Shareholders also receive transactional rights(put and call options) triggered by specified corporate actions. These include preemptive rights when a company issues new shares; appraisal rights for shareholders who do not approve major transactions; and takeout rights when a controlling stake in the firm is acquired( that is, minority shareholder rights to sell their shares to the new controlling shareholder) The self-enforcing model seeks to build legal norms that managers and large shareholders will see as reasonable and comply with voluntarily. The need to induce voluntary compliance reinforces our preference for procedural rather than substantive protections. For example, managers may evade a flat ban on self-interested transactions, yet comply with a procedural requirement for shareholder approval because they think that they can obtain approval. Once they decide to obtain shareholder approval, the managers may make the transaction more favorable to shareholders, to ensure approval and avoid embarrassment. The model often relies not only on bright-line rules, but also on relatively simple rules. Managers can't comply with, and judges can,'t enforce, rules that they don,'t understand. Nor will managers respect an unduly complex statute The british City Code on Takeovers and mergers offers a good set of self-enforcing ules to govern change-of-control transactions, which we largely adopt. We propose a delay period before a change of control occurs to provide a market check on the fairness of the price (30% ownership is our proxy for control); a takeout offer requirement, under which a new controlling shareholder must offer to purchase minority shares(unless the minority shareholders waive this requirement by majority vote); and a ban on defensive actions that could frustrate a takeover bid (unless the actions are approved in advance by the target's shareholders) Shareholders are protected against dilutive share issuances through a combination of preemptive rights; a requirement that shares be issued only at market value(determined by the board of directors); shareholder approval for issuances to insiders(under the self-interested transaction rules) and shareholder approval for large issuances(our threshold is 20% of the previously outstanding shares SIn the economic literature, "self-enforcement"is sometimes given only this narrower meaning-a contract is said to be self-enforcing if it induces voluntary compliance. See, e.g., Lester G. Telser, A Theory of Self- Enforcing Agreements, 53 J. Bus. 27, 27-28(1980). Inducing voluntary compliance is an important element of our approach to company law, but it is only part of what we mean by a"self-enforcing"law 9 Panel on Takeovers and Mergers, The City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisitions of Shares(1993)[hereinafter City Code on Takeovers and mergers] The Panel on Takeovers and Mergers, which administers the City Code, is a self-regulatory organization, with a chair chosen by the Bank of England and members representing institutional investors, public companies, and the London Stock Exchange. Panel rulings can be enforced by a number of sanctions, including delisting from the London Stock Exchange. See Black Coffee, supra note 6, at 2027 C. City Code on Takeovers and Mergers, supra note 9, General Principles 4, 7, 10, at Bl-B2, Rule 9.1 at F1, Rule 21, at 113 (stating similar rules)8 In the economic literature, "self-enforcement" is sometimes given only this narrower meaning -- a contract is said to be self-enforcing if it induces voluntary compliance. See, e.g., Lester G. Telser, A Theory of Self￾Enforcing Agreements, 53 J. Bus. 27, 27-28 (1980). Inducing voluntary compliance is an important element of our approach to company law, but it is only part of what we mean by a "self-enforcing" law. 9 Panel on Takeovers and Mergers, The City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisitions of Shares (1993) [hereinafter City Code on Takeovers and Mergers]. The Panel on Takeovers and Mergers, which administers the City Code, is a self-regulatory organization, with a chair chosen by the Bank of England and members representing institutional investors, public companies, and the London Stock Exchange. Panel rulings can be enforced by a number of sanctions, including delisting from the London Stock Exchange. See Black & Coffee, supra note 6, at 2027. 10 Cf. City Code on Takeovers and Mergers, supra note 9, General Principles 4, 7, 10, at B1-B2, Rule 9.1, at F1, Rule 21, at I13 (stating similar rules). 5 Shareholders also receive transactional rights (put and call options) triggered by specified corporate actions. These include preemptive rights when a company issues new shares; appraisal rights for shareholders who do not approve major transactions; and takeout rights when a controlling stake in the firm is acquired (that is, minority shareholder rights to sell their shares to the new controlling shareholder). The self-enforcing model seeks to build legal norms that managers and large shareholders will see as reasonable and comply with voluntarily. The need to induce voluntary compliance reinforces our preference for procedural rather than substantive protections. For example, managers may evade a flat ban on self-interested transactions, yet comply with a procedural requirement for shareholder approval because they think that they can obtain approval. Once they decide to obtain shareholder approval, the managers may make the transaction more favorable to shareholders, to ensure approval and avoid embarrassment.8 The model often relies not only on bright-line rules, but also on relatively simple rules. Managers can't comply with, and judges can't enforce, rules that they don't understand. Nor will managers respect an unduly complex statute. The British City Code on Takeovers and Mergers offers a good set of self-enforcing rules to govern change-of-control transactions, which we largely adopt.9 We propose a delay period before a change of control occurs to provide a market check on the fairness of the price (30% ownership is our proxy for control); a takeout offer requirement, under which a new controlling shareholder must offer to purchase minority shares (unless the minority shareholders waive this requirement by majority vote); and a ban on defensive actions that could frustrate a takeover bid (unless the actions are approved in advance by the target's shareholders).10 Shareholders are protected against dilutive share issuances through a combination of: preemptive rights; a requirement that shares be issued only at market value (determined by the board of directors); shareholder approval for issuances to insiders (under the self-interested transaction rules); and shareholder approval for large issuances (our threshold is 20% of the previously outstanding shares)