11 Search Results

January 29, 2018 |
2017 Year-End Activism Update

This Client Alert provides an update on shareholder activism activity involving NYSE- and NASDAQ-listed companies with equity market capitalizations above $1 billion during the second half of 2017, as well as a look back at trends for the 2017 calendar year. Activism activity declined modestly during the second half of 2017, similar to the trend we found in the second half of 2016, which can be partially attributed to the passing of the proxy season. Overall, activist activity rose slightly in 2017 from 2016. In 2017, Gibson Dunn’s Activism Update surveyed 98 public activist actions involving 82 companies and 63 activist investors, compared to 90 public activist actions involving 78 companies and 60 activist investors in 2016. Our survey covers 46 total public activist actions, involving 36 different activist investors and 39 companies targeted, during the period from July 1, 2017 to December 31, 2017. Six of those companies faced advances from multiple investors, including three companies that faced coordinated actions by activist groups. Equity market capitalizations of the target companies ranged from just above the $1 billion minimum covered by this survey to approximately $235 billion. By the Numbers – 2017 Full Year Public Activism Trends *Includes data compiled for both 2017 Mid-Year and Year-End Activism Update publications. **All data is derived from the data compiled from the campaigns studied for the 2017 Year-End Activism Update. Additional statistical analyses may be found in the complete Activism Update linked below. In the second half of 2017, activists most frequently sought to influence target companies’ business strategies (63.0% of campaigns), while changes to board composition and M&A-related issues (including pushing for spin-offs and advocating both for and against sales or acquisitions) were sought in 41.3% and 34.7% of campaigns, respectively. Changes to corporate governance practices (including de-staggering boards and amending bylaws) (23.9% of campaigns), changes in management (10.9% of campaigns), and requests for capital returns (10.9% of campaigns) were relatively less common. Seven campaigns involved proxy solicitations during the second half of 2017, five of which reached a vote. Finally, activism was most frequent among small-cap companies (64.1% of companies targeted had equity market capitalizations below $5 billion). More data and brief summaries of each of the activist actions captured by our survey follow in the first half of this publication. The most notable change from prior periods surveyed is the decrease in publicly filed settlement agreements, as our survey captured only four such agreements in the second half of 2017, compared to 12 in the first of 2017 and 13 in the second half of 2016. The decline in publicly filed agreements may be partially attributable to the decrease in the percentage of actions in which activists sought board seats. Though certain key terms of settlement agreements, including standstills, voting agreements, ownership thresholds and non-disparagement agreements, remain nearly ubiquitous, we think it is notable, despite the small sample size, that all four agreements covered in this edition of Activism Update included expense reimbursement provisions, which had been on the decline during prior periods. We hope you find Gibson Dunn’s 2017 Year-End Activism Update informative.  If you have any questions, please do not hesitate to reach out to a member of your Gibson Dunn team. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this publication.  For further information, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following authors in the firm’s New York office: Barbara L. Becker (+1 212.351.4062, bbecker@gibsondunn.com) Richard J. Birns (+1 212.351.4032, rbirns@gibsondunn.com) Dennis J. Friedman (+1 212.351.3900, dfriedman@gibsondunn.com) Eduardo Gallardo (+1 212.351.3847, egallardo@gibsondunn.com) Adam J. Brunk (+1 212.351.3980, abrunk@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Mergers and Acquisitions Group: Jeffrey A. Chapman – Dallas (+1 214.698.3120, jchapman@gibsondunn.com) Stephen I. Glover – Washington, D.C. (+1 202.955.8593, siglover@gibsondunn.com) Jonathan K. Layne – Los Angeles (+1 310.552.8641, jlayne@gibsondunn.com) Securities Regulation and Corporate Governance Group: Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@gibsondunn.com) Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com) James J. Moloney – Orange County, CA (+1 949.451.4343, jmoloney@gibsondunn.com) Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com) Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 15, 2017 |
M&A Report: 2017 Mid-Year Activism Update

