Structural Defenses to Shareholder Activism
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Canadian Public Company Mergers & Acquisitions Guide
Canadian Public Company Mergers & Acquisitions A practical guide to the issues surrounding acquisitions of public companies in Canada. CANADIAN PUBLIC COMPANY MERGERS & ACQUISITIONS Osler, Hoskin & Harcourt llp Table of Contents Acquisition Structures 3 Pre-Acquisition Considerations 16 Minority Shareholder Protections 21 Directors’ Duties 23 Competition Law and Foreign Investment Review 28 2 CANADIAN PUBLIC COMPANY MERGERS & ACQUISITIONS Osler, Hoskin & Harcourt llp 1 Acquisition Structures While several different methods exist to acquire control of a Canadian public company, M&A transactions in Canada are most commonly effected by a “plan of arrangement” and less frequently by a “take-over bid.” These transaction structures are outlined below. PLAN OF ARRANGEMENT Overview A statutory arrangement, commonly referred to as a “plan of arrangement,” is a voting transaction governed by the corporate laws of the target company’s jurisdiction of incorporation. It is first negotiated with the target company’s board of directors and remains subject to the approval of the target company’s shareholders at a special meeting held to vote on the proposed transaction. Notably, an arrangement also requires court approval. Due to the ability to effect the acquisition of all of the outstanding securities of a target in a single step and its substantial structuring flexibility, the majority of board-supported transactions are structured as arrangements. Due to the ability to effect the acquisition of Court Supervision and Approval all of the outstanding Unlike any other transaction structure typically used to effect a change of corporate control, an arrangement is a court-supervised process. securities of a target in The target company applies to court to begin the process of effecting the a single step and its arrangement. -
Proxy Voting Guidelines Benchmark Policy Recommendations TITLE
UNITED STATES Proxy Voting Guidelines Benchmark Policy Recommendations TITLE Effective for Meetings on or after February 1, 2021 Published November 19, 2020 ISS GOVERNANCE .COM © 2020 | Institutional Shareholder Services and/or its affiliates UNITED STATES PROXY VOTING GUIDELINES TABLE OF CONTENTS Coverage ................................................................................................................................................................ 7 1. Board of Directors ......................................................................................................................................... 8 Voting on Director Nominees in Uncontested Elections ........................................................................................... 8 Independence ....................................................................................................................................................... 8 ISS Classification of Directors – U.S. ................................................................................................................. 9 Composition ........................................................................................................................................................ 11 Responsiveness ................................................................................................................................................... 12 Accountability .................................................................................................................................................... -
Adopting a Poison Pill in Response to Shareholder Activism
IN THE BOARDROOM CAPITAL MARKETS & CORPORATE GOVERNANCE Ismagilov/Shutterstock.com Adopting a Poison Pill in Response to Shareholder Activism In his regular column, Frank Aquila drafts a memo to a board explaining the considerations it should evaluate when deciding whether to adopt a poison pill. FRANCIS J. AQUILA PARTNER SULLIVAN & CROMWELL LLP Frank has a broad multidisciplinary practice that includes extensive experience in negotiated and unsolicited mergers and acquisitions, activist and takeover defense, complex cross-border transactions, global joint ventures, and private equity transactions. He regularly counsels boards of directors and board committees on corporate governance matters and crisis management. MEMORANDUM TO: The Board of Directors FROM: Frank Aquila RE: Considerations When Adopting a Poison Pill in Response to Shareholder Activism As we have discussed, the Investor has just filed a Schedule 13D with the Securities and Exchange Commission disclosing equity holdings in the Company equal to 8.8% of the Company’s common stock. The Investor has also disclosed its intentions to increase its stake to approximately 15%, seek representation on the Company’s Board, and then advocate for either a spin-off of certain business units or a sale of the Company. 22 April 2016 | Practical Law © 2016 Thomson Reuters. All rights reserved. To strengthen the Board’s negotiating leverage and provide adequate time to evaluate what alternatives would be in the best interests of the Company and its shareholders, the Board is considering adopting a shareholder rights plan, commonly known as a poison pill, with a 10% threshold. Correctly implemented, the triggering of this poison pill would massively dilute the Investor’s voting and equity stake as soon as the Investor acquires 10% of the Company’s outstanding common stock by allowing all other shareholders to purchase additional shares at a steep discount. -
