Determination of Anti-Greenmail provision’
Anti-greenmail provision is a special clause in the Charter of the company, what prevents the Board of Directors to approve greenmail payments. Greenmail is basically a premium Payment to an unwanted party to drive him from their hostile intentions capture. Anti-greenmail provision will be to remove the possibility that the Board adopts appropriate output and pays off an unwanted purchaser of shares of the company, leaving shareholders worse off. Greenmail is conceptually the same as blackmail, but the green stands for money.
Breaking down the ‘Anti-Greenmail provision’
Anti-greenmail. the position acts as a preventative measure, restraining the Board from repurchase of shares of the company with the award from the hostile “investor” (investor in quotes, because man is primarily interested in quick profits, not shares). This provision requires that if a premium payment is made on greenmailer, the same fee should be available to all shareholders. In addition, this provision requires a majority vote of shareholders to make a lump sum payment of greenmail, hostile party.
Institutional Support Anti-Greenmail provisions
Institutional investors are generally not in favor of anti-greenmail provisions. An example is American century investment, which States in various avenues of his etf securities, that: “Anti-greenmail’ proposals generally limit the right of the Corporation, without shareholders, to vote, to pay a premium or to redeem 5% or more shares. Management often argues that they should not be limited to negotiate the deal to buy out a large shareholder at a premium if they believe it is in the best interests of the company. Institutional shareholders generally believe that all shareholders should have the opportunity to vote on such a significant use of corporate assets [cash]. Advisor [American century investments] believes that any repurchase by the company at a price premium a large stake, are subject to a shareholder vote. Thus, as a rule, vote in favor of anti-greenmail provisions.”