This Client Alert provides an update on shareholder activism activity involving NYSE- and NASDAQ-listed companies with equity market capitalizations above $1 billion during the first half of 2017.  Activism has continued at a vigorous pace thus far in 2017.  As compared to the same period in 2016, this mid-year edition of Gibson Dunn’s Activism Update captured more public activist actions (59 vs. 45), more activist investors taking actions (41 vs. 35), and more companies targeted by such actions (50 vs. 38). During the period from January 1, 2017 to June 30, 2017, seven of the 50 companies targeted faced advances from multiple activists, including two companies that each had three activists make separate demands and two companies that each dealt with activists acting jointly.  As for the activists, 10 of the 41 captured by our survey took action at multiple companies.  Equity market capitalizations of the target companies ranged from just above the $1 billion minimum covered by this survey to approximately $235 billion, as of June 30, 2017. By the Numbers – H1 2017 Public Activism Trends *Study covers selected activist campaigns involving NYSE and NASDAQ-traded companies with equity market capitalizations of greater than $1 billion as of June 30, 2017 (unless company is no longer listed). **All data is derived from the data compiled from the campaigns studied for the 2017 Mid-Year Activism Update. Additional statistical analyses may be found in the complete Activism Update linked below. Activists continued to be most interested in changes to board composition, including gaining representation on the board (67.8% of campaigns), and changes to business strategy (61.0% of campaigns).  Goals related to M&A, including pushing for spin-offs and advocating both for and against sales or acquisitions, came up in 45.8% of the campaigns covered by our survey, while other governance initiatives (30.5% of campaigns) and changes in management (27.1% of campaigns) were relatively less common.  Interestingly, multiple activists approached companies not only seeking a change in management but with hand-picked replacements identified as part of their campaigns (e.g., Mantle Ridge at CSX Corp.).  Finally, while 20.3% of campaigns involved proxy solicitations during this past proxy season, none of the situations we cover involved attempts to take control of companies.  Of the 12 proxy solicitations we reviewed, four reached a shareholder vote but only one resulted in a dissident victory, despite ISS and Glass Lewis supporting the dissident slate in two of the votes in which companies prevailed.  We also note that, while activism continues to be most frequent at small-cap companies (46.0% of companies targeted had equity market capitalizations below $5 billion), the first half of 2017 saw a resurgence in activism at companies with equity market capitalizations greater than $20 billion, with 14 such companies targeted (28.0% of companies targeted), which is double the total number of such companies targeted in all of 2016.  More data and brief summaries of each of the activist actions captured by our survey follow in the first half of this publication. The number of publicly filed settlement agreements reviewed for this edition of our Activism Update declined against the same period in 2016 (12 vs. 17).  The decline in publicly filed agreements despite the rise in overall campaigns may be attributable to an increased willingness of companies to adopt activist requests, sometimes even appointing activist director nominees, without reaching a formal agreement.  Within the settlement agreements we reviewed, the inclusion of certain key terms has appeared to become standard since we first started tracking such terms in 2014.  Standstill periods, voting agreements, and ownership thresholds each appear in at least 90% of agreements.  Non-disparagement provisions appear in 87% of agreements, while the inclusion of other strategic initiatives (e.g., replacement of management, spin-offs, governance changes) and committee appointments for new directors are somewhat less frequent, each appearing in just over 70% of agreements.  Reimbursement of expenses continues to appear only occasionally (36%).  Notably, the frequencies of each of the tracked terms in the 12 agreements reviewed for this edition did not materially differ from the respective average frequencies since 2014.  We delve further into the data and the details in the latter half of this edition of Gibson Dunn’s Activism Update. Finally, we note the frequency and publicity of “activist shorts” in 2017.  Though different from a traditional activist campaign in that such shorts inherently come without warning, this different breed of activist is no less worthy of note to the companies they target.  Unlike many traditional activists who aim to increase shareholder value and stay in a company’s stock (sometimes even referring to themselves as “constructivists”), activist short-sellers are inherently disruptive.  The common practice is for an activist short-seller to take a short position in a company, then publicize, often in a white paper, what it feels are material vulnerabilities of the target company (e.g., overvaluation, misstated financials, industry weaknesses) and allow the market to react.  In the first half of 2017, within the same range of companies we survey for traditional activism (NYSE- and NASDAQ-listed companies with equity market capitalizations above $1 billion), 22 different activist short-sellers (only two of which also took traditional activist actions at other companies) publicized short positions in 30 different companies (two of which were targeted by multiple activist short-sellers). We hope you find Gibson Dunn’s 2017 Mid-Year Activism Update informative.  If you have any questions, please do not hesitate to reach out to a member of your Gibson Dunn team. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this publication.  For further information, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following authors in the firm’s New York office: Barbara L. Becker (212.351.4062, bbecker@gibsondunn.com) Richard J. Birns (212.351.4032, rbirns@gibsondunn.com) Dennis J. Friedman (212.351.3900, dfriedman@gibsondunn.com) Eduardo Gallardo (212.351.3847, egallardo@gibsondunn.com) Adam J. Brunk (212.351.3980, abrunk@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Mergers and Acquisitions Group: Jeffrey A. Chapman – Dallas (214.698.3120, jchapman@gibsondunn.com) Stephen I. Glover – Washington, D.C. (202.955.8593, siglover@gibsondunn.com) Jonathan K. Layne – Los Angeles (310.552.8641, jlayne@gibsondunn.com) Securities Regulation and Corporate Governance Group: Brian J. Lane – Washington, D.C. (202.887.3646, blane@gibsondunn.com) Ronald O. Mueller – Washington, D.C. (202.955.8671, rmueller@gibsondunn.com) James J. Moloney – Orange County, CA (949.451.4343, jmoloney@gibsondunn.com) Elizabeth Ising – Washington, D.C. (202.955.8287, eising@gibsondunn.com) Lori Zyskowski – New York (212.351.2309, lzyskowski@gibsondunn.com)   © 2017 Gibson, Dunn & Crutcher LLP   Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 9, 2017 |
M&A Report – 2016 Year-End Activism Update

This Client Alert provides an update on shareholder activism activity involving domestically traded public companies with equity market capitalizations above $1 billion during the second half of 2016.  Notwithstanding a difficult market backdrop in 2016, including the surprise “Brexit” vote, a bitterly fought U.S. presidential campaign, a significant decline in oil prices, and vigorous public debate on “short-termism,” activist investors continued to be busy across a wide range of industries (even if fewer campaigns made major headlines).  Furthermore, in 2016 as compared to 2015, our survey found relative consistency in the total number of public activist actions (90 vs. 95), the number of activist investors involved in such actions (60 vs. 56), and the number of companies targeted by such actions (78 vs. 81). In this edition of Activism Update, our survey covers 48 total public activist actions, involving 35 different activist investors and 43 companies targeted, during the period from July 1, 2016 to December 31, 2016.  Four of those companies faced advances from multiple investors, including one company that faced actions by three investors and another company that saw two activists temporarily coordinate their efforts.  Equity market capitalizations of the targets range from just above the $1 billion minimum covered by this survey to approximately $280 billion. By the Numbers – 2016 Full Year Public Activism Trends **Includes data compiled for both 2016 Mid-Year and Year-End Activism Update publications. **All data represented here is derived from the data compiled from the campaigns studied for Activism Update. Additional statistical analyses may be found in the complete Activism Update linked below. For the second half of 2016, changes to board composition, including gaining representation on the board, continued to be the most common objective of activist investors (52.1%).  In addition to goals related to M&A, including pushing for spin-offs and advocating both for and against sales or acquisitions (39.6%), activist investors frequently took on target companies’ business strategy plans (39.6%).  Large equity capitalization companies were infrequently targeted, as only 8.3% of the companies included in this edition of Activism Update had equity market capitalizations greater than $20 billion, while the majority of campaigns included in our survey involved small capitalization companies, as 53.5% of the companies in our survey had equity market capitalizations below $5 billion.  The trend toward smaller targets continued from the first half of 2016 (for the first half of 2016, 10.5% of the companies were above $20 billion and 55.3% of the companies were below $5 billion). We also note an increase in publicly filed settlement agreements in 2016, as this survey covers 13 settlement agreements publicly filed in the second half of 2016, making it 30 total settlement agreements in 2016 compared to 22 such agreements in 2015.  Within the settlement agreements publicly filed in the second half of 2016, standstill periods and voting agreements remain nearly ubiquitous, and the marked increase in the inclusion of other strategic initiatives (e.g., replacement of management, spin-off company governance, etc.) seen in the first half of 2016 continued through the second half of the year (92.3% in the second half of 2016 and 86.7% for 2016 in total).  We delve further into the data and the details in the latter half of this edition of Gibson Dunn’s Activism Update, in which we have included a chart of the activist campaigns covered by the survey and statistical analyses of various trends for the second half of 2016, as well as a survey of settlement agreement terms with breakdowns of settlement agreements publicly filed during the second half of 2016 and updated statistics on key settlement terms from 2014 through 2016. We hope you find Gibson Dunn’s 2016 Year-End Activism Update informative.  If you have any questions, please do not hesitate to reach out to a member of your Gibson Dunn team. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this publication.  For further information, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following authors in the firm’s New York office:   Barbara L. Becker (212.351.4062, bbecker@gibsondunn.com) Richard J. Birns (212.351.4032, rbirns@gibsondunn.com) Dennis J. Friedman (212.351.3900, dfriedman@gibsondunn.com) Eduardo Gallardo (212.351.3847, egallardo@gibsondunn.com) Adam J. Brunk (212.351.3980, abrunk@gibsondunn.com)   Please also feel free to contact any of the following practice group leaders and members:  Mergers and Acquisitions Group: Jeffrey A. Chapman – Dallas (214.698.3120, jchapman@gibsondunn.com) Stephen I. Glover – Washington, D.C. (202.955.8593, siglover@gibsondunn.com) Jonathan K. Layne – Los Angeles (310.552.8641, jlayne@gibsondunn.com) Securities Regulation and Corporate Governance Group: Brian J. Lane – Washington, D.C. (202.887.3646, blane@gibsondunn.com) Ronald O. Mueller – Washington, D.C. (202.955.8671, rmueller@gibsondunn.com) James J. Moloney – Orange County, CA (949.451.4343, jmoloney@gibsondunn.com) Elizabeth Ising – Washington, D.C. (202.955.8287, eising@gibsondunn.com) Lori Zyskowski – New York (212.351.2309, lzyskowski@gibsondunn.com)     © 2017 Gibson, Dunn & Crutcher LLP   Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 16, 2016 |
M&A Report – 2016 Mid-Year Activism Update

