What are coat tail provisions?

What are coat tail provisions?

• A. Agreements that protect minority shareholder rights.
• B. Shares granted certain voting rights in a takeover bid.
• C. Restrictions on selling shares during a takeover.
• D. Terms that ensure equal treatment of all shareholders.

Answer: (B)

Coattail provisions are designed to ensure that all shareholders receive equal treatment during a takeover bid. Specifically, they require that if one shareholder receives a specific offer or benefit during a takeover, the same offer must be extended to all shareholders. This ensures that minority shareholders are not disadvantaged or left out, which supports fair treatment across the board.

This concept is particularly important in maintaining trust and integrity in the market, as it prevents situations where certain stakeholders could take advantage of their position or influence during a takeover.

While the chosen response focuses specifically on voting rights during a takeover, coattail provisions are more broadly about equitable treatment rather than just the rights of shares in a takeover bid context. The emphasis is on creating fairness and protecting all shareholders, not selectively granting voting privileges.