BAHAMAS Law and Practice Contributed by: Michelle Neville-Clarke, Lethea Carey and Stan Burnside, Lennox Paton
9.3 Common Defensive Measures Companies often employ various defensive meas - ures to protect against hostile takeovers. Common strategies include poison pills, which dilute shares or increase the cost of acquisition if an unwanted bid - der reaches a certain ownership threshold, making the company less attractive. A staggered board can pre - vent a quick takeover by limiting the number of board members up for election in any given year, thus giving the company time to respond. The company might also seek a white knight, a friendly third party willing to acquire the company on more favourable terms. Golden parachutes are pre-arranged agreements that offer significant financial benefits to executives if they are terminated following a change of control, making a takeover more expensive. Shareholder rights plans or poison pills allow existing shareholders to buy dis - counted shares if a hostile bidder acquires a certain percentage of the company, diluting the acquirer’s stake. Fair price provisions require that any acquirer offer the same price to all shareholders, preventing discriminatory pricing. In some cases, companies might engage in asset divestitures or restructuring to make themselves less attractive to potential acquirers, or impose limitations on voting rights to restrict control by shareholders who acquire a significant amount of stock without board approval. These measures are designed to either block a hostile takeover, buy time for a strategic response, or push the acquirer to nego - tiate more favourable terms. 9.4 Directors’ Duties The Bahamas permits directors to employ defensive measures only to the extent they are lawful, bona fide and consistent with the directors’ fiduciary duties, the company’s constitutional documents and the applica - ble regulatory framework. Directors owe a fiduciary duty to act in the best interests of the company and its shareholders, exercising due care and good faith. Defensive measures may be contemplated within this fiduciary remit to preserve corporate value, protect minority rights and ensure an orderly consideration of offers, provided such actions do not amount to self- dealing, misfeasance, or violation of statutory duties. In the case of public companies, the use of defensive tactics is governed and constrained by the Securities Industry (Take-over) Rules, 2019 and the Amendments of 2020, which require directors to advise sharehold -
ers on takeover bids, prohibit actions designed to frustrate a bona fide offer absent proper compliance with the Rules and impose stringent procedures and disclosure requirements to protect minority holders and ensure market fairness. Accordingly, while defen - sive measures are permissible in principle, they must be anchored in the governing documents and fiduci - ary duties and strictly adhere to the Take-over Rules and amendments; any action that would frustrate a bona fide offer or that lacks proper regulatory and, where required, shareholder authorisation, would be impermissible and subject to regulatory sanction. 9.5 Directors’ Ability to “Just Say No” In The Bahamas, directors cannot unilaterally block a business combination without adhering to their statutory duties, fiduciary obligations and the Securi - ties Industry (Take-over) Rules, 2019, as amended. They may resist a takeover to protect the company’s long-term interests, for example, if a bid undervalues assets or disrupts strategic plans, but any action must be genuine, proportionate and free from improper motives. Courts and the Securities Commission will assess whether resistance serves the company rather than personal management interests. Directors’ actions must satisfy the proper purpose standard, aiming to safeguard minority shareholders, preserve market integrity and maintain value for all holders. The Take-over Rules regulate the bid process, including disclosure obligations, requirements for an independent adviser, shareholder communications and prohibitions on misleading actions. Amendments in 2020 clarified “offeror” and “in concert” definitions, notice to dissenting shareholders and conditions for waiving mandatory offers, reinforcing that opposition must be legally justified, procedurally fair and com - pliant with minority protections. In practice, directors may say no only when their assessment of the bid is bona fide, supported by independent analysis and executed within fiduciary, statutory and regulatory frameworks, with recourse to the Securities Commis - sion or the courts if needed.
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