Shareholder Rights Plan
Produces an execution-ready rights plan package with board rationale and post-adoption compliance steps.
Prerequisites
Collect before drafting:
- Charter and bylaws (blank-check preferred authority, vote thresholds)
- Cap table and outstanding equity/derivative positions
- Board resolution template
- Proposed Rights Agent and fee terms
- Trading price range and peer plan comparables
- Incorporation jurisdiction and exchange listing rules
- Known large holders, activism context, or inbound bid details
Quick Start
- Run fact intake checklist (Section 1)
- Set key plan terms with the board (Section 2)
- Draft rights agreement per outline (Section 3)
- Prepare certificate of designations, board memo, and disclosure package (Sections 4-6)
- Execute post-adoption checklist (Section 7)
- Use
[PLACEHOLDERS] for all client-specific inputs
Workflow
1. Fact Intake
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
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].
1---2name: shareholder-rights-plan3description: >-4 Drafts a U.S. shareholder rights plan (poison pill) package including rights5 agreement, certificate of designations, board memo, Form 8-K, and press6 release. Applies Unocal/Revlon fiduciary framing, Rule 13d-3 beneficial7 ownership, flip-in/flip-over economics, and redemption/exchange mechanics.8 Use when a board addresses a hostile bid, activist accumulation, or plan9 renewal. Trigger: "poison pill", "rights plan", "rights agreement",10 "flip-in", "flip-over", "DGCL 203", "Unocal", "Revlon".11---1213# Shareholder Rights Plan1415Produces an execution-ready rights plan package with board rationale and post-adoption compliance steps.1617## Prerequisites1819Collect before drafting:20211. Charter and bylaws (blank-check preferred authority, vote thresholds)222. Cap table and outstanding equity/derivative positions233. Board resolution template244. Proposed Rights Agent and fee terms255. Trading price range and peer plan comparables266. Incorporation jurisdiction and exchange listing rules277. Known large holders, activism context, or inbound bid details2829## Quick Start30311. Run fact intake checklist (Section 1)322. Set key plan terms with the board (Section 2)333. Draft rights agreement per outline (Section 3)344. Prepare certificate of designations, board memo, and disclosure package (Sections 4-6)355. Execute post-adoption checklist (Section 7)366. Use `[PLACEHOLDERS]` for all client-specific inputs3738## Workflow3940### 1. Fact Intake4142- [ ] Incorporation state standards (Unocal/Revlon for Delaware)43- [ ] Anti-takeover statute applicability (e.g., DGCL 203)44- [ ] Charter/bylaw constraints on rights or preferred issuance45- [ ] Exchange rules and proxy advisor policies [VERIFY]46- [ ] SEC reporting timeline (Form 8-K within 4 business days) [VERIFY]47- [ ] Existing defensive measures and thresholds48- [ ] Peer rights plan comparables4950### 2. Key Plan Terms5152| Term | Default Range | Notes |53|---|---|---|54| Trigger threshold | 10%-20% | Adjust for ownership concentration |55| Distribution Date | 10 biz days post-trigger or tender offer | Board may extend/shorten |56| Exercise Price | 2x-3x market price | Drives dilution severity |57| Duration | 1-10 years | Align with governance norms |58| Redemption price | $0.001/Right | Nominal; confirm economics |59| Exchange ratio | 1 share/Right | Subject to adjustments |6061### 3. Rights Agreement Outline6263**Preamble and definitions:**64- Parties: company name, state, principal office; Rights Agent65- Recitals: fiduciary rationale, shareholder value protection66- Key definitions: Acquiring Person (threshold + affiliate aggregation + exceptions), Beneficial Ownership (Rule 13d-3), Distribution Date, Flip-In Event, Flip-Over Event, Expiration Date6768**Rights issuance and preferred stock:**69- One Right per outstanding share; attach to common until Distribution Date70- Series A Junior Participating Preferred: dividend, voting, and liquidation parity with common7172**Triggering mechanics:**73- 10 biz days after public announcement of threshold ownership74- 10 biz days after tender/exchange offer commencement75- Exceptions: inadvertent acquirer cure, passive investor certification, repurchase-induced increases7677**Flip-in provisions:**78- Non-Acquiring holders buy common at 50% discount; Acquiring Person Rights void79- Exercise procedures, payment methods, fractional share cash-in-lieu8081**Flip-over provisions:**82- Post-Flip-In merger/asset sale triggers right to buy acquirer shares at 50% discount83- Acquirer assumption or supplemental agreement required84- Covenant to maintain sufficient authorized shares8586**Redemption, exchange, and amendment:**87- Pre-Distribution redemption at nominal price88- Post-Flip-In exchange for common at set ratio89- Broad pre-trigger amendment authority; no post-trigger adverse changes to non-Acquiring holders9091**Termination:**92- Fixed expiry, redemption, exchange, or board-approved merger93- Optional annual review covenant9495**Rights Agent and governance:**96- Limited duties, reliance on company instructions, indemnification, successor mechanics97- Governing law: incorporation state; exclusive forum for internal corporate claims9899### 4. Certificate of Designations100101- Series name, authorized shares count102- Dividend, voting, and liquidation parity with common103- Conversion/exchange mechanics tied to Rights104- Anti-dilution adjustments105106### 5. Board Memo107108- Fiduciary framework: Unocal/Revlon threat analysis and proportionality109- Market comparables and governance considerations110- Recommended terms and alternatives considered111112### 6. Disclosure Package113114- Form 8-K summary and exhibit list [VERIFY]115- Press release with key terms and FAQ116- Exchange notice checklist [VERIFY]117118### 7. Post-Adoption Checklist119120- [ ] File Certificate of Designations with Secretary of State121- [ ] File Form 8-K with rights agreement and exhibits [VERIFY]122- [ ] Notify exchange and transfer agent [VERIFY]123- [ ] Issue press release and update investor materials124- [ ] Train internal contacts and Rights Agent on exercise/redemption workflows125126## Pitfalls127128- **Fiduciary record is mandatory.** Board rationale and proportionality analysis (Unocal/Revlon) must be documented — absence invites challenge.129- **Authorized shares shortfall.** Verify sufficient authorized shares for flip-in/exchange and flip-over before adoption.130- **Charter conflicts.** Confirm no bylaw or charter constraints block rights or preferred issuance.131- **Proxy advisor exposure.** Review ISS/Glass Lewis policies before setting thresholds or duration [VERIFY].132- **Disclosure timing.** Form 8-K is due within 4 business days of adoption [VERIFY].