of the factors described in subsection (a), if the board of directors determines that any business combination is not in the best interests of the corporation, it may reject the business combination. If the board of directors determines to reject any business combination, the board of directors has no obligation to facilitate, to remove any barriers to, or to refrain from impeding, the business combination. P.L. 1990, ch. 138, § 1.

Source: State of Rhode Island General Assembly (rilegislature.gov)URL: https://webserver.rilegislature.gov/Statutes/TITLE7/7-5.2/INDEX.htmFetched: 10/20/2026