In a tender offer by a value-increasing raider, voting shareholders face a free-rider problem. However, when they are not atomistic, they do not completely free-ride. In contrast, non-voting shareholders, who are never pivotal for the success of the offer, are absolute free-riders. Hence, in this case there is a gain from departing from one share/one vote. This departure also has a cost; there is an increased vulnerability to value-decreasing raiders, and the optimal governance structure balances the cost and the gain.

How do resolution frameworks affect the private restructuring of distressed banks? We model a bank’s shareholders and creditors negotiating a restructuring, under two frictions: asymmetric information about asset quality and externalities on the government. High-quality banks signal themselves by delaying the negotiation, which is socially inefficient. Public policies can improve welfare if they reduce the signaling motive or increase the negotiation surplus. Stricter bail-in rules make debt more information sensitive and increase delays. The bank chooses a capital structure with too little renegotiable debt, giving a new rationale, for example, for Total Loss Absorbing Capacity requirements.

We develop a theory of secured debt, unsecured debt, and debt with anti‐dilution covenants. We assume that, as in practice, covenants convey the right to accelerate if violated, but the new secured debt retains its priority even if issued in violation of covenants. We find that such covenants are nonetheless useful: They provide state‐contingent financing flexibility, balancing over‐ and underinvestment incentives. The optimal debt structure is multilayered, combining secured and unsecured debt with and without covenants. Our results are consistent with observations about debt structure, covenant violations, and waivers. They speak to a policy debate about debt priority.