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An Introduction to the Law of Corporations: Cases and Materials

DGCL Sec. 203 - State anti-takeover legislation

Section 203 is an example of state anti-takeover legislation. Section 203 is a flavor of the kinds of restrictions on stock transfer as we saw in §202. In §203 restrictions a board may prohibit a stockholder from purchasing additional shares in the corporation for a period of time once they have completed a transaction that gives them control of the corporation. The restrictions described in §203 are intended to delay the ability of a hostile acquirer to quickly complete a hostile acquisition of the corporation unless the target corporation's board consents. Note that the requirements of §203 can be waived by a resolution of the target corporation's board.