IRELAND Law and Practice Contributed by: Leonora Malone, John Olden, John Darmody and Doreen Mescal, Addleshaw Goddard
9.2 Directors’ Use of Defensive Measures
• Denial of Due Diligence Access: In a hostile scenario, the target may refuse to provide the bidder with access to due diligence informa - tion, thereby limiting the bidder’s ability to fully assess the target’s operations and value. • “Put Up or Shut Up” Rules: The target board can seek to invoke the “put up or shut up” rules, which require a potential bidder to either make a firm offer or announce that it will not pursue the takeover. This prevents a bidder from dragging out the process without committing to an actual offer. • Poison Pill Mechanisms: While less com - mon in Ireland, defensive mechanisms such as “poison pills” (issuing new shares to dilute the bidder’s stake) can, in principle, be considered by the target’s board, though such actions would need to be approved by shareholders or the Takeover Panel. • White Knight Defence: The target company may seek to find a more favourable third- party bidder, known as “white knight” , who would make a competing offer to prevent the hostile bidder from taking control. • Asset Lock-Up Agreements: The target may agree to sell off certain assets to make the company less attractive to the hostile bid - der, though this would require shareholder approval and Takeover Panel consent. 9.4 Directors’ Duties When enacting defensive measures, directors must uphold their fiduciary duties, including the following: • Acting in Good Faith: Directors must act in the best interests of the company, ensuring defensive actions are genuinely beneficial for all stakeholders, not just for management or existing shareholders. • Avoiding Conflicts of Interest: Directors must disclose any personal interests and recuse
Defensive measures are permitted in Ireland, but they are strictly regulated under the Takeo - ver Rules. The target company’s directors are prohibited from taking any actions that could frustrate or block a takeover offer without share - holder approval or consent from the Takeover Panel. Defensive measures, such as issuing new shares or making significant asset disposals, can only be implemented if the target’s sharehold - ers approve these actions at a general meet - ing or if the Takeover Panel gives its consent. These regulations are designed to ensure that any defensive strategies are in the best interests of shareholders and do not unduly prevent the shareholder from having a say in the outcome of a takeover. 9.3 Common Defensive Measures In a hostile bid scenario, the target company’s board has several defensive measures availa- ble, though these are subject to strict regulatory oversight under the Takeover Rules. • Response Document: Once a bidder announces its intention to make a firm offer, the target’s board is required to issue a response document within 14 days. This doc - ument will include the board’s views on the offer, which may include recommendations to reject or accept the offer, depending on the target’s stance. This is a key opportunity for the board to present any strategic reasons why the offer is not in the best interests of the shareholders. • Refusal to Engage in Negotiations: The target’s board can choose not to engage in negotiations with the bidder, potentially mak - ing it difficult for the bidder to pursue further discussions.
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