Shareholder Rights Agreements, also known as a “poison pill”, refers generally to any agreement providing for the distribution of preferred stock, rights, warrants, options or debt instruments to the shareholders of a company designed to deter non-negotiated takeovers by conferring rights on certain shareholders (other than an “acquirer”) upon the occurrence of a “triggering event,” such as an unsolicited tender offer or unsolicited third party acquisition of a specified percentage of stock. These agreement confer rights on the shareholders but also restrict each holder in respect to selling, transferring, or otherwise distributing their restricted shares.

A shareholder rights agreement is often predated by a shareholder rights policy, which empowers a company’s board of directors to enact an agreement on short notice upon the occurrence of a “triggering event.”

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