On October 21, 2024, a Massachusetts Superior Court ruled in favor of four closed-end funds, holding that the funds’ 2020 bylaw amendment that requires trustee nominees in a contested election to receive the affirmative vote of a majority of the fund’s outstanding shares in order to be elected does not violate Section 18(i) of the Investment Company Act of 1940, which requires all shares to have equal voting rights, or the funds’ declaration of trust, which allows shareholders to elect trustees.

The plaintiff, an activist investor in the closed-end funds, argued that the funds’ amended bylaw provisions set a threshold for electing dissident trustees that was too high to achieve in practice and therefore deprived the funds’ shareholders of their right to elect trustees. The court rejected the plaintiff’s assertion, concluding that increasing the required vote to elect a dissident trustee from a plurality threshold to a majority of the fund’s outstanding shares does not disenfranchise shareholders and instead ensures that a dissident trustee candidate has the support of a majority of the fund’s shareholders.  Regarding the plaintiff’s claim that the bylaw amendment violated the Section 18(i) requirement that all shares have equal voting rights, the court held that the amendment did not cause any shareholder votes to be weighted differently from any other shareholder vote.       

The order was issued under the caption Eaton Vance Senior Income Trust v. Saba Capital Master Fund, Ltd., Case No. 2084-CV-01533 (Mass. Super. Ct. Oct. 21, 2024).