KS Bancorp Shareholder Rights Plan Frequently Asked Questions
FREQUENTLY ASKED QUESTIONS (“FAQ”) CONCERNING THE ADOPTION OF THE SHAREHOLDER RIGHTS PLAN ON FEBRUARY 9, 2018 1. What is a shareholder rights plan? A shareholder rights plan is a commonly used anti- takeover device utilized to protect a corporation and its shareholders against unwelcome takeovers. Such plans often provide for the issuance of additional shares to the corporation’s shareholders in order to dilute the ownership of a hostile third party. 2. Why has KS Bancorp adopted a shareholder rights plan? Last year, we received informal, non-binding “indications of interest” from First Citizens BancShares (“First Citizens”). Your Board engaged a nationally-recognized investment banking firm to conduct a detailed analysis of the indications of interest and other strategic alternatives. After thorough and extended consideration of the analysis and other relevant information, your Board unanimously determined to reject the indications of interest and resolved that the continued independent operation of KS Bancorp is in the best interest of our shareholders. We feel our recently announced yearend results support this decision. Previously, the indications of interest created significant unrest among our employees and our existing and prospective clients. Notwithstanding our rejection of First Citizens’ indications of interest, we have recently learned that First Citizens’ bank subsidiary (and our direct competitor), First-Citizens Bank & Trust Company, has directly approached certain of our customers and shareholders, expressing its intent -
Frozen Charters
Frozen Charters Scott Hirst* In 2012, the New York Stock Exchange changed its policies to prevent brokersfrom voting shares on corporate governance proposals when they have not received instructions from beneficial owners. Although the change was intended to protect investors and improve corporate governance, it has had the opposite effect: a significant number of U.S. public companies are no longer able to amend important parts of their corporate charters, despite the support of their boards of directors and overwhelming majorities of shareholders.Their charters arefrozen. This Article provides the first empirical and policy analysis of the broker voting change and its significant unintended consequences. I provide empirical evidence that the broker voting change has resulted in the failure of more than fifty charter amendments at U.S. public companies, despite board approvaland overwhelming shareholder support, and that hundreds more companies have frozen charters as a result of the change. The rule change has also made it more difficult to amend corporate bylaws and given some insiders a de-facto veto in proxy voting contests. These costs substantially outweigh the negligible benefits of the broker voting change. I compare a number of solutions to address these problems and identify several that would be preferable to the current approach. Introduction ............................................................................................ 93 I. Charter Amendments and Broker Voting ............................................. 99 A. Amending Corporate Charters................................................. 99 B . B roker Voting .............................................................................. 102 t Lecturer on Law, Harvard Law School; Associate Director, Harvard Law School Program on Corporate Governance and Harvard Law School Program on Institutional Investors. An earlier version of this article was part of a dissertation submitted in partial fulfillment for the degree of Doctor of Juridical Science at Harvard Law School. -
Information to Users
INFORMATION TO USERS The most advanced technology has been used to photograph and reproduce this manuscript from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand corner and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. University Microfilms International A Bell & Howell Information Company 300 North Zeeb Road, Ann Arbor, Ml 48106-1346 USA 313/761-4700 800/521-0600 Order Number 910S075 Antitakeover amendments as alternatives to costly signalling Borokhovich, Kenneth Aubrey, Ph.D. The Ohio State University, 1990 UMI 300 N. -
Frequently Asked Questions About Initial Public Offerings
