A Wrong Poison Pill

The Delaware Chancery Court has just issued an opinion holding the board of The Williams Companies in breach of its fiduciary duties and invalidating the Stockholder Rights Plan ("poison pill") adopted by the board at the height of the economic disruption and stock market volatility caused by the Covid-19 pandemic. The court did not change the law in Delaware on poison pills, but concluded that the board's reasons for adopting the defensive measure and the unique features of this particular device (e.g., a 5% threshold and a broad concept of when activist stockholders may be deemed to be "acting in concert") were not justifiable.

Key Takeaways from the Decision

• Poison pills continue to be valid in Delaware, but they are "nuclear weapons" in a takeover defense arsenal and have to be handled "with the delicacy they deserve";