ShareSoc, the private shareholder group claiming to speak for 10per cent of small stock market investors, has backed the challenge to Alliance Trust from its activist shareholder Elliott Advisors.

Roger Lawson, ShareSoc deputy chairman, accused Alliance of a rapid and "intemperate" response to Elliott late last week, when the trust dismissed proposals for three new non-executives as "completely unacceptable", igniting a war of words with its 12 per cent shareholder.

Mr Lawson said the key issues were the trust's reported 14.6 per cent discount before Elliott's move, which was "too high for such a non-specialist trust", and the total share price return, which was below sector average over one, three, five and 10 years.

"Although there was some improvement in the last year, this seems to have partly arisen from special circumstances related to their private equity and mineral rights investments. In essence the performance has been pedestrian for many years."

ShareSoc says Elliott's reported past suggestion of a tender offer is "perfectly understandable" but with self-managed trusts such as Alliance there can be "reluctance to downsize the company".

The nominated directors appeared to be independent and under company law would have to consider only the interests of the trust when on the board, it added.

ShareSoc says shareholders should vote in favour of the proposed directors unless Alliance comes up with stronger arguments. "Their rejection of the proposals out of hand seems unwise and unfortunately a typical response from boards who are reluctant to tackle the key issues when faced by criticism from outside."