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Glossary Term: SHAREHOLDER RIGHTS PLAN:

Definition(s) for SHAREHOLDER RIGHTS PLAN::


1. ) Same as poison pill, shareholder rights plans are among the more complicated anti-takeover devices. Although their terms and conditions vary considerably, the purpose of a poison pill is to force potential bidders to negotiate with a target company’s board of directors. If the board approves the deal, it may redeem the pill. If the board does not approve a bid and the potential acquirer proceeds anyway, the pill would be 'triggered,' causing actions that would make the target financially unattractive or dilute the voting power of the potential acquirer. Under a typical plan, shareholders are issued rights to purchase stock in their own company or in the acquiring company at a steep discount (usually half price) if a hostile bidder acquires a certain percentage (usually 15 or 20 percent) of the outstanding shares. Unlike anti-takeover charter and bylaw amendments, poison pills do not have to be ratified by shareholders.



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