Which of the following is the best deﬁnition of a shareholder rights plan?
A) The splitting up of a company into two or more companies.
B) The distribution of shares in a subsidiary to existing parent company shareholders.
C) Provisions allowing existing shareholders to purchase stock at some ﬁxed price should an outside takeover bid take place, discouraging hostile takeover attempts.
D) Attempts to gain control of a ﬁrm by soliciting a suﬃcient number of shareholder votes to replace existing management.
E) A ﬁnancial device designed to make unfriendly takeover attempts unappealing, if not impossible.

Question

Quizplus · Accepted Answer

A shareholder rights plan, also known as a poison pill, is a provision in a company's bylaws that allows existing shareholders to purchase additional shares at a fixed price if an outsider attempts a hostile takeover. This makes the takeover more expensive and less appealing, as it dilutes the value of the shares and makes it more difficult to gain control of the company.

Which of the Following Is the Best Deﬁnition of a Shareholder