How should boards respond to shareholder activism? Shoosmiths' Corporate and Dispute Resolution experts unpack the key strategic points below.

Published: 29 September 2026
Authors: Emma Carr

Shareholder activism is no longer confined to the largest listed companies.

For AIM companies, the combination of concentrated shareholdings, lower liquidity, valuation pressure and a relatively lean investor relations function can mean that an activist shareholder acquires influence quickly. What begins as a private challenge to strategy, management or capital allocation can rapidly become a public campaign for board change.

For directors, the difficult question is rarely whether a shareholder is entitled to disagree with the board. It is how the board should respond when that disagreement starts to gather momentum.

The first 90 days can be critical.

So, what should boards be thinking about when an activist appears on the register? Emma Carr, Commercial Litigation Partner, and Ed Nisbet, Corporate Partner, consider the key issues during the first 90 days: from initial engagement and governance through to preparing for the possibility of a shareholder dispute.

Days 1-30: Understand the challenge before responding to it

An activist approach can create an understandable instinct to defend the company’s existing position outright. That can be a mistake.

The first task is to understand what is really driving the challenge. The stated demand may be for a strategic review, disposal, return of capital or change of directors. The underlying concern may be simpler: disappointing performance, a valuation discount, executive remuneration or a loss of confidence in management.

Boards should establish a small response team (including independent directors), consult with their nominated adviser, take legal and, where appropriate, financial PR/IR advice and map the shareholder register. Who is likely to support the activist? Which shareholders remain undecided? Is the activist raising a concern that other investors have expressed privately?

The nominated adviser should be involved early where the campaign touches on strategy, board composition, financial performance, expectations or market messaging. The company should also consider whether specialist shareholder identification work, including the use of section 793 Companies Act 2006 notices, is needed to understand beneficial ownership behind nominee positions.

Early engagement can be valuable. Meeting an activist does not mean accepting its case. It gives the board an opportunity to test the argument, understand the level of support behind it and avoid being forced into a reactive position later.

Practical steps for the board

• identify the activist, its holding, its historic voting behaviour and any known support from other shareholders
• agree who will speak for the company and how internal and external communications will be controlled
• consider carefully how communications with advisers will be managed to preserve privilege in any legal advice obtained at this stage
• stress-test the activist’s stated concerns against the company’s own performance, strategy and market messaging
• keep a clear record of board discussions and the reasons for decisions taken.

Consider how likely it is that the challenge will evolve into a dispute and the company’s preparedness for that. As soon as litigation is contemplated, relevant documents must be preserved. Days 31-60: Pressure test the board’s own case

The uncomfortable part of an activist campaign is that the activist may have a point.

Once the immediate position has been stabilised, the board should test its own strategy with the same rigour it applies to the activist’s proposals. Is capital being allocated effectively? Does the board have the right composition? Is there a credible explanation for persistent underperformance or a valuation discount?

Directors must continue to exercise their own judgment. Their duties are owed to the company, and the interests of shareholders cannot simply be equated with the demands of the loudest or largest investor.

Communication becomes particularly important at this stage. For an AIM company, statements made during an activist campaign sit within an existing framework of AIM Rule 11 disclosure obligations and market abuse restrictions, including the need to manage inside information and avoid selective disclosure. Assertions about performance, strategy or future prospects therefore need to withstand market, regulatory and shareholder scrutiny.  The defensibility of such assertions, if they are challenged in due course, will largely rise or fall on the company being able to ‘show its working’ in the paper trail.

When activism becomes contentious

Boards should also prepare for the possibility that what starts as shareholder engagement becomes a dispute.

Documents created in the early stages may assume considerable importance later. Board minutes should properly record the decisions taken and the reasons for them, while directors and executives should exercise appropriate discipline over emails, messages and other communications. Legal advice should also be taken on preserving privilege where potentially contentious issues are being considered, particularly where a blend of legal and other more commercial (e.g. brand/reputation management) advice is being sought.

Emma Carr comments: “An activist campaign can become contentious very quickly. The emails, board papers and messages created in the first few days may later be scrutinised in a shareholder dispute or contested meeting. Good decision-making and good record-keeping need to start before positions become entrenched.”

Days 61-90: Prepare for the campaign to become a contest

If private engagement fails, the focus can shift rapidly from persuasion to votes.

Shareholders holding at least 5% of the company’s paid-up voting share capital can require directors to call a general meeting and may ultimately seek the removal and replacement of directors. By the time a requisition arrives, a board which has not already considered voting scenarios, communications and procedural requirements may be operating at a significant disadvantage.

Preparation does not mean assuming that confrontation is inevitable. Settlement may produce a better commercial outcome than a public contest. A board appointment, governance change or strategic review may address legitimate shareholder concerns while ensuring that the board remains able to discharge its duties without surrendering complete control of the company’s strategy – or becoming tied up in a complex and management time-intensive dispute.

What matters is that any compromise can be justified as advancing the interests of the company, rather than protecting individual directors from challenge.

Practical steps for the board

• review the company’s articles and the procedural requirements for requisitioned meetings
• model likely voting outcomes and identify the shareholders whose position may decide the result
• prepare consistent, stress-tested messaging for shareholders, employees and the market
• consider whether a negotiated outcome could address legitimate concerns while preserving the board’s strategic control
• consider seeking legal and any other relevant advice on negotiation strategy, wider consequences of potential outcomes, and documenting any terms agreed.

The 90-day question

Shareholder activism ultimately tests more than a company’s legal defences. It tests the board’s understanding of its shareholders, its confidence in its strategy and its ability to make decisions under scrutiny.

A well-prepared AIM board should therefore ask one question before an activist ever appears:

If a shareholder publicly challenged our strategy tomorrow, could we explain, not simply assert, why our present course remains the right one?

If the answer is uncertain, the best time to address that vulnerability is before the 90-day clock starts.