Overview
- The Court issued a 6-3 decision on Thursday, June 11, 2026, in FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd., reversing lower-court rulings that had allowed private suits under Section 47(b).
- The justices held that Section 47(b) — the part of the law that says contracts that violate the Investment Company Act are void — does not create an implied private right for shareholders to sue to rescind bylaws.
- Saba Capital had argued that so-called control-share bylaws used by several Maryland-organized closed-end funds unlawfully limited voting power and violated the Act’s equal-vote rule in Section 18(i).
- The decision reduces a litigation tool long used by activist investors and lowers the immediate legal risk for fund managers who adopt voting-limiting bylaws.
- With private rescission suits blocked, investors must rely on the SEC, proxy contests, negotiation, or other legal claims to challenge fund governance, and the ruling resolves a split among federal appeals courts that had created uncertainty.