shareholder-rights-plan

name	shareholder-rights-plan
language	en
description	Drafts a U.S. shareholder rights plan (poison pill) package including rights agreement, certificate of designations, board memo, Form 8-K, and press release. Applies Unocal/Revlon fiduciary framing, Rule 13d-3 beneficial ownership, flip-in/flip-over economics, and redemption/exchange mechanics. Use when a board addresses a hostile bid, activist accumulation, or plan renewal. Trigger: "poison pill", "rights plan", "rights agreement", "flip-in", "flip-over", "DGCL 203", "Unocal", "Revlon".

Shareholder Rights Plan

Produces an execution-ready rights plan package with board rationale and post-adoption compliance steps.

Prerequisites

Collect before drafting:

1. Charter and bylaws (blank-check preferred authority, vote thresholds)
2. Cap table and outstanding equity/derivative positions
3. Board resolution template
4. Proposed Rights Agent and fee terms
5. Trading price range and peer plan comparables
6. Incorporation jurisdiction and exchange listing rules
7. Known large holders, activism context, or inbound bid details

Quick Start

1. Run fact intake checklist (Section 1)
2. Set key plan terms with the board (Section 2)
3. Draft rights agreement per outline (Section 3)
4. Prepare certificate of designations, board memo, and disclosure package (Sections 4-6)
5. Execute post-adoption checklist (Section 7)
6. Use [PLACEHOLDERS] for all client-specific inputs

Workflow

1. Fact Intake

• Incorporation state standards (Unocal/Revlon for Delaware)
• Anti-takeover statute applicability (e.g., DGCL 203)
• Charter/bylaw constraints on rights or preferred issuance
• Exchange rules and proxy advisor policies [VERIFY]
• SEC reporting timeline (Form 8-K within 4 business days) [VERIFY]
• Existing defensive measures and thresholds
• Peer rights plan comparables

2. Key Plan Terms

Term	Default Range	Notes
Trigger threshold	10%-20%	Adjust for ownership concentration
Distribution Date	10 biz days post-trigger or tender offer	Board may extend/shorten
Exercise Price	2x-3x market price	Drives dilution severity
Duration	1-10 years	Align with governance norms
Redemption price	$0.001/Right	Nominal; confirm economics
Exchange ratio	1 share/Right	Subject to adjustments

3. Rights Agreement Outline

Preamble and definitions:

• Parties: company name, state, principal office; Rights Agent
• Recitals: fiduciary rationale, shareholder value protection
• Key definitions: Acquiring Person (threshold + affiliate aggregation + exceptions), Beneficial Ownership (Rule 13d-3), Distribution Date, Flip-In Event, Flip-Over Event, Expiration Date

Rights issuance and preferred stock:

• One Right per outstanding share; attach to common until Distribution Date
• Series A Junior Participating Preferred: dividend, voting, and liquidation parity with common

Triggering mechanics:

• 10 biz days after public announcement of threshold ownership
• 10 biz days after tender/exchange offer commencement
• Exceptions: inadvertent acquirer cure, passive investor certification, repurchase-induced increases

Flip-in provisions:

• Non-Acquiring holders buy common at 50% discount; Acquiring Person Rights void
• Exercise procedures, payment methods, fractional share cash-in-lieu

Flip-over provisions:

• Post-Flip-In merger/asset sale triggers right to buy acquirer shares at 50% discount
• Acquirer assumption or supplemental agreement required
• Covenant to maintain sufficient authorized shares

Redemption, exchange, and amendment:

• Pre-Distribution redemption at nominal price
• Post-Flip-In exchange for common at set ratio
• Broad pre-trigger amendment authority; no post-trigger adverse changes to non-Acquiring holders

Termination:

• Fixed expiry, redemption, exchange, or board-approved merger
• Optional annual review covenant

Rights Agent and governance:

• Limited duties, reliance on company instructions, indemnification, successor mechanics
• Governing law: incorporation state; exclusive forum for internal corporate claims

4. Certificate of Designations

• Series name, authorized shares count
• Dividend, voting, and liquidation parity with common
• Conversion/exchange mechanics tied to Rights
• Anti-dilution adjustments

5. Board Memo

• Fiduciary framework: Unocal/Revlon threat analysis and proportionality
• Market comparables and governance considerations
• Recommended terms and alternatives considered

6. Disclosure Package

• Form 8-K summary and exhibit list [VERIFY]
• Press release with key terms and FAQ
• Exchange notice checklist [VERIFY]

7. Post-Adoption Checklist

• File Certificate of Designations with Secretary of State
• File Form 8-K with rights agreement and exhibits [VERIFY]
• Notify exchange and transfer agent [VERIFY]
• Issue press release and update investor materials
• Train internal contacts and Rights Agent on exercise/redemption workflows

Pitfalls

• Fiduciary record is mandatory. Board rationale and proportionality analysis (Unocal/Revlon) must be documented — absence invites challenge.
• Authorized shares shortfall. Verify sufficient authorized shares for flip-in/exchange and flip-over before adoption.
• Charter conflicts. Confirm no bylaw or charter constraints block rights or preferred issuance.
• Proxy advisor exposure. Review ISS/Glass Lewis policies before setting thresholds or duration [VERIFY].
• Disclosure timing. Form 8-K is due within 4 business days of adoption [VERIFY].