Dead Man or Dead Hand? New Poison Pills in Debt

Journal of International Banking and Financial Law, Forthcoming

Oxford Legal Studies Research Paper 45/2015

9 Pages Posted: 8 Aug 2015 Last revised: 17 Aug 2015

See all articles by Wolf-Georg Ringe

Wolf-Georg Ringe

University of Hamburg - Institute of Law & Economics; University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: August 8, 2015

Abstract

“Poison puts” are contractual clauses in debt arrangements that work similar to poison pills – they are triggered on a certain pre-defined moment and allow the debtholder to claim repayment of the debt, much to the disadvantage of the company. This provides a chilling effect on shareholder activism and potential takeover bids. Recent Delaware case-law suggests that the most extreme, ‘dead hand’ version of such clauses might violate directors’ fiduciary duties.

This short article develops some initial thoughts on the phenomenon and evaluates how the new poison pills would be handled under European takeover and corporate law.

Keywords: poison puts, proxy puts, poison pills, takeovers, fiduciary duty, shareholder activism

JEL Classification: K22, G34

Suggested Citation

Ringe, Wolf-Georg, Dead Man or Dead Hand? New Poison Pills in Debt (August 8, 2015). Journal of International Banking and Financial Law, Forthcoming; Oxford Legal Studies Research Paper 45/2015. Available at SSRN: https://ssrn.com/abstract=2640893

Wolf-Georg Ringe (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

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HOME PAGE: http://www.ile-hamburg.de

University of Oxford - Faculty of Law

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HOME PAGE: http://www.law.ox.ac.uk/people/wolf-georg-ringe

European Corporate Governance Institute (ECGI) ( email )

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Belgium

HOME PAGE: http://ecgi.global/users/wolf-georg-ringe

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