Shareholder Activism

Company shareholders are increasingly wielding their weight to drive corporate change. The growth of shareholder activism is an emerging area of legal complexity and — for some firms — opportunity.

Shareholder activists are now regularly targeting companies they believe to be underperforming or poorly managed. After acquiring substantial shareholdings in those companies, they leverage their ownership position to replace board members, install new leadership or even alter the strategic direction of the business.

While activists pursue interventions with the stated aim of improving performance, they are understandably seen as a threat by established boards. This explains why, for many years, representing activist shareholders was considered a risky proposition.

Larger law firms were reluctant to take on such work, fearing it would damage their relationships with the very boards and executives they served in other capacities. Only a minority of firms were willing to represent activists, leaving it as a niche and somewhat controversial area of practice.

In parallel with this shift in the legal market, case law is also evolving. Notably, the shareholder principle was rejected in a landmark case this year, potentially allowing companies to withhold privileged documents from shareholders.

A Turning of the Tide

The UK legal sector is slowly shedding its traditional reluctance. As shareholder activism becomes more common and accepted in the corporate world, some firms are recognising it as a legitimate and growing practice area. White & Case, McDermott Will & Schulte and Akin, for example, have begun to make a name for themselves in this field.

In a similar vein, as British companies increasingly face activist pressure, demand for specialist legal counsel has risen.

Shareholder activism has been a more established and normalised practice in the US, which means that some US law firms operating in London have a headstart.

Chambers Ranking Changes

At Chambers, we have responded to this market development by creating a new dedicated ranking table for lawyers who represent shareholder activists.

This table specifically focuses on the representation of the activists themselves, not on the defensive work undertaken by the target companies. The new ranking table indicates excellence within this emerging practice area.