The U.S. Securities and Exchange Commission yesterday gave unanimous final approval to changes to its “best price” rule concerning tender offers.

The “best price” rule requires that all shareholders are paid the same price in a tender offer. The changes, which were made necessary by conflicting court interpretations, make clear that compensation for services that might be paid to a shareholder doesn’t count as part of the price paid for his shares.

“Confusion over whether compensation, severance, and other employee benefits are counted for the purpose of the best-price rule has injured investors by discriminating against tender offers,” SEC chairman Christopher Cox said. “Our regulations should be absolutely neutral as between tender offers, mergers, and other forms of business combination so that market considerations can determine which structure creates more value for shareholders.”

The new tender offer best-price rules clarify that the consideration paid to any security holder for securities tendered in a tender offer is the highest consideration paid to any other security holder for securities tendered in the offer. To ensure that investors are protected and the fundamental purpose of the rule is upheld, it also exempts compensatory arrangements from the rule so long as specific substantive standards are satisfied, and includes a safe harbour that hinges upon approval of independent members of the board of directors, the SEC notes.