This Client Alert provides an update on shareholder activism activity involving domestically traded public companies with equity market capitalizations above $1 billion during the first half of 2016.  Despite the uncertain domestic and international economic and political climates, shareholder activism continues to be common. In this edition of Activism Update, our survey covers 45 total public activist actions, involving 35 different activist investors and 38 companies targeted, during the period from January 1, 2016 to June 30, 2016.[1]  Seven of those companies faced advances from multiple investors, including two companies that faced coordinated actions by two investors.[2]  Equity market capitalizations of the targets range from just above our study’s $1 billion minimum to approximately $334 billion. By the Numbers – H1 2016 Public Activism Trends   *Study covers selected activist campaigns involving domestically traded companies with equity market capitalizations of greater than $1 billion as of June 30, 2016 (unless company is no longer listed). **All data is derived from the data compiled from the campaigns studied for the 2016 Mid-Year Activism Update. Additional statistical analyses may be found in the complete Activism Update attached below.  For the first half of 2016, both change in board composition, including gaining representation on the board (73.3%), and goals related to M&A, including pushing for spin-offs and advocating both for and against sales or acquisitions (53.3%), continued to be the most common objectives of activist investors.  While large capitalization companies were not immune from activist pressure (10.5% of the companies included in our 2016 mid-year survey had equity market capitalizations above $20 billion), the majority of public activist actions involved small capitalization companies, as 55.3% of the companies in our survey had equity market capitalizations below $5 billion. Our survey also covers 17 settlement agreements publicly filed in the first half of 2016.  Within such settlement agreements, non-disparagement clauses, standstill periods and voting agreements all remain nearly ubiquitous, while we note an uptick in the number of agreements providing for other strategic initiatives (e.g., replacement of management, spin-off company governance, etc.) (82.4% in H1 2016 vs. 58.8% in 2014 and 2015).  We delve further into the data and the details in the following pages. In this edition of Gibson Dunn’s Activism Update, we have included a chart of the activist campaigns covered by the survey and statistical analyses of various trends for H1 2016, as well as a survey of settlement agreement terms with breakdowns of settlement agreements publicly filed during the first half of 2016 and updated statistics on key settlement terms from 2014 through the end of H1 2016. We hope you enjoy Gibson Dunn’s 2016 Mid-Year Activism Update.  If you have any questions, please do not hesitate to reach out to a member of your Gibson Dunn team.   [1]   Several companies faced actions from multiple activist investors, some of whom were acting in concert while others were acting independently vis-à-vis the target.   [2]   The other five companies were subject to multiple activists acting independently. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this publication.  For further information, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following authors in the firm’s New York office:   Barbara L. Becker (212.351.4062, bbecker@gibsondunn.com) Richard J. Birns(212.351.4032, rbirns@gibsondunn.com) Dennis J. Friedman (212.351.3900, dfriedman@gibsondunn.com) Eduardo Gallardo (212.351.3847, egallardo@gibsondunn.com) Adam J. Brunk (212.351.3980, abrunk@gibsondunn.com)   Please also feel free to contact any of the following practice group leaders and members:  Mergers and Acquisitions Group: Jeffrey A. Chapman – Dallas (214.698.3120, jchapman@gibsondunn.com) Stephen I. Glover – Washington, D.C. (202.955.8593, siglover@gibsondunn.com) Jonathan K. Layne – Los Angeles (310.552.8641, jlayne@gibsondunn.com) Securities Regulation and Corporate Governance Group: Brian J. Lane – Washington, D.C. (202.887.3646, blane@gibsondunn.com) Ronald O. Mueller – Washington, D.C. (202.955.8671, rmueller@gibsondunn.com) James J. Moloney – Orange County, CA (949.451.4343, jmoloney@gibsondunn.com) Elizabeth Ising – Washington, D.C. (202.955.8287, eising@gibsondunn.com) Lori Zyskowski – New York (212.351.2309, lzyskowski@gibsondunn.com)     © 2016 Gibson, Dunn & Crutcher LLP   Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

September 3, 2015 |
The Heat is on: Update on Shareholder Activism in Germany

​Munich partner Markus Nauheim is the author of “The Heat is on: Update on Shareholder Activism in Germany” [PDF] published on September 3, 2015 by Business Law Magazine.

March 30, 2015 |
Shareholder Activism – The European Dimension “En Garde”

London partner Selina Sagayam and associate Amar Madhani are authors of ‘Shareholder Activism – The European Dimension “En Garde”‘ published March 30, 2015 by LexisNexis Corporate Law.

