Dead Hand Provision

Like when you sleep wrong and cut off circulation to your hand, and when you finally wake up, you can’t feel it and you can’t move it, and just have to flop it around as dead weight until the blood comes back. Dead. Hand.

In financial terms, imagine a similar thing happening to the voting power of your stock. Suddenly it becomes virtually useless. That's a dead hand provision. Like, if something bad happens, your vote ain't worth much.

When would you use such a thing? Hostile takeovers. And there exist myriad techniques designed to defend against them. They are called poison pills. Yes, See: Poison Pill. The deadhand provision represents a specific type of poison pill.

We know. This all sounds very last season of Breaking Bad...like someone's carrying a vial of ricin in a cigarette pack.

But poison pills are ways to keep someone from launching a hostile takeover of your company. In the dead hand provision, when someone acquires a large chunk of stock angling for a takeover of the company you thought you controlled, the firm issues a bunch of new stock to other shareholders. Suddenly, the stock held by the potential takeover artists isn't as influential as it was before...it has been massively diluted. Now with a smaller total percentage ownership of the company, it's much more difficult for the hostile takeover to move forward, because there's so much more stock that needs to be purchased to buy a controlling stake. Dead hand provisions usually accompany the distribution of t-shirts that say, "Neener squared."