• What is a poison pill?

Poison pill is a way of making a company “inedible” to an unwanted buyer. If an investor crosses a set ownership threshold (15-20%) without management approval, the company gives the remaining shareholders the right to buy ultra-cheap shares. This dilutes the acquirer's stake and makes the takeover economically unfavorable. This tactic, whose name refers to spy poison, was resorted to by Twitter to defend itself against Ilon Musk and Netflix against raider Carl Icahn.

• And what about us?

In Russia, this tool cannot be used directly, but there are many alternatives: from mandatory offer to buy shares and pre-emptive rights to options and convertible loans. Companies can use several mechanisms at once and combine them in different ways. But in order for the defense to work and for the restrictive rules not to be challenged, it is necessary to formulate all the terms correctly and be guided by the goals of existing shareholders.

In the article, lawyers discuss why this mechanism will not work in Russia and what alternative tools can be used to protect businesses. In particular, KKMP senior associate Ekaterina Sharapova notes:

"Preemptive right, prior consent and option constructions are the most common methods of protection for non-public companies. The market has already developed a stable and clear practice of their application, so the risk of their challenge is relatively low, unlike, for example, measures aimed at diluting undesirable acquirers. These instruments are generally more affordable than share capital increases and convertible loans, and technically easier to apply than issuing different classes of shares and convertible bonds."

The full article can be accessed by clicking here