Shareholder rights plans were developed more than 30 years ago to fend off opportunistic hostile offers and other abusive takeover transactions. Rights plans deter unauthorized stock accumulations by imposing substantial dilution upon any shareholder who acquires shares in excess of a specified ownership threshold (typically ten to twenty percent) without prior board approval. Although the freewheeling takeover environment of the 1980s is now a distant memory, corporations today face continued threats of abusive takeover transactions, as well as threats from activist and other “event-driven” investors who may disproportionately affect governance. This paper updates papers first published in April 2009 and April 2011 and documents and analyzes recent rights plan trends.
Recent years brought a number of important developments affirming the legality and demonstrating the effectiveness of shareholder rights plans.
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