No-Action Letter under:
|1||In connection with this request, we also considered letters submitted to the staff by Advantage Partners, LP dated January 18, 2001 and March 23, 2001, as well as a response from the Fund dated March 16, 2001.|
|2||The anti-takeover measures are codified in sections 3-802 through 3-805 of the MGCL.|
|3||See Rule 14a-8(e)(2). If, however, the date of the next annual meeting is changed by more than 30 days from the date of the previous meeting, or if there was no annual meeting the previous year, the deadline is a reasonable time prior to the company's printing and mailing its proxy materials.|
|4||See Definitive Proxy Statement of the France Growth Fund Inc. filed with the Commission on March 17, 2000|
|5||To the contrary, the Fund states that the Proposal was delivered on the "121st day before the date the Company's proxy statement was released to the stockholders for the previous year's annual meeting."|
File Number 882767
January 15, 2001
VIA FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of Chief Counsel
Division of Corporation Finance
Re: Shareholder Proposal Submitted to The France
Growth Fund, Inc. by Advantage Partners, LP
Dear Ladies and Gentlemen:
This letter is submitted on behalf of our client, The France Growth Fund, Inc., a Maryland corporation (the "Company"), pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company hereby gives notice of its intention to omit from its proxy statement and form of proxy (the "Proxy Materials") the proposal and statement of support (the "Proposal") submitted by Advantage Partners, LP (the "Proponent") by letter dated November 15, 2000. The Company has advised us that the Proxy Materials are tentatively scheduled to be filed pursuant to Rule 14a-6 on or about April 5, 2001. Pursuant to the provisions of Rule 14a-8(j) under the Exchange Act, enclosed for filing are six copies of each of this letter and the Proposal. For a copy of the Proposal, please see Exhibit A. Also, pursuant to the provisions of Rule 14a-8(j), we are sending a copy of this letter and the Exhibits to the Proponent.
The Company respectfully requests the concurrence of the Staff of the Division of Corporate Finance (the "Staff") that no enforcement action will be recommended to the Commission if the Company omits the proposal from the Proxy Materials.
For ease of reference, the text of the Proposal, exactly as received, is set forth below.
RESOLVED, that all amendments to the By-Laws adopted by the Board of Directors in June 2000 are hereby repealed since the vast majority, if not all, changes are believed to disenfranchise shareholders in a number of ways, and additionally, are inconsistent with the voting preferences expressed by shareholders at the April 2000 annual meeting. Furthermore, notwithstanding anything to the contrary in the "unspoiled" By-Laws in effect prior to June 2000, future changes to these affected sections of the By-Laws may not be amended, altered or repealed except by the vote of shareholders.
It is our opinion that this Proposal may be omitted from the Proxy Materials based on Rule 14a-8(i)(1), (2), (6) and (3).
Rule 14a-8(i)(1) (Improper Under State Law)
The Proposal seeks to repeal "all amendments to the By-Laws adopted by the Board of Directors in June, 2000 . . . ." According to Rule 14a-8(i)(1), a stockholder proposal is excludable from proxy materials if it is not a proper subject for action by stockholders under the company's state of organization. The Proposal is excludable from the Proxy Materials under Rule 14a-8(i)(1) because the repeal of "all" of the amendments (the "Amendments") to the Amended and Restated Bylaws (the "Bylaws") adopted on June 13, 2000 is not a proper subject for action by stockholders under Maryland law for the following reasons, each of which is more fully discussed below: First, the Bylaws include various provisions of Title 3, Subtitle 8 ("Subtitle 8") of the Maryland General Corporation Law (the "MGCL") to which the Company elected to be subject in June, 2000. Under the MGCL, these Bylaw provisions may not be amended by the stockholders. Second, the Amendments also include provisions that were added to conform to Maryland law. Third, the stockholders may not repeal the Board's power to amend the Bylaws. Fourth, the Proponent failed to satisfy the notice requirements of Article II, Section 13 of the Bylaws. Finally, the Proposal is too vague to be considered by the stockholders. For ease of reference, please see attached Exhibit B, which are the Bylaws currently in effect for the Company, and Exhibit C, which are the unamended Bylaws, marked to show the amendments adopted on June 13, 2000.
