Gerard Magliocca asks a good question,
Now we own 60% of GM. Does that make GM a state actor until those shares are sold?
Under our deeply twisted and narrow state action jurisprudence, I think the answer will be no, so long as the government is not actually controlling a majority of the Board.
Similarly, no sovereign immunity abroad, in nations that use rules like our Foreign Sovereign Immunities Act (FISA). And, of course, none here, since its not federally chartered.
[I am just waiting for someone to make the — losing — argument that nationalizations violate the Government Corporation Control Act, 31 U.S.C. § 9102 which states,
An agency may establish or acquire a corporation to act as an agency only by or under a law of the United States specifically authorizing the action.
GM isn't being (partly) acquired “to act as an agency,” so the GCCA won't apply.]
Re: Board of Directors.
That, I hope, would be a temporary situation. Why would a cohesive block of 60% of the shares NOT be able to elect a majority of the board at the next annual meeting of shareholders?
They would surely be able to. But the government could also choose not to vote them. That then raises a nice issue: is the implicit threat of the 60% vote sufficient? I don’t recall any cases addressing that question.
The government could also threaten, apparently, to have the board subsequently removed, regardless of the number of shares it holds. Or to conduct perpetual, intrusive audits. Or… The problem with government interacting with business this way is that it’s got so many other clubs it can wield besides just voting it’s shares. In that respect it’s a special class of super dooper shareholder, regardless of what the nominal status of it’s shares might be.
This isn’t precisely on point but I wonder if the IRS may be asking itself similar questions. See Notice 2009-49, out today, at http://www.irs.gov/pub/irs-drop/n-09-49.pdf — “[I]f the Treasury Department (or an entity acting on its behalf) acquires preferred stock, common stock, warrants to purchase common stock or other types of equity of a financial institution or other entity pursuant to the Emergency Economic Stabilization Act of 2008, then such acquisition is not a change in control event with respect to which a payment can be made under a nonqualified deferred compensation plan pursuant to § 409A(a)(2)(A)(v) of the Internal Revenue Code.”