Poison Pills in a Comparative Perspective

Editor’s Note: This post comes to us from Till Immanuel Lefranc at Harvard Law School. Till invites comments at till.lefranc [at] gmail.com.

The French Commercial Code was amended in 2006 in order to make poison pills possible in France. Only two months after the amendments were enacted, the general meeting of fifteen large companies gave its board authority to adopt a pill. Comparing French and American poison pills is interesting for two main reasons:

(1) France is likely to face same problems that the Delaware courts have been dealing with for more than twenty years. Corporate directors may have legitimate reasons for refusing an acquisition, such as finding time to obtain a higher price from a third party. But directors may also be acting out of self interest, and use the pill to entrench themselves–to the detriment of shareholders. How will French institutions regulate the pill to prevent this type of conduct from happening?

(2) On the other hand, the French pill has been carefully designed to mitigate those risks. A new pill must be approved by a general meeting of shareholders, and rights can only be issued by the board with shareholder consent. If shareholders do give the board authority to issue rights, that authority is valid for a maximum of 18 months.

I have prepared a Memorandum that sets forth a comparative analysis of the French poison pill and its implications. The Memorandum is available for download here.

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