Anti-Takeover Statute

An anti-takeover statute is a set of state regulations that prevent or deter companies from attempting hostile takeovers. These regulations vary across state lines and typically affect only the companies incorporated within the state.

Although anti-takeover statutes are meant to restrict predatory takeovers, they will sometimes be detrimental to shareholders by preventing companies from partaking in profitable or justified takeovers.

A corporate charter — simply referred to as "charter" or "articles of incorporation" — is a written document filed with a U.S. state by the founders of a corporation detailing the major components of a company such as its objectives, its structure and its planned operations. If the charter is approved by the state government, the company becomes a legal corporation. It's referred to as "charter" and "articles of incorporation." Businesses organizing under the corporation form (incorporation), rather than sole-proprietor or a partnership structure, will often carefully select which U.S. state they formally file a charter under because the laws and regulations will defer from state to state. Delaware, for instance, is generally considered a pro-business friendly environment given its flexible business law structure.

At the state level, the inclusion of anti-takeover statutes (ATSs) on firm and managerial behavior is largely mixed, possibly even overstated. Because most firms have access to other, more powerful takeover defenses — specifically, poison pills and similar techniques — standard anti-takeover statutes do not materially increase a company’s ability to resist a hostile takeover bid. Savvy corporate executives and their legions of tax, legal, and financial consultants have found numerous methods to sidestep state level antitakeover statutes which are often slow to adjust to changing business environments given the clumsy and lengthy legislative process.

Although seemingly a topic most appealing to those drawn to specialized legal debates; effective anti-takeover statutes do play a big role in determining whether the threat of takeovers acts as a disciplining device or induces a sense of short-termism. More recently, the debate has centered on markets taking on a hyper short-term focus.