Poison pills and golden parachutes are well-known anti-takeover mechanisms in global corporate law, particularly in jurisdictions like the United States. However, their legality and enforceability under Indian takeover law are subject to specific regulatory frameworks, especially under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

A poison pill is a defensive strategy where existing shareholders are allowed to purchase additional shares at a discount to dilute the holdings of a potential acquirer, thereby making a hostile takeover prohibitively expensive. In India, such mechanisms are not explicitly prohibited, but they must comply with SEBI’s takeover code and the Companies Act, 2013. Any issuance of shares or securities to frustrate a takeover bid requires shareholder approval and may attract scrutiny under Regulation 26 of the SEBI Takeover Regulations, which prohibits the board of the target company from taking any action that may frustrate an open offer without the approval of shareholders by a special resolution. Therefore, poison pills are not illegal per se, but their implementation is highly restricted and subject to regulatory oversight.

On the other hand, golden parachutes refer to lucrative compensation packages offered to top executives in the event of termination following a takeover. While golden parachutes are legally permissible in India, they must align with the provisions of the Companies Act, particularly sections relating to managerial remuneration (Section 197) and disclosure requirements under SEBI (LODR) Regulations, 2015. Excessive or unjustified payouts may be challenged by shareholders or regulators if deemed oppressive or against the interests of the company.

In conclusion, while poison pills and golden parachutes are not outright illegal under Indian law, their use is tightly regulated and must comply with the corporate governance and shareholder protection principles embedded in Indian securities and company law.

In India, poison pills are largely illegal under takeover regulations, while golden parachutes, though not explicitly prohibited, are rarely used as a primary defense strategy against hostile takeovers and are subject to scrutiny under company law.

1. Poison Pills:
Definition:
Poison pills are strategies that make a company less attractive to hostile bidders. Examples include issuing new shares to existing shareholders (dilution) or creating obligations that are triggered upon a change of control.

Legal Position in India:

Indian takeover law, governed primarily by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations), does not explicitly permit poison pills.
Under Regulation 26, the board of the target company is restricted from taking any action that could frustrate the open offer, without shareholder approval.
This includes issuing new shares, selling key assets, or entering into significant contracts that could alter the company's capital structure.
Thus, poison pills are largely impermissible under Indian law unless explicitly approved by shareholders in a general meeting.
Conclusion on Poison Pills:
Due to stringent SEBI regulations, poison pills are not legally viable in India without prior shareholder consent. This ensures a level playing field for acquirers and protects shareholder rights.

2. Golden Parachutes:
Definition:
Golden parachutes are substantial benefits (like severance pay, stock options, or bonuses) promised to top executives in the event of a change in control or hostile takeover.

Legal Position in India:

Golden parachutes are not expressly prohibited, but their legality depends on corporate governance norms and shareholder approval.
Under the Companies Act, 2013, particularly Sections 197 and 203, any remuneration or compensation to directors and KMPs must be approved by the board and, in many cases, by shareholders.
SEBI’s LODR Regulations also impose disclosure and approval requirements for executive compensation.
Conclusion on Golden Parachutes:
While golden parachutes are legally permissible, they must be transparent, reasonable, and compliant with corporate law and governance standards. Excessive or non-disclosed packages can attract regulatory scrutiny or shareholder litigation.

Conclusion:
Indian takeover law adopts a pro-shareholder and pro-transparency approach. While golden parachutes are conditionally permissible, poison pills are significantly restricted. Regulatory oversight by SEBI ensures that corporate defenses do not unfairly prejudice the rights of shareholders or undermine open offer obligations.