September 18, 2014 |
Webcast – Shareholder Activism

Please join us for an informative presentation on the practical steps to prepare for and respond to shareholder activism. Topics include: Current trends in shareholder activism. Effective shareholder communication strategies. Rule 14a-8 shareholder proposals. Legal planning for activism and considerations for the Board. Stockholder identification programs. Recent trends and issues regarding ISS voting recommendations. View Slides [PDF] Our Panelists: Eduardo Gallardo Partner, Gibson, Dunn & Crutcher Eduardo Gallardo is a partner in Gibson Dunn’s New York office. His practice focuses on mergers and acquisitions and corporate governance matters. Mr. Gallardo has extensive experience representing public and private acquirers and targets in connection with mergers, acquisitions and takeovers, both negotiated and contested. He has also represented public and private companies in connection with proxy contests, leveraged buyouts, spinoffs, divestitures, restructurings, recapitalizations, joint ventures and other complex corporate transactions. Mr. Gallardo also advises corporations, their boards of directors and special board committees in connection with corporate governance and compliance matters, shareholder activism, takeover preparedness and other corporate matters. He also represents various major investment banks as financial advisors in M&A transactions, and hedge funds in their M&A and investment activities. Elizabeth A. Ising Partner, Gibson, Dunn & Crutcher Elizabeth A. Ising is a partner in Gibson Dunn’s Washington, D.C. office, practicing in the Securities Regulation and Corporate Governance Practice Group and the Financial Institutions Practice Group. She advises clients, including public companies and their boards of directors, on corporate governance, securities law and regulatory matters and executive compensation best practices and disclosures. Representative matters include advising on Securities and Exchange Commission reporting requirements, proxy disclosures, director independence matters, proxy advisory services, board and committee charters and governance guidelines and disclosure controls and procedures. Ms. Ising also regularly counsels public companies on shareholder activism issues, including on shareholder proposals and preparing for and responding to hedge fund and corporate governance activism. Adam H. Offenhartz Partner, Gibson, Dunn & Crutcher Adam H. Offenhartz is a partner in Gibson Dunn’s New York office. He is a member of Gibson Dunn’s Litigation Practice Group and focuses on commercial litigation with an emphasis on corporate control contests and other board and shareholder disputes as well as securities claims. He has handled and tried jury and non-jury cases involving mergers and acquisition battles, shareholder proposals, securities claims, board and shareholder disputes, restrictive covenants, bank fraud cases, real estate valuation and earn-out disputes and other matters. Mr. Offenhartz regularly represents plaintiffs/claimants for whom he has recovered substantial sums or achieved significant injunctive relief. Matthew Sherman Joele Frank, Wilkinson Brimmer Katcher A founding partner and named President in August 2013, Matt has more than 18 years of experience providing strategic corporate, financial and crisis communications counsel to Boards of Directors and executive leadership of public corporations and private equity firms involved in M&A, hostile takeovers, proxy contests, shareholder activism defense, spin-offs, reorganizations, financial restructurings, management changes, litigation, regulatory actions and a wide range of corporate crises. His areas of experience include shareholder activism, mergers and acquisitions, and investor relations and financial public relations. Scott S. Winter Innisfree M&A Incorporated Scott S. Winter is a Managing Director of Innisfree M&A Incorporated. Mr. Winter advises companies and investors on all aspects of shareholder engagement focusing on hostile and friendly acquisitions, shareholder activism, contested shareholder meetings, corporate governance, and other proxy solicitation matters.

April 8, 2014 |
Webcast – Shareholder Activism – The New Dialogue

​The rapidly changing landscape in UK and the rest of Europe & Lessons Learned from the US “There has never been a better time than today for activist investing” Carl Icahn, 2013 Over 235 companies worldwide were publicly targeted by activists in 2013, an increase of almost 10% from 2012. Of this nearly 20% involved European companies and just over 70% US companies (Activist Insight, 2014). It has been widely noted that activist activity in recent years has seen a significant increase in Europe, and notably the UK. Fevered media coverage of the “shareholder spring” in 2012 and 2013 may have ebbed, but shareholder focus has not. A new dimension characterises the dialogue between issuers and investors. Both sets of “players” have developed their “playbooks” to take account of regulatory changes and sentiment. Understanding this evolving area, the “swords and shields” available to companies and active investors; and how best to prepare for an activist campaign, will be key to any company or shareholder campaign. Please join a panel of experts from four leading advisory firms with extensive experience of advising both companies and activists, to guide you through this developing area. View Slides [PDF]   Their presentation covers: An overview of recent trends and developments in Europe: what’s new – campaigns, participants, strategies, regulatory developments and their impact on strategy The activist’s toolkit and strategy – The Campaign Advance preparation and response by investee companies – The Defence Case studies (US, UK and Europe) Who should view this webcast: Listed company representatives, investors in listed companies (asset managers and asset owners) and advisors to this community Our Panelists: Selina Sagayam (Partner – Gibson Dunn, London) Selina is a corporate finance partner in the London office of Gibson Dunn. She is recognized as a leading lawyer in the fields of Corporate/M&A and corporate governance. She spent two years seconded in the senior role as The Secretary to the UK Panel on Takeovers and Mergers and has extensive experience advising on transactions involving public companies, including issuers and shareholders on (hostile) takeovers and public campaign/activist situations. Dennis Friedman (Partner – Gibson Dunn, New York) Dennis is a partner in the New York office of Gibson, Dunn & Crutcher. He has led the Firm’s Mergers and Acquisitions Practice for many years. He is a widely recognized corporate lawyer with extensive experience in the mergers and acquisitions, corporate governance and capital markets areas. In addition to his 35-year-plus legal career, Dennis was an investment banker at several major Wall Street firms, where he was a senior M&A banker and also the head of a merchant banking group (1986 to 1992). Cas Sydorowitz (CEO, Corporate Advisory Services – Georgeson) Cas has been with Georgeson for close to 15 years, bringing with him five years’ experience in international investor relations and shareholder identification. Cas is responsible for Georgeson’s Northern European Proxy and Corporate Advisory business. He has an expert knowledge of global proxy voting mechanics and key governance matters affecting issuers and shareholders globally. Having worked for several activists and against many more he has in-depth experience to support investors or issuers in complex, sensitive activist campaigns. Jonathan Kaye (Managing Director – Moelis, New York) Jonathan is a Managing Director and Partner at Moelis & Company, based in New York, where he leads the Firm’s shareholder activism defense practice. Jonathan has broad experience working with companies in dissident shareholder situations across sectors and in campaigns ranging from private settlement to public and acrimonious disputes. Jonathan joined Moelis from Citigroup, where he was a Managing Director and founded the Activism Defense practice. Olly Scott (Partner – Bell Pottinger) Olly has over a decade of communications experience across several sectors, including institutional and retail financial services, asset management, energy, retail and leisure. His work focuses on helping companies achieve their objectives through reputation development and defence by undertaking programmes that complement their wider communications. Olly specialises in financial and business issues public relations, IPOs, shareholder activism, crisis management and campaigns.

February 10, 2014 |
A Look At Shareholder Activism In The Retail Sector

New York partners Lois Herzeca and Eduardo Gallardo are the authors of “A Look At Shareholder Activism In The Retail Sector” [PDF] published by Law360 on February 10, 2014 at www.law360.com.

May 31, 2013 |
Shareholder Activism in the U.K. – an Introduction

London partners Jeffery Roberts and Selina Sagayam and associate Gareth Jones are authors of “Shareholder Activism in the U.K. – an Introduction” [PDF] published in the May 2013 issue of Wall Street Lawyer.

