1. Put together an advisory team
They will want to know, amongst other things, the participants underlying objectives, how to minimise damage to the company’s relationship with other stakeholders, and the impact of the desired shake up.
2. Information gathering
Locating the balance of power in a company involves questions of law. The first step is to gather the necessary information. Shareholder activists posses only the information that they have already received as shareholders, and what they can glean from publicly available information. Shareholders agreements are private documents.
Insider access can go a long way, but there are inherent risks. There is the risk that directors can breach their “director duties”, abuse their rights of inspection, and be put at great risk of personal liability.
3. Analytical due diligence
Information that can help or hinder the coup can be found when analysing the company’s articles of association and its share register.
Potentially winning tactics – locking-in support (by personal agreement between shareholders as to how they will exercise their voting rights), removing directors who are put forward for annual re-election, and making use of the various statutory procedures (in particular those under the Companies Act 2006, section 168 – the right to remove a director).
Flawed tactics – failing to appreciate that company law tends to militate against surprise tactics (so, for example, special notice is required not only for a resolution to remove a director under section 168, but also to appoint somebody in his place); board directors acting in ways that may be problematic, i.e. not attending board meetings, and improperly withholding information; abusing shareholder power, making defamatory statements and carrying out improper surveillance.
Planning really is everything!