SEC Differs With CBS On National Amusements Bylaw Changes

By Dawn C. Chmielewski, Dade Hayes

CBS Corp

The Securities and Exchange Commission challenged CBS’s interpretation of a rule that forms the cornerstone of its legal challenge to bylaw changes made by the Redstone family, according to regulatory filings made today.

The SEC’s division of corporate finance asked CBS to explain its interpretation of SEC rules as imposing a 20-day delay before any bylaw change could take effect. Federal regulators appeared to reject the media company’s explanation about regulations requiring shareholder notification.

“We are unable to agree with the legal conclusions set forth in your response,” the SEC notes in a letter date June 13.

The SEC’s correspondence with CBS doesn’t have a direct impact on its pending suit, which proceeds in Delaware. Hearings in the case determining control of CBS are due to start in the fall.

CBS has argued that the last-minute changes National Amusements made to its bylaws are invalid, both under federal law and under Delaware law. NAI instituted them to render ineffective an anticipated board vote to dilute the Redstone family’s control over the company by issuing voting shares of stock to those who now hold non-voting shares.

The suit (read it here) filed in Delaware Court of Chancery alleges breaches of fiduciary duty by National Amusements, the controlling shareholder of both CBS and Viacom. The media company went to court to prevent National Amusements from “abusing” its voting control over the network or hampering the work of its independent directors in evaluating a potential combination with Viacom.

“The statement in the SEC staff letter simply reflects the fact that the SEC does not express formal legal positions as part of its review process,” CBS said in a statement. “We remain confident in our position that the purported bylaw amendments were ineffective under federal law until 20 days after the information statement was mailed to stockholders.”

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