FREQUENTLY ASKED QUESTIONS ABOUT INITIAL PUBLIC OFFERINGS Initial public offerings (“IPOs”) are complex, time-consuming and implicate many different areas of the law and market practices. The following FAQs address important issues but are not likely to answer all of your questions. • Public companies have greater visibility. The media understanding IPOS has greater economic incentive to cover a public company than a private company because of the number of investors seeking information about their What is an IPO? investment. An “IPO” is the initial public offering by a company • Going public allows a company’s employees to of its securities, most often its common stock. In the share in its growth and success through stock united States, these offerings are generally registered options and other equity-based compensation under the Securities Act of 1933, as amended (the structures that benefit from a more liquid stock with “Securities Act”), and the shares are often but not an independently determined fair market value. A always listed on a national securities exchange such public company may also use its equity to attract as the new York Stock exchange (the “nYSe”), the and retain management and key personnel. nYSe American LLC or one of the nasdaq markets (“nasdaq” and, collectively, the “exchanges”). The What are disadvantages of going public? process of “going public” is complex and expensive. • The IPO process is expensive. The legal, accounting upon the completion of an IPO, a company becomes and printing costs are significant and these costs a “public company,” subject to all of the regulations will have to be paid regardless of whether an IPO is applicable to public companies, including those of successful. -
Amended and Restated Shareholder Rights Plan Agreement
AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN AGREEMENT DATED AS OF APRIL 26, 2013MAY 3, 2019 BETWEEN TRANSCANADA CORPORATION AND COMPUTERSHARE TRUST COMPANY OF CANADA AS RIGHTS AGENT - i - AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN AGREEMENT TABLE OF CONTENTS Article 1 - INTERPRETATION......................................................................................................2 1.1 Certain Definitions ..........................................................................................................2 1.2 Currency ........................................................................................................................15 1.3 Headings ........................................................................................................................15 1.4 Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares ................................................................................................................15 1.5 Acting Jointly or in Concert ......................................................................................1516 1.6 Generally Accepted Accounting Principles...................................................................16 Article 2 - THE RIGHTS ..............................................................................................................16 2.1 Issue of Rights: Legend on Common Share Certificates..............................................16 2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights.................................17 -
Doing Public M&A Deals in Pennsylvania
Doing Public M&A Deals in Pennsylvania:Copyright 2004 Dechert LLP. All rights reserved. Materials Minesweeper have been abridged from laws, court decisions, and Required administrative rulings and should not be considered as legal opinions on specific facts or as a substitute for legal counsel. by William G. Lawlor, Peter D. Cripps, and Ian A. Hartman Dechert LLP The Review of Securities and Commodities Regulation Vol. 38, No. 15 September 7, 2005 This article first appeared in The Review of Securities & Commodities Regulation, and is published here with the permission of Standard & Poor’s. www.dechert.com d Doing Public M&A Deals in Pennsylvania: Minesweeper Required By William G. Lawlor, Peter D. Cripps, and Ian A. Hartman Anti-takeover Statutes in Pennsylvania, among Other Provisions, Give Target Shareholders a Put, Impose a Moratorium on Mergers with Interested Shareholders, and Prohibit Voting of Control Shares. In Addition, in Change-of-control Situations, the Target’s Board May Consider the Interests of Corporate Stakeholders Other than Stockholders, and Its Decisions Will Not be Subject to Enhanced Scrutiny under the Business Judgment Rule. As a response to the 1980s wave of hostile takeovers, many state legislatures adopted or strengthened anti-takeover statutes. Today, virtually all states have such laws, but only a few, including Massachusetts, Ohio, Virginia and Wisconsin , rival Pennsylvania in terms of breadth and complexity (and to some cynics, opacity) of their statutes. The Pennsylvania anti-takeover statutes enacted in 1990 were considered so draconian that they ignited a nationwide firestorm of shareholder protest. CalPERS chief executive Dale Hanson summed it up for many investors when he wrote at the time of passage: “Although the Pennsylvania antitakeover legislation has been characterized as ‘protective’ of corporations, we believe the bill will actually have an ‘anti-business’ effect by discouraging investors from entrusting their assets in Pennsylvania companies.”1 Many public Pennsylvania companies took note of the shareholder protests. -
