Defensive Measures Flashcards
Reasons for “Anti-Takeover Defenses” / Common “Defensive Measures” or Mechanisms?
Avoid shareholders accumulating significant ownership positions or hostile takeover attempts or unsolicited tender offers.
Describe the “Written Consent” Defensive Mechanism
Section 228(a) of the Delaware General Corporation Law (DGCL) generally provides that, unless restricted by the certificate of incorporation, the requisite stockholders needed to approve an action may do so by written consent instead of a meeting—including actions to elect new directors or to approve a takeover proposal.
Companies seek to prohibit this in their documentation to prevent shareholders taking swift action in a takeover scenario.
Done by Chache (2013). Tiffany’s suggestion would be to not risk including this, as there is more attention on these provisions now than in prior years.
Describe the “Special Meetings” defense mechanism?
Under Section 211(d) of the DGCL, special meetings of stockholders may be called by the board of directors or by persons authorized by the certificate of incorporation or the bylaws.
Eliminating the ability of shareholders to call special meetings means they need to wait until the next annual meeting to seek an action on a proposal, particularly if the ability to act by written consent doesn’t exist.
Done by all three FL precedent companies that re-domesticated.
Describe “Advance Notice” Bylaws?
These provide public companies with notice of shareholder director nominations or other proposals in advance of an annual or special meeting, as well as establish a deadline for a shareholder to submit such nominations or proposals. Some also require certain reps from shareholders.
Done by Adynxx and Cache – but note can also add now – attached is a chart from DealPoint of publicly trading FL companies, and most have advance notice provisions.
Don’t know what DE law specifically says about it. Courts are in favor.
Classified Board
Voting Standard for Director Elections
Cumulative Voting
Size of Board
Exclusive Forum Provisions
Court decision; not DE law provision.
Business Combination Provisions
Authority to Amend Documents
Supermajority Provisions
Poison Pill
Blank Check Preferred Stock
A provision in a corporation’s certificate of incorporation or bylaws stating only the board (and not stockholders) may fill board vacancies helps thwart the ability of an activist to remove members of the board outside of the typical proxy and annual meeting process.
Describe the “Director Vacancies” Measure?
A provision in a corporation’s charter or bylaws stating that only the board (and not stockholders) may fill board vacancies. Helps thwart the ability of an activist to remove members of the board outside of the typical proxy and annual meeting process.
Done by Adynxx and Cache.
