“The third statute at issue, the Poison Pill Statute, Va.Code Ann. § 13.1-646, allows a corporation to give shareholders certain rights or options to purchase, on favorable terms, shares in the corporation. The rights take effect upon the occurrence of a specified event, such as the acquisition by one shareholder of a certain percentage of the company’s stock. Such rights take effect upon the occurrence of a specified event, such as the acquisition by one shareholder of a certain percentage of the company’s stock. Such rights may be issued discriminatorily, i.e., may be withheld from designated shareholders or groups of shareholders. The directors of the corporation are required to exercise their good faith business judgment when granting such rights.” J. Murnaghan, WLR Foods, Inc. v. Tyson Foods, Inc., 65 F.3d 1172, 1178 (4th Cir. 1995).
Poison pill
Definition
A corporation’s defensive strategy against a hostile takeover bid in which current shareholders other than the tender-offer bidder or prospective bidder, upon a triggering event, have the right to purchase additional corporate stocks at a deeply discounted price. The effect is to dilute the value of the stock and increase the bidder’s acquisition costs. Also called a shareholder rights plan.
See also
Definition from Nolo’s Plain-English Law Dictionary
A defensive strategy for avoiding a hostile takeover in which a company offers low-price stock to its current shareholders in order to dilute the shares and make it more expensive for another company to buy them out.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:21 pm