Shareholder Rights Plan Agreement
AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN AGREEMENT DATED AS OF APRIL 10, 2019 (AMENDING AND RESTATING A SHAREHOLDER RIGHTS PLAN AGREEMENT DATED AS OF APRIL 15, 2016) BETWEEN THERATECHNOLOGIES INC. and COMPUTERSHARE TRUST COMPANY OF CANADA as Rights Agent FASKEN MARTINEAU DUMOULIN LLP Place Victoria Suite 3700, Box 242 800 Place Victoria Montreal, Québec H4Z 1E9 Theratechnologies 2019 Shareholder Rights Plan TABLE OF CONTENTS Page ARTICLE 1 INTERPRETATION ................................................................................................. 2 1.1 Certain Definitions ............................................................................................... 2 1.2 Currency ............................................................................................................. 16 1.3 Descriptive Headings ......................................................................................... 16 1.4 References to Agreement ................................................................................... 16 1.5 Calculation of Number and Percentage of Beneficial Ownership of Outstanding Common Shares ........................................................................... 16 1.6 Acting Jointly or in Concert.............................................................................. 17 1.7 Application of Statutes, Regulations and Rules .............................................. 17 ARTICLE 2 THE RIGHTS ......................................................................................................... 17 -
Keeping Shareholder Activism Alive: a Comparative Approach to Outlawing Dead Hand Proxy Puts in Delaware
KEEPING SHAREHOLDER ACTIVISM ALIVE: A COMPARATIVE APPROACH TO OUTLAWING DEAD HAND PROXY PUTS IN DELAWARE Danielle A. Rapaccioli* Current trends in shareholder activism have brought to light the competing interests of management and stockholders. With a rise in shareholder activism, firms are continuing to include change in control provisions, known as proxy puts, in their debt agreements to counter activist success. Recent litigation regarding the use of these provisions has created a debate as to whether these provisions are valid under Delaware law. Moreover, companies and lending institutions have morphed these provisions into a more restrictive form, known as “dead hand proxy puts.” The controversy analyzed in this Note arises out of the use of dead hand proxy puts in debt agreements. The Delaware Chancery Court has considered the issue of proxy puts in three recent cases. On no occasion has the court declared traditional or dead hand proxy puts invalid; the court, however, expressed skepticism toward these provisions. With a recognized entrenchment effect on management and a deterrent effect on the stockholder franchise, the court indicated that they could potentially be invalid in Delaware as a matter of public policy. This Note considers the rise of shareholder activism in the United States and the use of both proxy puts and poison pills to defend against activist investors and hostile takeovers. It analyzes the current debate over dead hand proxy puts and compares these provisions to the already illegal dead hand poison pills. It ultimately argues that dead hand proxy puts should be outlawed in Delaware on the same basis as dead hand poison pills. -
Proxy Voting Guidelines
Table of Contents INTRODUCTION � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 About the New York State Common Retirement Fund . 1 Proxy Voting and the Bureau of Corporate Governance ������������������������������������������������������������� 1 Environmental, Social, and Governance Principles . 1 Review of Proxy Voting Guidelines . 3 Proxy Voting Procedure ���������������������������������������������������������������������������������������������������������� 3 Reporting ���������������������������������������������������������������������������������������������������������������������������� 3 PROXY VOTING GUIDELINES � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4 Governance Issues ���������������������������������������������������������������������������������������������������������������� 4 Access to the Proxy . 4 Anti-takeover Provisions . 4 Auditors . 5 Board of Directors’ Independence, Accountability and Responsibilities . 6 Capital Structure . 13 Cumulative Voting . 14 Employee Stock Purchase, Retirement and Pension Plans . 15 Executive and Director Compensation . 15 Poison Pills ����������������������������������������������������������������������������������������������������������������� 19 Preemptive Rights . 19 Reimbursement of Proxy Expenses �������������������������������������������������������������������������������� 19 Reincorporation ����������������������������������������������������������������������������������������������������������� 19 Restructurings . 20 Voting Policies