Corporate Governance Crises and Related Party Transactions: A Post-Parmalat Agenda

Abstract

This chapter focuses on the regulation of related party transactions by corporate managers and transactions by controlling shareholders which conflict with the interests of minority shareholders. It considers the Community-level and national legal frameworks that are designed to deter related party transactions by controlling shareholders and directors and officers. Attention is given to the Commission's proposed regulation of related party transactions and the variety of devices for dealing with these issues at the member state level. The chapter is divided into six parts. Part II analyses the significance of diverse patterns of ownership and control for regulating the conflicts between majority and minority shareholders. This part also discusses the Parmalat scandal and explores the mechanisms employed by the family-controlling shareholder to extract private benefits at the expense of minority shareholders and creditors. Part III explores the arguments for and against the regulation of related party transactions. Part IV examines legal mechanisms designed by EU lawmakers to regulate these transactions. Part V evaluates the variety of strategies that have been developed by member states to regulate conflicted transactions. Part VI concludes by offering an alternative technique to regulate these transactions.