All-Holders Rule

What Is the All-Holders Rule?

In finance, the term "all-holders rule" alludes to a regulationstipulating that any tender offer must be made accessible to all shareholders inside the particular class of shares being requested for purchase.

This rule is especially important during takeover bids, guaranteeing that any tender offers made by the obtaining company can't be directed to just those shareholders for the takeover.

How the All-Holders Rule Works

While seeking to purchase a controlling share of a publicly traded company, would-be acquirers will issue a tender offer framing their proposed terms. This offer will quite often incorporate a premium relative to the then-predominant market price of the company's shares, to boost the existing shareholders to support the transaction.

As a rule, tender offers will be made with the cooperation or implied endorsement of the existing management team, who might have been actively pursuing prospective purchasers. In those examples, the managers will issue a letter communicating their endorsement of the tender offer and suggesting its acceptance by shareholders. In different cases, notwithstanding, the tender offer might form part of a hostile takeover endeavor in which the acquirer requests straightforwardly to the company's shareholders, against the desires of its existing management team.

Regardless, retail investors are in a difficult situation to institutional investors, in that they lack the ability to effectively facilitate with each other about the decision about whether to support the proposed transaction. Hence, the Securities and Exchange Commission (SEC) manages various policies expected to safeguard retail investors from manipulation by bigger and more persuasive investors.

One such provision is the all-holders rule, which expects that any tender offer must be extended to all of the holders of the particular class of shares to which the tender offer alludes.

Real World Example of the All-Holders Rule

Gotten from Rule 14d-10 of the Securities Exchange Act of 1934, the all-holders rule is one of many provisions intended to safeguard the rights of shareholders. It is applied in combination with another financial backer security rule, known as the "best-price rule."

Under the best-price rule, the price paid to all security holders in a tender transaction must be the "most noteworthy" or "best" price that anyone could hope to find to any of the security holders engaged with that transaction. Taken together, these two rules keep any shareholders from being disregarded in the course of the tender offer, while likewise keeping certain shareholders from being offered a less good price than others.

Features

• The all-holders rule is applied in combination with a second provision, known as the best-price rule.
• The all-holders rule is a shareholder-security provision applying to publicly traded companies.
• Getting the interests of retail investors with regards to mergers and acquisitions is planned.