March 15, 2013 |
Shareholder Activism in the UK: An Introduction

This alert provides a summary of certain principles of English law and UK and European regulation applicable to UK-listed public companies and their shareholders that may affect shareholder activism, namely (i) stake-building, (ii) shareholders’ rights to require companies to hold general meetings, (iii) shareholders’ rights to propose resolutions at annual general meetings and (iv) recent developments in these and related areas. I Own or Am Intending to Acquire Shares; Do I Need To Make Any Disclosures? The UK’s disclosure obligations (under the UK Listing Authority’s Disclosure and Transparency Rules (the “DTRs”)) apply once a person (or persons acting in concert) has (or together have) a holding of 3 per cent. or more of a listed company’s total voting rights and capital in issue (either as a shareholder or through a direct or indirect holding of relevant financial instruments) unless the relevant listed public company enters an “offer period” (as to which, see below).  Thereafter, any changes to that holding that cause the size of the holding to reach, exceed or fall below every 1 per cent. above the 3 per cent. threshold (i.e. reaching, exceeding or falling below 4, 5, 6 per cent. etc.) must be disclosed by the relevant shareholder(s) to the listed company and the listed company is then obliged to announce those disclosures to the market.  In addition, the disclosure obligations extend to the disclosure of voting rights held by a person as an indirect holder of shares, such as where a person is entitled to acquire, dispose of or exercise the voting rights attaching to shares (for example, via synthetic holdings or contract(s) for difference).  It is important to note that any indirect holdings must be aggregated and separately identified in the relevant notification(s). The form and timing of disclosure There are rules on the form of notification that must be used and the information that it must contain.  In particular, notifications must provide details of all the parties to any agreement (formal or informal) which obliges them to adopt, by the concerted exercise of the voting rights they hold, a common policy towards the management of their holdings (although there is no requirement to disclose the detailed nature of that agreement).  The notification must be made to the relevant listed company as soon as is possible and in any case within two trading days in the case of UK companies and four trading days in the case of non-UK companies.  For shares admitted to trading on the London Stock Exchange’s main market for listed securities, the notification must be made using the FSA’s Form TR-1. Further comments The disclosure obligations cannot be avoided by connected third-parties (such as a financial adviser or related company) acquiring shares as part of an arrangement under which they would ultimately be sold to or otherwise under the control of the principal.  A person will be an indirect holder of shares for the purpose of the notification requirements where voting rights are held by a third-party with whom that person has concluded an agreement which obliges them to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards the management of the target in question.  Such an agreement does not necessarily need to be in writing or indeed legally binding.  While ad hoc discussions and understandings which might be reached between institutional shareholders in relation to particular issues or corporate events, which is often referred to as collective engagement by institutional shareholders, are unlikely to be caught[1], an understanding reached in relation to planning or agreeing how to vote at an upcoming (and possibly future) AGM or general meeting may well start to fall on the wrong side of the line and accordingly could result in an aggregation of the relevant shareholdings for disclosure purposes.  For these reasons, the standards promulgated by the UK’s Hedge Funds Standards Board suggest that all such arrangement be documented and reported to the compliance function.  As the issues arise for the specific facts of each case, it is important to seek advice at an early stage. Finally, a disclosure should also be made to the relevant listed company by a person who reaches, exceeds or falls below the thresholds as a result of events changing the breakdown of voting rights and on the basis of information disclosed by the listed company (for example, following an unrelated corporate action such as a share buy-back).  In terms of penalties, non-compliance with the DTRs, while not a criminal offence, may attract significant financial penalties and/or a public censure.  It should be noted that, if a UK-listed public company enters an “offer period”, disclosures of any dealings are then required by any person who is interested (directly or indirectly) in 1 per cent. or more of any class of securities of the company in question (pursuant to Rule 8 of the Code (as defined below)).  This rule catches a wider category of instruments than the DTRs, including, in particular, options and long derivative positions. I Have a Significant Shareholding: What Actions Can I Take? Calling shareholder meetings A shareholder (or shareholders acting together) can use the statutory procedure set out in Part 13 of the Companies Act 2006 (the “Act”) to requisition a general meeting.  The directors of a company are required to call such a general meeting once the company has received requests to do so from shareholders representing at least 5 per cent. of such of the paid-up capital of the company that carries the right to vote at general meetings (excluding any paid-up capital held as treasury shares).  If multiple shareholders together requisition the meeting (such that their holdings are aggregated for the purposes of reaching the relevant threshold) the requests must be in substantively the same form (either on multiple substantially identical requests or by way of the relevant shareholders submitting a single joint requisition). The content of the request, timing and shareholder statements The relevant shareholder’s request must state the general nature of the business to be dealt with at the meeting and may (but is not required to) include the text of a resolution (or resolutions) intended to be moved at the meeting.  Assuming the necessary formalities are complied with, the directors are required to call the meeting within 21 days of the requisition, with the meeting to be held not more than 28 days after the date of the notice of the meeting (although there are additional restrictions on the timing for the meeting for “quoted companies” under the EU’s Shareholder Rights Directive 2007/36/EC, as implemented in the UK (the “SRD”), as implemented by amended provisions in the Act.  For quoted companies, there must be at least 14 or 21 clear days (depending on whether the company has passed the relevant enabling resolution at its most recent annual general meeting) between the date on which the notice of meeting is circulated and the date of the meeting itself). Shareholders representing at least 5 per cent. of such of the paid-up capital of the company as carries the right of voting at general meetings (excluding treasury shares) also have a right to require the circulation to shareholders of a statement (limited to 1,000 words) relating to the matters referred to in a proposed resolution to be tabled at the relevant meeting (or the business to be dealt with at the relevant meeting more generally) by the company.  Any such statement must be received by the company at least seven days before the general meeting.  It is generally the case (although there are certain limited exceptions) that the shareholder(s) who request the circulation of the statement will be responsible for the costs associated with its circulation, unless the company resolves otherwise.  In such circumstances, the company is not bound to comply and circulate the statement unless there is deposited with or tendered to it, not later than seven days before the meeting, a sum reasonably sufficient to meet its expenses in doing so (again, unless the company resolves otherwise). Annual general meetings of public companies In addition to the right to require resolutions to be put before a general meeting requisitioned under the Act for that purpose, shareholders of public companies can require specific resolutions to be put before a listed company’s annual general meeting (“AGM”).  