Jenner & Block

Client Alert: Poison Pills during the COVID-19 Pandemic

A shareholder rights plan (often referred to as a “poison pill”) can be an effective tool for a public company and its board of directors to protect against non-negotiated hostile takeover attempts or other coercive or unfair corporate control tactics.  However, in recent years, poison pills have come under increasing scrutiny, in large part due to the oversight from proxy advisory firms.  While relatively few public companies in the United States had an active poison pill in place at the end of 2019, the COVID-19 pandemic has brought declining stock prices and economic uncertainty, leading many companies to once again consider poison pills to protect against unsolicited takeovers or activist attacks during the crisis.  For example, between March 15, 2020 and April 30, 2020, 31 US public companies adopted “traditional” poison pills (while another 12 companies adopted poison pills specially designed to protect against certain ownership changes that could impair the company’s ability to use its net operating loss carryforwards).  In response to the COVID-19 pandemic and renewed interest in poison pills, two of the major proxy advisory firms, ISS and Glass Lewis, released updated guidance for companies considering this defensive mechanism.

To read the full alert, please click here