In a publicly-traded company's charter or bylaws, a provision allowing the board of directors to invoke the supermajority provision. If a board exercises the board-out clause, the consent of more than a simple majority of shareholders is needed for certain actions, especially a merger or acquisition. The board-out clause is almost always used as an anti-takeover measure. For example, the board may invoke the board-out clause to require that two thirds of shareholders approve of a merger or acquisition the board does not favor. The board-out clause exists to make hostile takeovers more difficult, while allowing leeway for friendly takeovers.
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A provision that permits a firm's board of directors to decide whether to enforce a supermajority antitakeover amendment.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.