Definition
Acting in Concert refers to a situation where multiple parties coordinate their actions to achieve a common objective within the affairs of an undertaking. This coordination could be based on either formal agreements, like contracts, or informal understandings, akin to a tacit agreement. This collective action could affect the decision-making, control, or operations of a business, and is significant in areas such as mergers and acquisitions, regulatory compliance, securities laws, and corporate governance.
Examples
Example 1: Shareholder Collaboration
Two or more significant shareholders might agree, either formally or informally, to vote in a certain way at a company’s Annual General Meeting (AGM) to influence the election of directors or other key decisions. If these shareholders together own a substantial percentage of shares, their concerted action can significantly impact the outcomes of such votes.
Example 2: Market Manipulation
A group of traders may act in concert to manipulate the stock price of a company by simultaneously buying or selling large quantities of shares. Regulators closely monitor such actions as they can distort the market, harming retail investors and eroding market confidence.
Frequently Asked Questions (FAQs)
What are the implications of being identified as acting in concert?
Identifying individuals or entities as acting in concert can summon various regulatory implications, including compliance with disclosure requirements, obtaining approvals for certain transactions, and facing penalties for restrictive practices like market manipulation.
Is acting in concert illegal?
Not necessarily. It depends on the context and the outcomes of such concerted actions. It is legal as long as the combined actions comply with all relevant laws and regulations, such as notifying regulatory bodies and not being involved in market abuse or anti-competitive practices.
How do regulators determine if parties are acting in concert?
Regulators assess factors such as historical voting patterns, communications between the parties, the existence of agreements, and simultaneous actions that suggest coordinated behavior. Evidence of intent or planning to work together can also be a determinant.
Can there be informal and formal agreements for acting in concert?
Yes. Acting in concert can occur through formal arrangements, like contracts, or informal understandings, like verbal agreements or mutual expectations without written documentation.
Does acting in concert apply only to shareholders?
No. It can involve various stakeholders, including shareholders, directors, financial advisors, consultants, and other entities influential in the decision-making or control within the undertaking.
Related Terms
Proxy Voting
Definition: A method where shareholders delegate their voting power to representatives to vote on their behalf, often seen during AGMs.
Syndicate
Definition: A group of individuals or entities that pool resources to undertake a large transaction, often seen in financial markets for making large-scale investments.
Hostile Takeover
Definition: An acquisition attempt by one company (the acquirer) directly approaching shareholders of another company (the target) against the wishes of the target’s board.
Online References
- Investopedia: Acting in Concert
- SEC.gov: Definition of Acting in Concert
- OECD.org: Corporate Governance and Concerted Actions
Suggested Books for Further Studies
- “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker
- “Security Analysis and Business Valuation on Wall Street” by Jeffrey C. Hooke
- “The Law of Corporations in a Nutshell” by Richard D. Freer
- “Mergers, Acquisitions, and Corporate Restructurings” by Patrick A. Gaughan
Accounting Basics: “Acting in Concert” Fundamentals Quiz
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