CD: To what extent are you seeing an increase in the number of shareholder disputes in today’s business world?
Williams: Over the last few years we have seen a general increase in the number of UK shareholder disputes. There are a number of factors that have contributed to the increase. These include the continuing economic uncertainty and volatility caused by general economic conditions in conjunction with the result of the Brexit referendum and the subsequent negotiations. There are also growing levels of shareholder activism and a continued perception of unfairness in executive remuneration and management self-interest to the detriment of shareholders, together with an increase in third-party litigation funding support for these claims. We are also seeing an increasing number of shareholder disputes arising in jurisdictions where corporate governance structures are less developed and require less detailed documentation, which then results in misunderstanding and conflict over financial benefits received by some.
Reed: We have seen a moderate uptick in shareholder litigation in Texas in recent years. Many of these suits are an outgrowth of the broader problems in the energy business. When business is going poorly, investors are more likely to question management’s decisions and disclosures. Plaintiffs tend to file suit in the courts that they believe will be most hospitable, both to their substantive arguments and to quick settlements. While Texas courts – and state courts generally – have been out of favour in recent years, recent decisions by the Delaware courts that expressed scepticism about strike suits – and more importantly, attorney fee awards – appear to be motivating plaintiffs to file cases outside of Delaware and in federal courts again.
Apr-Jun 2018 issue
Norton Rose Fulbright
Skadden, Arps, Slate, Meagher & Flom LLP
Slaughter and May
Wachtell, Lipton, Rosen & Katz