The Proposal Is Not a Proper Matter under State Law Because Stockholders of the Company Do Not Have the Power to Amend Certain Provisions of the Bylaws.
In 1999, Subtitle 8 was enacted to permit a Maryland corporation with at least three independent directors and a class of securities registered under the Exchange Act, by resolution of the board of directors and without stockholder approval, to, among other things, (1) provide for a classified board, (2) increase the vote requirement for director removal and (3) vest in the board of directors the exclusive power to set the number of directorships and to fill board vacancies. Such a corporation may elect to be subject to any or all of the provisions of Subtitle 8. The stockholders of the corporation are also permitted to elect for the corporation to become subject to any or all of the provisions of Subtitle 8. If the Subtitle 8 election is accomplished by board resolution, articles supplementary, describing the provisions of Subtitle 8 to which the corporation has elected to be subject, must be filed with the State Department of Assessments and Taxation of Maryland (the "SDAT"). The filing of articles supplementary does not require stockholder or board approval. Subtitle 8 specifically provides that a corporation may elect to be subject to a provision notwithstanding a contrary provision in its charter or bylaws.
Pursuant to Sections 3-802 through 3-805 of Subtitle 8, on June 13, 2000, the Board of Directors of the Company (the "Board") elected on behalf of the Company to be subject to various provisions of Subtitle 8. Articles Supplementary, describing the Subtitle 8 provisions to which the Company became subject, were filed by the Company and accepted for record by the SDAT, thus making those provisions a part of the charter of the Company (the "Charter"). See Exhibit D. The Bylaws were then amended to reflect the various provisions of Subtitle 8 now governing the Company. These Amendments covered (a) special stockholders meetings (Article II, Section 3), (b) the election, tenure and removal of directors (Article III, Sections 2, 3 and 4) and (c) board vacancies (Article III, Section 6).
Pursuant to Section 3-802(b)(3) of Subtitle 8, a corporation may opt out of any provision of Subtitle 8 to which it has previously elected to become subject if the corporation opts out of the provision in the same manner in which it elected to become subject to the provision. Because the Company became subject to the provisions of Subtitle 8 by Board action, only the Board may approve the Company's withdrawal from those provisions. Therefore, to allow the stockholders to unilaterally amend these provisions of the Bylaws would be an improper subject for stockholder action under Maryland law. Reflective of the Board's responsiveness to stockholder concerns, the Board has resolved to opt out of one of the Subtitle 8 provisions, Section 3-805, effective at the 2002 Annual Meeting of stockholders. The Board has also resolved to amend Article II, Section 3 of the Bylaws to reduce the threshold required to call a stockholder requested special meeting from a majority to not less than 40% of all the votes entitled to be cast at such meeting. This amendment will not become effective until the Company opts out of Section 3-805 as of the 2002 Annual Meeting.
Additionally, the limitation on stockholder power to amend these Bylaws exists notwithstanding Article XII of the Bylaws, which permits either the Board or the stockholders to amend the Bylaws, because Subtitle 8 provides that the election is effective notwithstanding contrary charter and bylaw provisions.
The Proposal Is Not a Proper Matter Under State Law Because Certain Amendments Were Adopted to Conform to the MGCL.
There are other provisions of the Bylaws, the repeal of which would be improper under Maryland law. For example, prior to the Amendments, Article II, Section 8 of the Bylaws would have precluded a stockholder from authorizing a proxy by electronic means. However, Section 2-507 of the MGCL authorizes electronic proxy authorization. The Amendments merely conform the Bylaws to the MGCL by allowing electronic proxy authorization. Repealing this provision and reinstating the former provision would result in an impermissible and ineffective Bylaw provision under the MGCL.