The ownership threshold for such an action is the same as for requisitioning a general meeting as described above, although a notice requiring such motion(s) must identify the actual resolution(s) to be tabled at the AGM (rather than merely requiring the discussion of general business, as is permitted at a requisitioned general meeting) and must be received by the company at least six weeks before the relevant AGM or, if later, by the time that the notice of AGM is circulated by the company. I Have a Significant Shareholding: What Resolutions Can I Propose (or Block)? Binding, advisory and conditional resolutions Generally, specific resolutions, which have the result of effecting particular transactions, appointments or events relating to a company, elicit greater shareholder interest and engagement and are much more effective in terms of shifting shareholders out of the apathy that can be  prevalent in companies with disparate (especially retail investor heavy) registers.  Nonetheless, it is also possible for a shareholder (or shareholders acting together) to propose, and a company to pass, both advisory (sometimes referred to as “directive”) and conditional resolutions.  An advisory resolution is one whereby shareholders either (i) request the directors undertake an action as an indication of their collective wishes (i.e. the wishes of a majority of shareholders that have voted on the relevant resolution(s)) but do not formally require the directors to do so (even though they may be able to as a matter of company law) or (ii) pass an ordinary resolution to request the directors to do something which they would be obliged to do had the resolution been proposed and passed as a special resolution. A resolution which is intended to be binding on the directors will often need to be passed as a special resolution as such a resolution will override the provisions of the company’s constitution that give the board of directors the power to manage the business of the company.  As compared to ordinary resolutions, special resolutions require a higher voting threshold in order to be passed (75 per cent., rather than a simple majority) and require compliance with additional formalities in terms of notice requirements and restrictions on the ability of directors and shareholders to make amendments to them prior to or at the vote at the relevant meeting. It is also possible for shareholders to propose and approve both advisory and binding resolutions that in each case are conditional upon the occurrence of another event and/or the passage of time (although it is essential that the occurrence of the event(s) upon which the relevant resolution is conditional is capable of being objectively and irrefutably determined).  Accordingly, it is not possible to make a resolution conditional upon the occurrence of some vague or indeterminate event (although that is not to say the triggering event cannot itself be subject to some other approval); the issue is one of certainty.  Typical examples of such conditional resolutions include the adoption of new constitutional documents following a capital reorganisation or the application for the listing of the shares in a demerged business following the dividend in specie of that business to shareholders. Blocking resolutions A shareholder or shareholders holding 25 per cent. or more of a UK company can restrict certain actions by the company by preventing special resolutions being passed, the most relevant being (i) an off-market purchase by the company of its own shares (although it should be noted that recent developments in UK company law may impact the position going forward[2]), (ii) a reduction of capital (a technique commonly used to increase distributable reserves, subject to approval by the court in the case of public companies) and (iii) a company altering its constitution. Similarly, a shareholder or shareholders holding 25 per cent. or more of a UK public company will be able to block a takeover of that company being effected by way of a court approved scheme of arrangement (as such a scheme will require special resolutions to be passed).  In practice, a shareholder or shareholders holding less than 25 per cent. of a company’s shares may also be able to prevent special resolutions being passed (because generally only votes cast by shareholders present in person or by proxy at the relevant shareholder meeting are counted and it is unlikely that all shareholders will attend and/or vote). Finally, it should be noted that a shareholder or shareholders holding 10 per cent. or more of a UK company will likely be able to block a takeover of that company by way of a contractual offer as the bidder would not be able to use the “squeeze-out” mechanism under Part 28 of the Act to remove that shareholder or shareholders and would likely not want to be left with a significant minority.  Accordingly, such a shareholding is likely to give the relevant shareholder “a seat at the negotiating table” in relation to any takeover offer. Executive remuneration Since 2002, UK company law has required listed public companies to produce and table a directors’ remuneration report, which is voted on by shareholders at the company’s AGM.  Although that vote is, at the moment, purely advisory and therefore a barometer of shareholder satisfaction, it has resulted in a number of high profile director resignations where there has been a significant vote against the remuneration report.  The UK Government is proposing to make changes to the directors’ remuneration report requirements for public companies from 1 October 2013 such that (i) the directors’ remuneration report will be split into two separate parts (an implementation report, detailing how the company’s current policy has been implemented during the previous financial year, and a policy report, setting out the company’s current remuneration policies for executives and restrictions on their salaries and benefits), (ii) the implementation report will remain subject to a shareholders’ advisory vote every year and the policy report will be subject to a binding vote (by way of ordinary resolution) either whenever changes are proposed or at least every three years, and (iii) a company’s approach to exit payments must to be included in the future remuneration policy and therefore made subject to the binding shareholder vote.  These changes are likely to give significant shareholders greater ability to influence public companies’ remuneration policies and structures and give those shareholders a more tangible way to influence boards and press for change should they be dissatisfied with the performance and/or effectiveness of current management. Is the UK Takeover Code Relevant? As defined in the City Code on Takeovers and Mergers (the “Code”), persons acting in concert are persons who, pursuant to an agreement or understanding (formally or informally), cooperate to obtain or consolidate control of a company or to frustrate the successful outcome of another offer for the company, with control for these purposes meaning the acquisition of 30 per cent. of the voting rights in the target company.  If persons are deemed to be acting in concert there are important implications in terms of obligations to make a mandatory offer under Rule 9 of the Code and the price at which any offer for the relevant company is required to be made. The Code presumes that certain categories of person will be acting in concert unless the contrary is shown; however, the Panel Executive (which oversees enforcement of the Code) has confirmed[3] that it does not believe that the intention or effect of Rule 9 and the mandatory bid requirements is to act as a barrier to collective shareholder action (such as minority shareholders jointly seeking to influence the board or other similar activist strategies).  That said, persons who collectively work to requisition a general meeting to consider a “board control-seeking” resolution (or threaten to do so) will usually be presumed to be acting in concert, and almost certainly will be where they have aligned themselves prior to the announcement of the requisition.  A resolution will not normally be considered to be “board control-seeking” unless it seeks to replace the existing directors with directors who are not independent, and have a significant relationship with the requisitioning shareholder(s), with the result that the shareholder(s) would effectively be in a position to control the board.  It will also not normally be considered to be “board control-seeking” if the directors that are proposed to be appointed are independent non-executive directors and the requisitioning shareholder(s) are seeking their appointment in order to improve the company’s corporate governance. The Panel Executive has also specified some situations which will not, of themselves, lead to a concert part relationship, being: (i) discussions between shareholders about possible issues which might be raised with a company’s board; (ii) joint representations to a company’s board by shareholders and (iii) an agreement by shareholders to vote in the same way on a particular resolution at a general meeting (but see the potential disclosure issues noted above).  