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On the Validity of Poison Pill By-Laws

49 Pages Posted: 6 Sep 2006  

Lucian A. Bebchuk

Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Jay W. Eisenhofer

Grant & Eisenhofer, P.A.

Stuart M. Grant

Grant & Eisenhofer, P.A.

Michael J. Barry

Grant & Eisenhofer, P.A.

P. Bradford DeLeeuw

Grant & Eisenhofer, P.A.

Date Written: June 2006

Abstract

This piece provides the brief submitted to the Delaware Chancery Court by plaintiff in the case of Bebchuk vs. CA, Inc. The case concerns the attempt by CA to exclude from the corporate ballot a stockholder proposal to adopt a proposed bylaw concerning the use of poison pills on grounds that it would be invalid under Delaware law. Under the proposed bylaw, a board would not be able to maintain a pill indefinitely without periodic determination than doing so would serve shareholders. The brief explains why, in contrast to the claims made by CA, the proposed bylaw would neither violate any of the provisions of the Delaware corporate code nor impedes directors' fulfillment of their fiduciary duties. Although the court decided that the case was not sufficiently ripe for a ruling on the validity of the proposed bylaw, the court's decision rejected CA's arguments that the bylaw is clearly invalid.

Keywords: Takeovers, takeover defenses, poison pill, bylaws, charter, fiduciary duties, corporate governance, agency costs, directors, shareholders, Delaware

JEL Classification: D70, G30, G32, G34, G38, K22

Suggested Citation

Bebchuk, Lucian A. and Eisenhofer, Jay W. and Grant, Stuart M. and Barry, Michael J. and DeLeeuw, P. Bradford, On the Validity of Poison Pill By-Laws (June 2006). Available at SSRN: https://ssrn.com/abstract=928674 or http://dx.doi.org/10.2139/ssrn.928674

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Jay W. Eisenhofer

Grant & Eisenhofer, P.A. ( email )

Chase Manhattan Centre
1201 North Market Street
Wilmington, DE 19801
United States

Stuart M. Grant

Grant & Eisenhofer, P.A. ( email )

Chase Manhattan Centre
1201 North Market Street
Wilmington, DE 19801
United States

Michael J. Barry

Grant & Eisenhofer, P.A. ( email )

302-622-7065 (Phone)
302-622-7100 (Fax)

HOME PAGE: http://www.gelaw.com

P. Bradford DeLeeuw

Grant & Eisenhofer, P.A. ( email )

Chase Manhattan Centre
1201 North Market Street
Wilmington, DE 19801
United States
(302) 622-7153 (Phone)

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