ASA Gold and Precious Metals Limited (NYSE: ASA) is facing a significant legal setback following a ruling by the United States District Court for the Southern District of New York. On March 28, 2025, the court granted a motion for summary judgment which determined that the company’s December 2024 shareholder rights plan must be rescinded. This decision stems from the plan's violation of the Investment Company Act of 1940, which mandates that such rights plans must expire within 120 days of their issuance.
The court's ruling effectively nullifies the December 2024 Rights Plan, which was adopted on December 20, 2024, and is no longer in effect. This decision is particularly impactful as it comes amidst ongoing litigation involving ASA and its shareholders, specifically in the case titled Saba Capital Master Fund, Ltd. v. ASA Gold and Precious Metals Ltd., No. 24-CV-690 (SDNY).
Previously adopted rights plans by ASA had already expired according to their terms, adding another layer of complexity to the company's current situation. In light of this ruling, the Litigation Committee of ASA’s Board of Directors has announced its intention to appeal the court's judgment, indicating that the company is not ready to accept this legal defeat.
ASA Gold and Precious Metals is a non-diversified, closed-end fund that primarily seeks long-term capital appreciation through investments in companies engaged in the exploration, development, and mining of precious metals and minerals. A fundamental policy of ASA mandates that at least 80% of its total assets must be invested in specific ways related to precious metals and minerals, including common shares of companies involved in these sectors, direct holdings of bullion, or securities that replicate the price movements of precious metals.
The implications of the court's ruling extend beyond just the rescission of the rights plan. Legal experts suggest that this development could potentially affect shareholder protection mechanisms that are designed to safeguard investor interests. This raises questions about the future of ASA’s governance and its ability to implement protective measures for its shareholders.
As ASA prepares for its appeal, the company faces ongoing litigation costs, which could strain its resources further. The appeal process could take several months, during which time the company will need to navigate the complexities of the legal system while maintaining its investment strategies and commitments to shareholders.
Investors and analysts are closely monitoring the situation, as the outcome of the appeal could set a precedent for how shareholder rights plans are structured and enforced in the future. The legal framework surrounding these plans is critical, given the increasing scrutiny from regulatory bodies and the evolving landscape of investment company regulations.
Founded in 1958, ASA is organized under the laws of Bermuda and is registered with the Securities and Exchange Commission as a closed-end investment company. The company has a history of investing in precious metals and minerals, leveraging comprehensive research and analysis to guide its investment decisions. This includes meetings with company executives, site visits to key operating assets, and proprietary financial analysis.
Merk Investments LLC, an SEC-registered investment adviser, has been providing investment advice to ASA since April 12, 2019, when they were approved by a vote of ASA shareholders. Merk specializes in liquid global markets, including equities, fixed income, commodities, and currencies, and plays a crucial role in shaping ASA's investment strategies.
As the appeal unfolds, ASA Gold and Precious Metals must not only contend with the legal ramifications of the court's ruling but also reassure its investors of its commitment to transparency and sound governance. The company is encouraging stakeholders to visit its website for additional information, including historical and current share prices, news releases, financial statements, and other relevant updates.
In summary, the ruling against ASA's December 2024 Rights Plan marks a pivotal moment for the company, which now faces the dual challenge of appealing the decision while ensuring that its investment strategies remain robust and effective in the face of legal uncertainties. The outcome of this case will likely resonate throughout the investment community, prompting a reevaluation of how shareholder rights plans are crafted and implemented moving forward.
