A shareholder rights plan , colloquially known as a " poison pill ", is a type of defensive tactic used by a corporation 's board of directors against a takeover . In the field of mergers and acquisitions , shareholder rights plans were devised in the early 1980s as a way for directors to prevent takeover bidders from negotiating a price for sale of shares directly with shareholders, and instead forcing the bidder to negotiate with the board. Shareholder rights plans are unlawful without shareholder approval in many jurisdictions such as the United Kingdom , frowned upon in others such as throughout the European Union , and lawful if used "proportionately" in others, including Delaware in the United States . The typical shareholder rights plan involves a scheme whereby shareholders will have the right to buy more shares at a discount if one shareholder buys a certain percentage of the company's shares. The plan could b...