Law firm Fox Williams has filed a lawsuit against the Boohoo Group last month on behalf of 49 institutional investors, according to City AM.
The legal action stems from a modern slavery scandal that emerged in 2020.
A Sunday Times investigation revealed employees at factories in Leicester were being paid as little as £3.50 an hour.
These allegations were later confirmed by an independent review conducted by barrister Alison Levitt KC.
The exposé led to a significant drop in Boohoo’s share price.
This slashed the company’s market value by more than £1.5 billion.
The new lawsuit claims that investors who purchased shares before the 2020 report suffered “huge losses” due to this decline.
The investors further allege that Boohoo made “untrue or misleading statements”.
“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”
They claim it failed to disclose, or delayed the disclosure of, material information to the market, which constitutes a breach of the Financial Services and Markets Act 2000.
Fox Williams is looking to recover damages, interest, and costs for the affected investors.
The specific amount has not been disclosed.
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Fox Williams partner Andrew Hill said: “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 Boohoo spokesperson said: “We have been made aware of a claim that is being brought by certain shareholders.
“The company strongly contests the allegations and will vigorously defend any claim.”
Boohoo also faced backlash from shareholders over plans to pay millions of pounds in bonuses to its top executives despite ongoing financial losses, leading the company to retract those plans.
