A key point in the debates was whether the law should require a simple or a two-thirds majority vote of shareholders to adopt a poison pill. Finance Minister Thierry Breton reminded the Senate that, in the United States, shareholder approval of poison pills is not required and that the new takeover rule would simply give French companies the ability to defend themselves on equal terms.

However, many investors question whether such defense mechanisms would ultimately be in shareholders' best interests. Because poison pills alter the balance of power between shareholders and management, most believe that shareholders should at least be allowed to make independent evaluations of the provisions contained in poison pills.

Pills that do not contain shareholder friendly features, especially when coupled with other takeover defenses, insulate management from the threat of a change in control. They provide a target's board with veto power over takeover bids that may be in shareholders' best interests. As such, while many investors believe that the proposed law does not go far enough in protecting shareholder interests, most feel requiring an 'up or down' vote of shareholders is indeed a very important provision that should be preserved.

ISS, for its part, believes that features such as a three-year sunset provision (allowing shareholders to periodically affirm or redeem the pill) and a qualifying offer clause (which gives shareholders the ability to redeem the pill when faced with a bona fide tender offer) would make poison pills more palatable to shareholders. When evaluating the merits of a poison pill, shareholders should also take into account whether or not the company has brought acquisition offers to shareholders or has adopted other takeover defenses in the past.

The French National Assembly is scheduled to reconvene on March 16, 2006 to hammer out the final amendments before the new takeover rules come into law. But no matter what final form French poison pills take, the law should require companies to include in their annual reports to shareholders detailed descriptions of any takeover defenses they may institute. Such disclosures would surely allow shareholders to take action against underperforming boards who may use this newfound power to entrench themselves.