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

[ ] 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].