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The Legality Of The Shareholder Rights By-Law In Delaware: Preserving The Market For Corporate Control


  • Jonathan R. Macey


Just as some lawyers almost killed the takeover market with the invention of the poison pill in the 1980s, others are now about to reinvigorate it with another legal invention. The "shareholder rights bylaw," which promises to be the next major legal battleground in the market for corporate control, aims to eliminate the current ability of target company boards of directors to block changes of control by keeping their poison pill defenses in place. The new bylaws require the poison pill (and other defensive measures) to expire automatically whenever the firm receives an allcash offer for 100% of the firm's stock at a price at least 25% above the prebid market price. The firm can keep its poison pill, but only if shareholders vote to keep it after receiving the offer. 1998 Morgan Stanley.

Suggested Citation

  • Jonathan R. Macey, 1998. "The Legality Of The Shareholder Rights By-Law In Delaware: Preserving The Market For Corporate Control," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(4), pages 63-68.
  • Handle: RePEc:bla:jacrfn:v:10:y:1998:i:4:p:63-68

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    Cited by:

    1. Jiraporn, Pornsit & Kim, Jang-Chul & Kim, Young Sang & Kitsabunnarat, Pattanaporn, 2012. "Capital structure and corporate governance quality: Evidence from the Institutional Shareholder Services (ISS)," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 208-221.

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