If your company is public and you have a large number of shares that are available for purchasing, you may face the problem of a hostile takeover. This is when another company attempts to acquire you by purchasing a controlling number of shares in your company. If you are concerned with being the target of a hostile takeover, a commercial lawyer may be able to help.
Types of Hostile Takeovers
Most often, a hostile takeover occurs when a company wants to obtain another company that is profitable so they can reap the profits. You may be against the hostile takeover because you want to continue to reap the benefits of the company yourself.
However, even if your company is not profitable, a hostile takeover might occur in the form of a corporate raid. If your stock is not very valuable, another company may still wish to purchase your company in an attempt to obtain land or equipment.
Speak With a Commercial Attorney
You will need to speak with a commercial attorney with experience with mergers and acquisitions so you can know what legal steps you can take to protect yourself. For example, you may be able to use a shareholder rights plan.
The shareholder rights plan gives other shareholders the ability to purchase more shares at a discount if one shareholder purchases a large number of shares. After an individual has purchased more than a specific number of shares, an offer must be made to all of the shareholders. The bidder would only be able to revoke the plan by negotiating with the board.
Your attorney can advise you on creating a specific plan that your board will enact in the event that a company attempts a hostile takeover. This will include the type of transactions you will want to do in response.
Find Potential Hostile Shareholders
Speak with a commercial attorney who has experience with mergers and acquisitions about which shareholders are likely to engage in a hostile takeover. Then, you can take proactive steps to prevent this from happening. Also, if you communicate with the shareholder, you may be able to gauge whether they are a happy or unhappy shareholder.
Other Proactive Steps
An attorney can assist you in creating bylaws so that the other shareholders must vote to allow a new shareholder to purchase shares. Then, you will be able to put the brakes on a hostile takeover.