In addition, a proposed change to the manner in which a company is managed that does not involve changes to the board will not normally be considered to be “board control-seeking” unless the activist shareholders make it known that “board control-seeking” proposals will be put forward if the management changes are not implemented. The Panel Executive will presume shareholders putting forward “board control-seeking” proposals to be acting in concert with each other, their supporters as at that date and also with the persons proposed to be appointed as directors of the company concerned.  While the act of coming together may not trigger a requirement to make a mandatory offer if those “acting in concert” together hold less than 30 per cent. of the relevant company’s voting rights, they must be careful not to do so by further stake-building.  It is important therefore to be able to identify the size of the aggregate of the shareholdings concerned.  It is also often the case that appropriate standstill arrangements are entered into.  It is interesting to note that, although it is technically possible for the proposal of a “board control-seeking” resolution to result in the relevant shareholders having to make a mandatory offer for the company concerned, since the introduction in 2002 into the Code of the current provisions on collective shareholder action, the Executive has not required any such mandatory offer to be made. Are the Insider Dealing and Market Abuse Regimes Relevant? The nature of possible offences One of the most important questions to be considered prior to the acquisition of any shares is whether purchasing shares (in whatever quantity) will amount to an offence under the criminal insider dealing and market abuse legislation.  Offences can be committed both when an individual in possession of inside information deals in securities and when that person encourages others to do so. Insider Dealing Under the Criminal Justice Act 1993 (the “CJA”) an offence is committed if an insider (i) deals in price-affected securities when in possession of inside information, (ii) encourages another to deal in price-affected securities when in possession of inside information, and/or (iii) discloses inside information otherwise than in the proper performance of his employment, office or profession.  However, it should be noted that all three offences can only be committed by an individual and only if he holds “inside information” as an “insider”.  For these purposes, “inside information” means information which (i) relates to particular securities or to a particular listed company or companies (and not to securities or listed companies generally), (ii) is specific or precise, (iii) has not been made public, and (iv) if it were made public, would be likely to have a significant effect on the price of any securities.  There are a number of important uncertainties here: there is no definition or guidance in the CJA on what “specific or precise” means and/or what will amount to a “significant effect on the price of securities”. Market Abuse In addition to the criminal regime under the CJA, the market abuse regime applies to both persons and bodies corporate, whether authorised or unauthorised, who abuse a prescribed market.  Market abuse can be committed by either one person acting alone or two or more persons acting jointly or in concert.  The relevant behaviour may be on-market or off-market and there are seven types of such behaviour, the most commonly referenced being engaging in insider dealing, misuse of information, and misleading behaviour and market distortion.  There is also an offence relating to the dissemination of false or misleading information.  It is important to note that the market abuse offences, in particular, can be committed without the any securities having been acquired and/or any profit having been made. Of particular relevance for activist shareholders is the market abuse offence of “misuse of information”.  This offence is committed where behaviour (not falling within the market abuse insider dealing or improper disclosure behaviours outlined above) is (i) based on information which is not generally available to those using the market, but which, if available to a regular user of the market, would be, or would be likely to be, regarded by him as relevant when deciding the terms on which transactions in qualifying investments should be effected, and (ii) likely to be regarded by a regular user of the market as a failure on the part of the person concerned to observe the standard of behaviour reasonably expected of a person in his position in relation to the market.  There is a good deal of subjectivity here in that an offence is only committed if the relevant conduct constitutes a failure to observe the standard of behaviour reasonably expected of market participants in the relevant position. Also of particular relevance to activist shareholders may be the offence of engaging in “manipulating transactions”.  This is where behaviour consists of effecting transactions or orders to trade (otherwise than for legitimate reasons and in conformity with accepted market practices on the relevant market), which either give, or are likely to give, a false or misleading impression as to the supply of, or demand for, or as to the price of, one or more qualifying investments and/or secure the price of one or more such investments at an abnormal or artificial level.  In terms of what constitutes “legitimate reasons” for the purpose of the relevant provisions, it is accepted under the Financial Services Authority’s (the “FSA”) Code of Market Conduct that where a transaction (or series of transactions) are entered into so as to open a new position (rather than closing out a position to remove the relevant person’s exposure to the relevant market) and where the transaction complies with the rules of the relevant prescribed markets (for example as regards reporting and disclosure in accordance with the DTRs, as described above) those facts are strong evidence that the relevant conduct has been undertaken for “legitimate reasons” and so falls outside the scope of the relevant market abuse regime. Issues for activist shareholders, etc. The most obvious concern in relation to a purchase of shares in the market by a stake-building activist is in circumstances where, through its enquiries prior to the purchase, it has received, and is therefore in possession of, non-public information from the company, or an insider such as a director, at the time of the purchase that would, if made public, be likely to significantly affect the company’s share price.  However, the FSA has also warned that an activist strategy could itself constitute inside information. While it is clear that dealings by an activist on the basis of its own intentions and knowledge of its strategy would not be regarded as market abuse, there are other circumstances which give rise to concerns, such as situations where (i) a person trades on the basis of knowledge of another investor’s intentions or strategy, (ii) warehousing arrangements are used to avoid disclosures to the market that might otherwise be required and (iii) false rumours and expectations are generated to take advantage of the resulting share price movements. Of course, once an activist’s presence on a company’s share register is publicly identified and its activist strategy is publicly known, any potential market abuse issues are normally addressed because they should cease to be price-sensitive.  This the main reason why activists, once relevant shareholdings have been acquired, often use “open letters” to garner support from other shareholders, as opposed to private approaches to them before publicly launching an activist campaign. Penalties and enforcement If a person is found guilty of market abuse the FSA may (i) impose an unlimited fine, (ii) censure that person publicly, and (iii) apply to the court for a restitution order.  The market abuse civil regime supplements (and, to a certain extent, cuts across) the criminal regime for insider dealing under the CJA and the criminal offences of misleading statements and market manipulation under s. 397 of the Financial Services and Markets Act 2000 (“FSMA”).  However, the civil market abuse regime under FSMA is wider in scope than the criminal regime and, in particular, effectively extends an insider dealing regime into the commodities and energy markets.  The existence of both a criminal and a civil market abuse regime means that various legislative provisions need to be considered in relation to any one set of facts (taking into account the differing burdens of proof) and may also mean the FSA has a choice as to whether to pursue a criminal prosecution or take civil action in respect of the same behaviour.  Against this legislative background, in recent years the FSA has adopted an increasingly robust approach to the investigation and prosecution of the market abuse offences and this approach is widely expected to continue and remain a focus of the FSA’s successor, the Financial Conduct Authority (the “FCA”), when it takes over from the FSA on 1 April 2013.  