Because the stockholders do not have the power to amend certain provisions of the Bylaws and because repealing other Amendments would result in inconsistency with the MGCL, the Proposal is a not a proper subject for action by the stockholders of the Company and should be excluded from the Proxy Materials pursuant to Rule 14a-8(i)(1).
The Stockholders May Not Limit the Board's Power to Amend the Bylaws.
The Proposal seeks to divest the Board of its power to amend the "affected section of the By-Laws." Section 2-109 of the MGCL provides that "the power to adopt, alter and repeal the bylaws of the corporation is vested in the stockholders except to the extent that the charter or the bylaws vest it in the board of directors." Pursuant to this provision, Article VI, Section (3)(a) of the Charter provides that the Board is "expressly authorized . . . to adopt, amend or repeal the By-Laws of the Corporation except to the extent that the By-Laws otherwise provide." In other words, as permitted by the MGCL, the Charter devolved the complete power to amend the Bylaws on the Board. On May 1, 1990, at the organizational meeting of the Company, the Board, in adopting the original Bylaws, granted to the stockholders the concurrent power to amend the Bylaws. Because the Charter delegates to the Board the power to amend the Bylaws, subject to any sub-delegation by the Board, and because the Board has delegated to the stockholders the concurrent power to amend the Bylaws, the stockholders may not unilaterally divest the Board of its retained concurrent power to amend the Bylaws. Thus, the Proposal would be an improper subject for consideration by the stockholders under Maryland law and should be excluded from the Proxy Materials under Rule 14a-8(i)(1).
The Stockholder's Notice to the Company of the Proposal Fails to Comply with the Company's Advance Notice Bylaws.
Section 2-504(e) of the MGCL expressly authorizes a Maryland corporation to adopt bylaws that require any stockholder proposing a matter for consideration at a meeting of the stockholders to provide minimum advance notice of the proposal to the corporation, inter alia, of not more than 90 days before the first anniversary of the mailing date of the notice of the preceding year's annual meeting. Pursuant to Section 2-504, the Company adopted Article II, Section 13 of the Bylaws, which requires, in the case of an annual meeting, a stockholder to give notice of a proposal to the Company not later than the 90th day nor earlier than the 120th day prior to the first anniversary of the date of mailing of the notice of the preceding year's annual meeting.
Article II, Section 13(a)(2) of the Bylaws requires that a stockholder's notice, to be proper, must set forth (1) a description of the business desired to be brought before the meeting, (2) the reasons for conducting such business at the meeting and (3) any material interest in such business of such stockholder (including any anticipated benefit therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made. The notice must be submitted by a record holder although the record holder may submit a notice on behalf of a beneficial owner. The name and address of the record holder must be provided as they appear on the Company's stock ledger. If the proposal is being submitted on behalf of a beneficial owner, the name and address of the beneficial owner must also be included in the notice. Additionally, the class and number of shares of the record holder and, if applicable, beneficial owner must be included in the notice.
The Proponent has failed to comply with Article II, Section 13 of the Bylaws. According to the transfer agent of the Company, PNC Bank, the Proponent does not appear on the stock records of the Company. Therefore, the Proponent is not a record holder. As stated above, Article II, Section 13 of the Bylaws requires a record holder to submit the notice to the Company. In addition, the notice, even if submitted on behalf of the Proponent by a record holder, fails to state the class and number of shares held by the Proponent. Because the notice of the Proposal fails to comply with Article II, Section 13 of the Bylaws, the Proposal should be excluded from the Proxy Materials pursuant to Rule 14a-8(i)(1). It should be noted that the Proponent requested a copy of the Bylaws and was sent a copy of the Bylaws on September 14, 2000.
