Mapping judicial reactions to shareholder activism in the UK

AL Christie, JS Liptrap - The Cambridge Law Journal, 2020 - cambridge.org
The Cambridge Law Journal, 2020cambridge.org
The Court held that each instance of Tinkler using confidential information against the board
was a separate violation of the directors' fiduciary duty to promote the success of the
company under Section 172 of the Companies Act 2006 (at [741],[749],[761]). Tinkler
attempted to argue that his unilateral actions were taken as a true “custodian of shareholder
value”(at [218]), but in Russen J.'s estimation he was selfishly influenced in large part by
what he regarded as a risk to his shareholding. In so concluding, the Court rejected Tinkler's …
The Court held that each instance of Tinkler using confidential information against the board was a separate violation of the directors’ fiduciary duty to promote the success of the company under Section 172 of the Companies Act 2006 (at [741],[749],[761]). Tinkler attempted to argue that his unilateral actions were taken as a true “custodian of shareholder value”(at [218]), but in Russen J.’s estimation he was selfishly influenced in large part by what he regarded as a risk to his shareholding. In so concluding, the Court rejected Tinkler’s argument that the duty to exercise independent judgment under Section 173 justified his taking of the abovementioned actions. The duty to exercise independent judgment is one that directors must observe in the context of membership in a collective body. This idea does not extend to an entitlement for an individual director to engage in “freelance activity” independently of the board in relation to matters that fall within the realm of managing the company’s business (at [414]). The power contained in the company’s articles of association are vested collectively in the board, not just in one director, and, therefore, it would not be in the best interests of the company for an individual director to act alone, especially when the aim is to destabilise and subvert the board
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