Court Crushes Saba’s Bid to Overturn Eaton Vance’s Governance

THE FACTS

In a decisive victory for Eaton Vance -- and a major blow to activist investor Saba Capital – Judge Debra Squires-Lee in Massachusetts Superior Court has upheld the Majority Rule Amendment, safeguarding the governance structure of Eaton Vance’s closed-end funds (CEFs). Saba’s high-stakes argument—that the amendment violated the Investment Company Act (ICA) and the funds’ Declarations of Trust—was soundly rejected. The court ruled that the amendment, which raises the voting standard for trustee elections, does not strip shareholders of their rights but merely fortifies the process, ensuring only candidates with broad support can succeed.

This legal war, which began in 2019 when Saba swooped in to exploit discounts in Eaton Vance’s CEFs, has finally reached a dramatic turning point. Eaton Vance’s move to adopt the Majority Rule Amendment was a preemptive strike against Saba’s attempts to destabilize the funds.

OUR TAKE

CEFs’ Long-Term Approach to Governance is Not Dead
Eaton Vance’s resounding court win sends a message that the long-term governance approach taken by closed-end fund managers is not dead at the hands of activist investors. The Majority Rule Amendment’s higher voting threshold ensures that no activist, regardless of size or strategy, can push their agenda without shareholder support. After legal victories over Control Share Amendments, Saba’s continued push against fund governance has hit a major roadblock. Robust fund governance protections can and will hold up under legal scrutiny.

CEF Governance Roadmap Clarified
This ruling confirms the tactical roadmap that funds have begun using since Eaton Vance’s amendment in 2019. Activist investors, with their aggressive tactics, may think twice before attempting to steamroll trustees and force liquidity events. Eaton Vance showed that well-crafted governance provisions, like the Majority Rule Amendment, can withstand legal scrutiny and preserve long-term stability for CEFs.

The Battle is Far From Over
Saba is not going to just accept this decision and roll over. They will appeal and push their arguments in other state fund domiciles such as Maryland and Delaware. Nevertheless, CEF managers and boards should feel vindicated that proactive governance structures can stand strong against opportunistic activist attacks.

Note: Paul Schulman, Co-Head of M&A and Activism Advisory at Sodali & Co, provided expert testimony on behalf of Eaton Vance in this trial.

Views on the News, by the Fund Solutions team provides critical insights into the evolving landscape of registered fund governance and activism, equipping fund managers with the tools they need to navigate these challenging and ever-shifting tides.