The FSA/FCA’s approach on market abuse is generally perceived to be merging into a broader focus on standards of market conduct, and the trust and integrity issues.  Market participants should note that the FSA has recently secured criminal prosecutions for insider dealing (which it had not often prosecuted) and issued a number of high profile civil sanctions and sizeable fines under the market abuse regime. Should I Engage with the Current Board or Other Activists/Shareholders? Engaging with the current board and the UK Stewardship Code Engaging with the current board of the company and establishing a dialogue should normally be seen as a precursor to any more aggressive “activist” strategies, the emphasis being to protect and enhance overall shareholder value.  The UK Stewardship Code was introduced in 2010 and sets out good practice for institutional investors seeking to engage with boards of UK-listed companies.  The purpose of the Stewardship Code is to encourage dialogue between investors and the boards of UK-listed companies when shareholders intend to use their powers to make a company take notice of issues of concern to them.  It is therefore expected that a board will engage with all significant shareholders on a regular basis to offer an appropriate forum for their views to be aired.  In particular, it would be common for the board of a UK-listed company to engage in dialogue with significant shareholders before they reach or exceed the 3 per cent. and 5 per cent. thresholds referred to above and to gauge their interest before major transactions involving the company are undertaken; the intention of the Code being that the relationship between the board and significant shareholders is one of co-operation and constructive dialogue to maximise overall shareholder value. The Stewardship Code operated by the Financial Reporting Council (FRC) and adherence by shareholders to it is voluntary.    The FRC encourages all institutional investors to publish a statement on their website of the extent to which they have complied with the Code, and to notify the FRC when they have done so and whenever the statement is updated (a “comply or explain” approach). The FRC also encourages each institution to name in its statement an individual who can be contacted for further information and by those interested in collective engagement. Engaging with other shareholders An activist shareholder looking to agitate for change will first commonly use public records (both from the company’s publicly disclosed information and/or previous shareholder filings, including DTR disclosures) to assess the size of other shareholdings and gauge (from public statements as mentioned above) the likelihood of various shareholders or groups of shareholders supporting its proposals or strategy. The next stage will often then be to engage with other significant shareholders.  However, there should be heighted sensitivity with respect to possible market abuse issues in relation to “joint strategies” by activists.  An activist may seek another’s support in numerous different ways, including (i) requesting permission to use its name in discussions with the company concerned, (ii) seeking a letter of support in relation to the activist’s proposals or strategy, (iii) agreeing a joint or co-ordinated stake-building strategy, (iv) seeking and agreeing non-binding letters of intent or legal undertakings to support a shareholder vote (and, perhaps, requiring the other to retain is shareholding ahead of the relevant shareholder meeting) and (v) requesting the other to join in and co-sign a meeting requisition to propose agreed resolutions, (which may also constitute “board control-seeking” proposals (as referred to above)). When engaging with other shareholders, the activist will need to confirm their willingness to be “wall-crossed” (i.e. be provided with potentially price-sensitive information) with respect to the activist’s proposals or strategy.  If they are so willing, any discussions prior to an announcement of a general meeting requisition or other matters that could constitute material price sensitive information should take place within the confines of appropriate confidentiality/non-disclosure and, possibly, standstill arrangements. Activists and other shareholders who come together to agree a joint or co-ordinated stake-building strategy in relation to company in the context of also adopting a joint activist strategy need to be fully aware of both the likely disclosure consequences of doing so and also the Code implications of potentially being treated as acting in concert.  Appropriately confidential discussions in connection with a properly disclosed and organised stake-building exercise are, of themselves, unlikely to constitute market abuse (although it is essential that such confidentiality be maintained and that information flows be carefully monitored) nor, of itself, is the actual stake-building (provided the disclosure rules are appropriately complied with).  Those involved need to be continually mindful of triggering a requirement to make a mandatory offer under the Code if they, and others “acting in concert” with them, together acquire 30 per cent. or more of the company’s voting rights. As mentioned above, once the general meeting requisition or other matters of concern have been announced and are then public knowledge, by definition, the information shared and/or that was the subject matter of the relevant discussions should cease to be price-sensitive, cleansing the parties and freeing them to deal in the relevant securities as they wish.  That said, any discussions post-announcement of a requisition, for example seeking non-binding letters of intent or legal undertakings to support a shareholder vote, should be done on the basis of “equality of information” to all shareholders, a principle enshrined in the DTRs. The Company is Being Mismanaged; What Other Actions Can I Take? Derivative claims  Any shareholder can make a derivative claim in the name of the company, for a wrong done to the company, in order to obtain relief on behalf of the company.  However, a claim can only be made for negligence, default, breach of duty and/or breach of trust of a director.  The director(s) in question need not have benefitted personally for such a claim to be made.  The shareholder must file evidence establishing the basis for a claim and obtain the court’s permission to continue.  However, the court will not give permission if the impugned action has or is likely to be authorised by the majority of independent shareholders. Unfair prejudice Any shareholder can apply to court if a company’s affairs are being conducted in a manner that is unfairly prejudicial to some or all of the shareholders in that company, including the applicant.  If the claim is proved, the court may take such action as it thinks fit.  The types of order that could be issued include, but are not limited to, an order regulating the future conduct of the company or, most commonly, providing for the sale or purchase of shares in the company by the complainant.  In contrast to a derivative action, an unfair prejudice claim is designed to compensate the particular aggrieved shareholder(s).     [1]   See the guidance from the Financial Services Authority of 19 August 2009. [2]   In mid-February 2013 the UK Government published its response to the Nuttal Review on company own-share buybacks (available at: https://www.gov.uk/government/consultations/employee-ownership-and-share-buy-backs-consultation-on-implementation-of-nuttall-review-recommendations).  In particular, the Government has elected to adopt a recommendation to change the requirement under the Act to obtain a special resolution for an off-market share purchase to an ordinary resolution.  It is expected that this change will come into effect through secondary legislation during the course of 2013.  In relation to public companies, it is possible that the Institutional Investor Committee (which includes bodies such as the Association of British Insurers) may nonetheless request that a special resolution be passed (as it does currently in relation to on-market share purchase authorities). [3]   See the Panel’s Practice Statement 26 dated 9 September 2009 (available at: http://www.thetakeoverpanel.org.uk/wp-content/uploads/2008/11/ps26.pdf          We will continue to monitor these and other related developments and keep you updated as both legislation and market practice unfolds.  Gibson Dunn’s lawyers are available to assist you with any questions you may have relating to the subject matter of this alert.  Please contact the Gibson Dunn lawyer with whom you usually work, or any of the following lawyers in the Firm’s London office: Jeffery Roberts (+44 20 7071 4291, jroberts@gibsondunn.com) Selina S. Sagayam (+44 20 7071 4263, ssagayam@gibsondunn.com) Gareth Jones (+44 20 7071 4266, gjones@gibsondunn.com)   © 2013 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.