Market volatility, market volatility, market volatility-there seems to be no end in sight to the monthly, weekly, and daily fluctuations in financial markets around the globe. One interesting implication created by this volatility is a resurgence of takeover fear. When stock prices fall, valuations fall, expectations may be lowered, and healthy, well-valued companies are presented with excellent buying opportunities. As a result, a company that had been growing exponentially may suddenly find itself under the shadow of a tender offer. Therefore, because of recent market volatility, corporate boardrooms have been forced to review and revamp certain defensive mechanisms. This Comment focuses on one defensive strategy and the recent developments regarding its use: the poison pill with continuing director provisions, namely "dead hand" and "no hand" poison pills.
First, this Comment will address the historical aspect of the poison pill as a takeover defense. Primarily, this section will highlight the origin of the poison pill, its mutations, operation and validation, and then more specifically analyze the particular species of poison pills that incorporate continuing director provisions.
Second, this Comment will outline recent developments in the case law regarding continuing director features in poison pills. The United States District Court for the Northern District of Georgia upheld a Georgia corporation's use of a poison pill with a continuing director feature in July 1997. However, in 1998 two separate cases made their way through the Delaware court system and essentially invalidated both the dead hand and no hand mutations of the poison pill.
Third, this Comment will analyze the reasoning that produced the Georgia and Delaware split. While the Georgia opinion was exclusively rooted in the Georgia Business Corporations Code ("GBCC"), the Delaware decisions not only analyzed the plain meaning of Delaware General Corporation Law ("DGCL") but also evaluated the rights plans under the scrutiny of the traditional business judgment rule.
In conclusion, this Comment will highlight possible ramifications of the Delaware decisions on Georgia jurisprudence and provide some insight for advising a corporate board of directors
Shearer, William B. III
"Poison Pills: Are Dead Hand Pills Dead In Georgia?,"
Mercer Law Review: Vol. 50
, Article 10.
Available at: https://digitalcommons.law.mercer.edu/jour_mlr/vol50/iss3/10