What Is A Limited Duration Stockholder Rights Agreement

The recent adoption of legal plans reflects the growing recognition of the benefits of a legal plan in the appropriate context. In particular, a rights plan serves as a mechanism to give a board of directors sufficient time to evaluate and respond to an offer from third parties. Given this delay, a board of directors may find that a response is not warranted under the company`s current strategic plan and may consider more carefully whether such an offer adds value to its shareholders in relation to the autonomous execution of the company`s long-term strategic plan by management and the board of directors. The adoption of a rights plan can also send a positive signal to the market that a company`s board of directors will evaluate options that it believes are in the best interests of shareholders and will not simply capitulate to an activist or hostile force. In this context, the review of the defence against acquisitions is more important than ever, as a board of directors assesses how best to protect and unlock shareholder value in times of difficulty. Recently, there has been a wave of activity related to the review of shareholder law plans (or “poison pills”). Boards are increasingly questioning whether they are putting a shareholder law plan on the shelf to respond to future implementation or whether they are adopting a legal plan in response to future threats. It should be noted that even ISS and Glass Lewis, leading proxy consulting firms, traditionally seen as philosophical opponents of many anti-acquisition schemes, including rights plans, have recently reaffirmed their support for the adoption by a body of properly adapted defence mechanisms, including, if necessary, a short-term shareholder rights plan. After Glass Lewis found that “these catastrophic conditions have led many companies to consider the additional risk of opportunistic activism,” Glass Lewis explained that he considers “companies affected by coronavirus and the associated economic crisis to be a reasonable context” to adopt a legal plan.

Williams announced today that its board of directors has approved a temporary shareholder rights agreement. In general, shareholder rights are exercised only if a person or group acquires 10% (or 20% for some passive investors) or more of the company`s current common shares (directly or indirectly via derivatives) and is made available to all holders from 12 June 2020. When the rights are exercised, any rights allow the owner (with the person or group that triggered the rights) to acquire a series of common shares of the company at a 50% discount. The Commission may also, on that date, exchange any rights held by these holders for a common share. “Williams` gas infrastructure strategy, royalty-based business model through the best asset base, investment degree ratings, a strong balance sheet and abundant liquidity are factors that allow the company to navigate through uncertainty in commodity markets and the broader economy.