CFA Practice Question

There are 86 practice questions for this study session.

CFA Practice Question

In general, ______ are designed to protect shareholders from coercive, two-tier tender offers in which some shareholders may be merged out on disadvantageous terms.
A. Fair price amendments.
B. Supermajority voting provision.
C. Restrictive voting rights.
Explanation: A fair price amendment is another type of charter amendment that would require an acquirer to pay a "fair" and uniform price to all shareholders in an acquisition.

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krisscfa Restricted Voting Rights

This is a mechanism that restricts shareholders from voting their shares if their equity ownership is above some threshold levels (e.g. 15%). The mechanism encourages any potential acquirers to negotiate with the board of directors since the board can release the shareholders from the constraint.

Supermajority Voting Provisions

A "supermajority" voting provision is a provision placed in a company's charter documents which would require a "supermajority" (ranging from 66 to 90%) of shareholders and shareholder votes to approve any type of acquisition of the company. It makes an acquisition more time-consuming and expensive for the acquirer.

Fair Price Amendments

A fair price amendment is an addition to a company's bylaws that prevents an acquiring firm or investor from offering different prices for the shares held by different stockholders during a takeover attempt. The amendment tends to discourage takeover attempts by making them more expensive.
Allen88 Thanks krisscfa!
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