The Delaware Chancery Court has rescinded a poison pill adopted by a closely-held e-commerce company after finding that the poison pill was intended for purposes other than protecting the company and its stockholders from economic harm. The court reviewed the board of directors' actions under the two-pronged Unocal/Unitrin standard (discussed immediately above) and held that the adoption of the poison pill failed under both prongs. Under the first prong, the court found that the company's argument that it was trying to protect its corporate culture was inadequate. Under the second prong, the court found that the poison pill was adopted to punish the significant stockholder for engaging in competitive activities and was therefore outside of the range of reasonableness.
eBay Domestic Holdings, Inc. v. Newmark, C.A. No. 3705-CC (Del. Ch. Sept. 9, 2010)