§80a–23 Closed-end Companies

Summary

Registered closed-end investment companies must not give out their securities as payment for services or for things other than cash or other securities, except when they pay a dividend or go through a reorganization. They must not sell their own common stock for less than its current net asset value (not counting any selling commission or discount). That net asset value must be figured as of a time within forty-eight hours, excluding Sundays and holidays, next preceding the sale. There are five exceptions: offers to existing holders; with a majority of common shareholders’ OK; on conversion of a convertible security under its terms; on exercise of a warrant outstanding on August 22, 1940 (or issued under section 80a–18(d)); or other situations the Commission allows to protect investors. A company may only buy back its own securities in limited ways: on a stock exchange or other open market the Commission approves (and if it is stock, the company must have told those stockholders in the prior six months); by a tender offer after giving all holders a fair chance to tender; or in other Commission-approved ways that prevent unfair treatment of holders.