The modus operandi of shareholder activism is to agitate for change, often involving campaigns to convince other shareholders to support proposals to change the composition of the board and the company’s strategy.
Under UK law a shareholder activist, in its capacity as shareholder, can attack the board and its strategy in the press and in discussions with other shareholders free from the constraints of corporate law duties. However, in a recent UK High Court decision, Stobart Group v Tinkler, the High Court considered a number of issues which are pertinent to the criticism of boards by shareholder activists who have nominated a director to the board. This case is a clear warning of the risks to board nominees of shareholder activists who in furtherance of an activist campaign brief against the board in discussions with other shareholders and misuse the company’s confidential information.
This Alert Memo was republished by the Harvard Law School Forum on Corporate Governance and Financial Regulation on May 24, 2019.