DOVER, DEL., JAN. 20 -- Delaware must enact legislation to curtail hostile corporate takeovers if the state hopes to retain its position as a leader in incorporations, supporters of the proposal said today.
Opposition to the proposal, however, centered on the fear the legislation would result in a halt to hostile takeovers, which opponents contended was unhealthy for the economy and could be costly to shareholders.
Supporters maintained the legislation protects fair prices for shareholders.
The comments came during a joint Senate and House public hearing on two bills pending in the Delaware General Assembly designed to amend the state's takeover laws.
Delaware's liberal corporate laws and tax advantages have led about 184,000 companies to incorporate in the state, including 56 percent of the Fortune 500 companies and 45 percent of the companies listed on the New York Stock Exchange.
The state's corporate franchise taxes and fees add more than $170 million annually to the state treasury, representing about 17 percent of Delaware's revenue, said Secretary of State Michael E. Harkins.
Harkins, who testified on behalf of the proposed legislation, said Delaware historically has produced "a body of law that is balanced, fair and moderate. The recommendations presented to you today are in lock step with that tradition."
The legislation proposes that a buyer with 15 percent or more of a target's stock wait three years before completing an intended takeover. Exceptions would include a buyer acquiring 85 percent of a target's stock in one transaction not influenced by management.
A House version would impose the restrictions until stockholders or the board of directors voted to invalidate them. A Senate version would impose restrictions only if stockholders or board of directors approved them.