London (Parliament News) – Investors in Boohoo are seeking over £100m in damages after revelations of labour abuses in 2020 led to a share price plummet. Boohoo contests the allegations, sparking a landmark legal battle.
A group of investors in Boohoo are pursuing more than £100m in compensation from the online fashion expert after information in 2020 alleging its suppliers in Leicester were abusing employees caused its share price to plummet.
How did labour abuse allegations affect Boohoo’s share price?
Shares in Boohoo plunged more than 40% over several days, tapping more than £1.5bn off its valuation, after a 2020 Sunday Times news of labour rights violations at the group’s suppliers’ manufacturers in Leicester suggested some employees were paid as little as £3.50 an hour, well below the legal minimum wage.
A damning independent report led by Alison Levitt QC on behalf of the fast fashion retailer later discovered that allegations of poor working methods in the company’s supply chain – initially rejected – were “substantially true”.
What legal claims are investors making against Boohoo?
A legal suit on behalf of 49 investors including the California State Teachers’ Retirement System conducted by lawyers at Fox Williams lodged against Boohoo Group last month alleges the company made false or misleading statements and failed to inform or delayed the disclosure of material information about the value to the market, breaching its responsibilities under the Financial Services and Markets Act 2000.
The group are comprehended to be seeking £100m in impairments as well as legal costs and interest that could count millions of pounds more to the potential bill for Boohoo. The investors, whose legal filing was first disclosed by City AM, state those who bought shares ahead of the 2020 report mourned huge losses as a result of the share price decline when the problems in Boohoo’s supply chain emerged.
How have further exposés impacted Boohoo’s share worth?
They state that further exposés on shapes in suppliers’ factories, including a BBC Panorama report filtered in November last year, have led Boohoo’s share worth to drop further. “Boohoo has long been aware of these issues, failing to keep to past promises of fair production,” stated Andrew Hill, a partner at Fox Williams who has previously directed two shareholder claims against Tesco that were settled out of court over the supermarket group’s access of a profits overstatement in 2014.
“Boohoo is a prominent example of a company that failed to live up to its environmental, social and governance (ESG) responsibilities and caused significant harm to investors. We believe that our clients have a strong case for compensation.
“This is a landmark case that will test the legal framework for securities litigation in the UK and the role of ESG factors in corporate governance and disclosure.”
A spokesperson for Boohoo stated: “We have been made aware of a lawsuit that is being brought by certain shareholders. The company vigorously contests the allegations and will vigorously uphold any claim.” According to the high court claims system, Boohoo has ordered the UK-Australian law firm Herbert Smith Freehills. The claim has occurred after protests from shareholders pushed Boohoo to ditch a scheme under which its three top leaders were handed £1m in bonuses despite the group reporting a £160m loss