The Proponent did include a statement in the notice of the Proposal that it "has owned shares of company stock with a market value of at least $2,000 continuously for the preceding year and intends to maintain such required ownership through the date of the next shareholders' meeting." Because the Proponent is not a record holder, Rule 14a-8(b) requires the Proponent to submit documentary evidence of beneficial ownership. The Proponent has failed to provide such documentary support. The Company did not notify the Proponent of the Rule 14a-8(b) deficiencies in eligibility because the Proponent did not deliver its Proposal until the 121st day before the date the Company's proxy statement was released to the stockholders for the previous year's annual meeting. Even if the Company had notified the Proponent of the eligibility defect, the Proponent could not possibly have provided the required documentary support for eligibility by the Rule 14a-8(e) deadline. In addition, even if the Company had notified the Proponent of its failure to certify eligibility, the Proponent's notice still fails to comply with Article II, Section 13 of the Bylaws. There is no requirement under Maryland law or the Company's Bylaws that the Company contact a person who has submitted a proposal that fails to comply with Article II, Section 13 of the Bylaws.
The Proposal Is Too Vague For Stockholder Action.
In proposing to repeal "all" of the Amendments, the Proponent ignored that (1) the repeal of some of the Amendments would not be a proper action for stockholders under Maryland law and, in some instances, as described below, would violate the MGCL and (2) certain of the Amendments were adopted to conform the Bylaws with Maryland law. As indicated above, the Proposal states that "the vast majority, if not all, changes are believed to disenfranchise shareholders in a number of ways, and additionally, are inconsistent with the voting preferences expressed by shareholders at the April 2000 annual meeting." If the Company were to attempt to accommodate the Proposal, it would be impossible for the Company to determine which of the provisions of the Bylaws that are subject to stockholder amendment the Proponent would wish to repeal. For example, would the Proponent wish to repeal Article I, Section 1 of the Bylaws, which simply states the official name of the Company? Would the Proponent wish to repeal Article I, Section 3 of the Bylaws, which governs the use of the corporate seal? Would the Proponent seek to repeal Article VI, Section 1 of the Bylaws, which allows the Company to issue uncertificated stock unless a certificate is requested by a stockholder? These provisions are representative of a broad array of changes, none of which has anything to do with the alleged disenfranchisement of stockholders or any of the proposals on which the stockholders voted in April, 2000, as described in the second full paragraph on the next page. In light of the foregoing, the Proposal is too vague for stockholders to understand what action they would be taking and, thus, is not really a proposal at all. Therefore, the Proposal is not a proper subject for stockholder consideration under Maryland law and should be excluded under Rule 14a-8(i)(1).
Rule 14a-8(i)(2) (Violation of Law)
As stated above, the Proposal seeks to repeal "all amendments to the By-Laws adopted by the Board of Directors in June, 2000 . . . ." According to Rule 14a-8(i)(2), a stockholder proposal is excludable from proxy materials if it would cause the company to violate a state, federal or foreign law to which it is subject. The Proposal is excludable from the Proxy Materials under Rule 14a-8(i)(2) because the repeal by the stockholders of Amendments adopted pursuant to the Subtitle 8 election is a direct violation of Section 3-802(b)(3) of Subtitle 8, which specifically provides that the only manner by which a Maryland corporation may opt out of any provision of Subtitle 8 is the same manner in which it elected to be subject to that provision. Because the Subtitle 8 election was accomplished by Board action, the stockholders may not reverse that action, and the Proposal should be excluded from the Proxy Materials under Rule 14a-8(i)(2).
Rule 14a-8(i)(6) (Absence of Power/Authority)
Rule 14a-8(i)(6) provides that a stockholder proposal may be excluded from a company's proxy materials if the company would lack the power or authority to implement the proposals. Section 2-103(17) of the MGCL, which sets forth the powers of a Maryland corporation, provides that a Maryland corporation may do an act "not inconsistent with law." The obvious negative implication of this provision is that a corporation lacks the power to perform an act that is inconsistent with law. Because repealing the Amendments adopted pursuant to the Subtitle 8 election would cause the Company to violate Section 3-802(b)(3) of the MGCL, the Company would not have the power to take such action under Section 2-103(17) of the MGCL. Thus, the Proposal should be excluded from the Proxy Materials under Rule 14a-8(i)(6).
