What Is a Shareholder Rights Plan? - TheStreet Definition

Dictionary of Financial Terms

A shareholder rights plan is a provision undertaken by a company wishing to fend off unwelcome takeover suitors. The trigger is the amount of outside ownership that triggers the rights plan; 15% is common. Rights plans can take various forms, but the basic idea is to make it easier for current shareholders to block an outside takeover attempt. For example, a rights plan might allow current shareholders to buy the company's shares at a discount if the trigger is tripped, thus making it easier for current holders to buy more shares than the unwanted suitor.

Definitions of Financial Terms