Trouble in the boardroom as shareholder rebellions rise

News Article

The number of shareholder rebellions has risen by more than a quarter in 2018, new research reveals.

The Investment Association (IA), which published the figures, said a growing number of shareholders are using their votes to hold executives to account.

The report reveals that 120 FTSE All-Share companies were added to the Public Register up to the end of July 2018, compared to 110 added during the same period last year.

Likewise, a total of 237 individual resolutions were added to the Public Register in 2018, an upturn of 25 per cent compared to the same period last year.

The IA notes that 29 “repeat offenders” appeared on the Public Register for the exact same resolution.

The figures also show that “opposition to individual director re-election” was a key driver of shareholder angst this year, with resolutions more than doubling from 38 in 2017 to 80 in 2018.

Although executive remuneration remains a key theme, resolutions in this area declined from 68 in 2017 to 61 in 2018.

Earlier this year, the IA said shareholder concerns over director accountability are at an all-time high since the introduction of the Public Register – an ‘aggregated list of publicly available information regarding meetings of companies in the FTSE All-Share who have received significant shareholder opposition’.

Luke Morgan, a Partner with Palmers who specialises in shareholder disputes, said: “Shareholder deadlock – particularly if accompanied by director deadlock – can paralyse a business.

“How shareholder disputes and deadlocks are dealt with can often be resolved and negotiated by careful review and consideration of the Company’s Articles of Association or a written Shareholder’s Agreement.

“However this assumes two important points – firstly that the Articles have properly been considered and drafted at the start of the relationship and, secondly, that a Shareholder’s Agreement exists in the first place.

“We often find that the contentious scenarios arise where the Articles are silent as to certain rights or where there is no Shareholder’s Agreement.

“In these situations and more the Companies Act 2006 is vital in determining your rights and unravelling the deadlock where possible.

“If your company is involved in a shareholder dispute or you suspect boardroom unrest it it important to seek prompt legal advice.

“We can walk you through the terms that apply to your shareholder relationship with a view to resolving matters amicably if possible and to get you back to running your business.”

For help and advice regarding shareholder and director disputes, please contact us.