Shareholder Disputes: What Is An Activist Shareholder?
A minority shareholder must put a significant amount of trust in the hands of a corporation’s officers and directors. Most shareholders are relatively “passive”—they rely on the company’s decision-makers to protect the best interests of the business. An “activist shareholder” is an exception. In this article, our West Palm Beach shareholder dispute lawyers highlight some of the key things to know about activist shareholders.
What is an Activist Shareholder?
In contrast to most shareholders, activist shareholders try to exert influence on the decisions or direction of the company. As simply defined by the Investopedia, an activist shareholder is an individual who “attempts to use their rights as a shareholder” in order to obtain a certain desired objective. The goals of activist shareholders vary widely—some have lofty ideological objectives, such as environmental concerns, whereas others are focused on internal company matters, such as corporate governance or profit distribution.
How Do Activist Shareholders Exert Influence?
Shareholders have a number of different legal tools available to exert their rights or otherwise influence the direction of the company. Shareholder activism is a highly fact-specific, case-by-case matter. A non-exhaustive list of the strategies that minority shareholders can use to engage in activism include:
- A proxy battle;
- A public awareness campaign;
- A shareholder resolution;
- Direct negotiations with management;
- Shareholder litigation; and
- A class action securities lawsuit.
Shareholder Activism: Offensive and Defensive
You can divide shareholder activism into two broad categories: Offensive shareholder activism and defensive shareholder activism. Offensive shareholder activism refers to cases in which a minority shareholder is trying to seek some type of proactive change in a corporation’s process or approach. The shareholder is initiating an issue. In contrast, defensive shareholder activism refers to cases in which a shareholder attempts to rectify an alleged wrong. For example, a shareholder may engage in defensive activism in order to correct the improper or inequitable denial of distributions.
Activist Shareholders May End Up in Disputes for Many Reasons
It is not uncommon for activist shareholders to end up in a legal dispute with the board of directors and/or officers of the corporation. In some cases, an activist shareholder initiates a legal dispute. In other cases, the corporation’s decision-makers are the ones that take legal action against the activist shareholder. It is crucial to be proactive in a shareholder dispute. If you have any questions about shareholder activism and legal disputes, an experienced Florida shareholder lawyer will protect your legal rights and financial interests.
Get Help From a Shareholder Law Attorney in South Florida
At Pike & Lustig, LLP, our Florida shareholder dispute lawyers are skilled, results-oriented advocates for our clients. We are focused on finding solutions. If you are locked in a shareholder dispute, our firm is here to help you find the best path forward. Give us a call or use our online contact form to set up your strictly confidential case assessment. We provide business litigation representation in West Palm Beach, Miami, and all around South Florida.