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The Corporate Contract in Changing TimesIs the Law Keeping Up?$
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Steven Davidoff Solomon and Randall Stuart Thomas

Print publication date: 2019

Print ISBN-13: 9780226599403

Published to Chicago Scholarship Online: September 2019

DOI: 10.7208/chicago/9780226599540.001.0001

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Hedge Fund Activism, Poison Pills, and the Jurisprudence of Threat

Hedge Fund Activism, Poison Pills, and the Jurisprudence of Threat

(p.156) Chapter Seven Hedge Fund Activism, Poison Pills, and the Jurisprudence of Threat
The Corporate Contract in Changing Times

William W. Bratton

University of Chicago Press

This chapter reviews the single high profile case in which twentieth century antitakeover law has come to bear on management defense against a twenty-first century activist challenge — the Delaware Court of Chancery’s decision to sustain a low-threshold poison pill deployed against an activist in Third Point LLC v. Ruprecht. The decision implicated an important policy question: whether a twentieth century doctrine keyed to hostile takeovers and control transfers appropriately can be brought to bear in a twenty-first century governance context in which the challenger eschews control transfer and instead makes aggressive use of the shareholder franchise. Resolution of the question entails evaluation of the gravity of two sets of threats, one at the doctrinal level and the other at the policy level. The doctrinal threats are exterior threats to corporate policy and effectiveness on which managers justify defensive tactics under Unocal v. Mesa Petroleum Co. Because some threats have greater justificatory salience under Unocal than do others, a question arises as to the nature and characterization of the threats allegedly held out by activist intervention. The policy threats implicate the new balance of power between managers and shareholders. The chapter appraises the threats.

Keywords:   Business Organizations, Corporations, Corporate Control, Corporate Governance, Corporate Voting, Merger, Mergers and Acquisitions Litigation, Proxy Contests, Restructuring, Takeovers

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