Rule 14a-8(i)(3) (Violation of Proxy Rules)
Rule 14a-8(i)(3) provides that a stockholder proposal is excludable from a company's proxy materials if the proposal or supporting statement is contrary to any of the Commission's proxy rules, including Rule 14a-9, which prohibits materially false or misleading statements in proxy soliciting materials. The Proposal states that "the vast majority, if not all, changes are believed to disenfranchise shareholders in a number of ways, and additionally, are inconsistent with the voting preferences expressed by shareholders at the April 2000 annual meeting."
It is not true that "the vast majority, if not all" the Amendments "disenfranchise shareholders." The Amendments cover a variety of topics, including the most mundane corporate functions. For example, the amendment to Article I, Section 2 repealed a provision establishing Baltimore City as the principal office of the Company in Maryland and inserted a provision allowing the Board to determine by resolution the location of the principal office of the Company in Maryland. As discussed above, Article I, Section 3 governs the use of the corporate seal. The amendments to Article II, Section 1 establish that the location of the annual meeting of stockholders shall be at the principal executive offices of the Company or at such other place as determined by the Board. Article II, Section 3 establishes important procedures for stockholder-requested special meetings on which stockholders may rely. Article II, Section 4 was amended to allow the Company to send electronic notices for stockholders meetings. The Amendments added a new Article II, Section 10 to provide procedures to conform to Section 2-508 of the MGCL for the voting of stock of the Company held by certain persons. The amendments to Article II, Section 12 provide that the reports of the inspectors of election must be in writing. Article III, Section 9 was updated to recognize developments in technology that allow directors to be notified of directors meetings by telephone, e-mail and fax. These provisions are merely representative of the wide variety of amendments that were adopted on June 13, 2000 and cannot by any reasonable interpretation be said to "disenfranchise shareholders."
The Amendments also have nothing to do with the voting preferences at the annual meeting of stockholders in 2000. Those proposals included a recommendation to the Board that it:
(a) expedite the process to ensure Fund shares can trade at net asset value (NAV) daily. Suggested alternatives include (1) conversion to an open-end investment company; or (2) merger with another open-end fund; and
(b) promptly conduct a tender offer for at least 5% of its outstanding shares at or close to net asset value ("NAV").
In fact, on December 18, 2000, the Company announced that the Board has authorized the Company to conduct a tender offer during the first quarter of 2001 for up to 20% of the Company's outstanding shares of stock at a price equal to 98% of the net asset value per share as of the close of regular trading on the New York Stock Exchange on the business day following the expiration of the offer.
In addition to the consideration of the stockholder proposals, two stockholder-nominated directors were elected at the 2000 annual meeting of stockholders. The Amendments do nothing to affect the tenure or possible re-election of those directors. In fact, on December 18, 2000, the Company announced that Bernard Chauvel tendered his resignation from the Board, effective spring 2001. The Company announced its intention to accept a nominee of Bankgesellschaft Berlin AG ("Bankgesellschaft"), the stockholder that nominated the two directors elected at the 2000 stockholders meeting, to fill the vacancy that will be created by Mr. Chauvel's resignation. The Company also announced its intention to include in its slate of nominees for directors to be considered for election at the 2001 annual meeting of stockholders a nominee suggested by Bankgesellschaft. The Amendments have done nothing to impede these actions. Therefore, they are not inconsistent with the "voting preferences expressed by shareholders at the April 2000 annual meeting."
Because of these false and misleading statements, the Proposal should be excluded pursuant to Rule 14a-8(i)(3).
Please direct any correspondence regarding this matter to the undersigned.
Very truly yours,
|HALE and DORR LLP
| BALLARD SPAHR ANDREWS &
cc: Steven M. Cancro, Esquire
Frederick J. Schmidt
(The France Growth Fund, Inc.)
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