• About
    • Login
    View Item 
    •   Institutional Repository Home
    • Law School
    • Vanderbilt Law School Faculty Works
    • View Item
    •   Institutional Repository Home
    • Law School
    • Vanderbilt Law School Faculty Works
    • View Item
    JavaScript is disabled for your browser. Some features of this site may not work without it.

    Browse

    All of Institutional RepositoryCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDepartmentThis CollectionBy Issue DateAuthorsTitlesSubjectsDepartment

    My Account

    LoginRegister

    Selectica Resets the Trigger on the Poison Pill: Where Should the Delaware Courts Go Next?

    Edelman, Paul H.
    Thomas, Randall S., 1955-
    : http://ssrn.com/abstract=1816754
    : http://hdl.handle.net/1803/6840
    : 2012

    Abstract

    Since their invention in 1982, shareholder rights plans have been the subject of intense controversy. Rights plans, or as they are known more pejoratively “poison pills,” enable a target board to “poison” a takeover attempt by making it prohibitively expensive for a bidder to acquire more than a certain percentage of the target company’s stock (until recently 15-20%). Not surprisingly, some commentators view rights plans as an inappropriate means of shifting power from shareholders to the board of directors. In this Article, we critically examine Delaware law on the use of shareholder rights plans and propose a new approach to assessing these plans. This new approach is particularly important given the Delaware Supreme Court’s recent decision in Versata Enterprises v. Selectica Inc. (5 A.3d 586 (Del. 2010)), which upheld a novel form of the poison pill with a only a 5% trigger level and created substantial confusion for future courts and commentators in the process. To bring clarity to this area, we provide courts with a new, consistent, and transparent methodology for evaluating whether a rights plan, or for that matter any defensive tactic, is “preclusive” of shareholders’ ability to wage a proxy contest and is therefore invalid under Delaware law. Specifically, we argue that courts should stop using ad hoc techniques for deciding preclusion and should instead adopt a weighted voting model to make this determination. Such a model will allow courts to transparently consider all of the key parameters that affect the outcome of corporate elections, including the type of bidder, the type of contest, and the differences in voting recommendations that result from these variations. We provide such a model and put it to the test. Specifically, we apply a weighted voting model to illustrate the effect lower trigger levels will have on dissidents’ chances of winning proxy contests. We further demonstrate the effect a classified board, an ESOP, or a white-squire defense will have on these contests. In each case, the model provides a level of consistency and transparency that has never existed in this area of the law.
    Show full item record

    Files in this item

    Thumbnail
    Name:
    Selectica Resets the Trigger.pdf
    Size:
    3.838Mb
    Format:
    PDF
    Description:
    published article
    View/Open

    This item appears in the following collection(s):

    • Vanderbilt Law School Faculty Works

    Connect with Vanderbilt Libraries

    Your Vanderbilt

    • Alumni
    • Current Students
    • Faculty & Staff
    • International Students
    • Media
    • Parents & Family
    • Prospective Students
    • Researchers
    • Sports Fans
    • Visitors & Neighbors

    Support the Jean and Alexander Heard Libraries

    Support the Library...Give Now

    Gifts to the Libraries support the learning and research needs of the entire Vanderbilt community. Learn more about giving to the Libraries.

    Become a Friend of the Libraries

    Quick Links

    • Hours
    • About
    • Employment
    • Staff Directory
    • Accessibility Services
    • Contact
    • Vanderbilt Home
    • Privacy Policy