Poison-pill rights plan

A rights plan may give eligible holders rights to acquire securities on favourable terms after a defined ownership trigger, commonly excluding the triggering acquirer. The resulting potential dilution can change the bidder’s incentives and create time for negotiation or alternatives. Designs and legal treatment vary. Distinguish this mechanism from every ordinary new-share issue and evaluate approvals, directors’ duties, costs and shareholder consequences. A plan can discourage an inadequate bid but can also protect management from a value-enhancing offer; its name establishes neither legality nor benefit.