Self-Dealing by Controlling Shareholders: Improving Minority Protection in Light of Article 9 c SRD

Abstract

Controlling shareholders may cause a company to enter into transactions with themselves or one of their subsidiaries, thereby expropriating minority shareholders. General principles of company law, such as board autonomy, often do not adequately constrain controlling shareholders. Moreover, Belgian, French and Dutch courts apply deferential standards of review to related party transactions, while approval procedures in these jurisdictions are also flawed. A recent amendment to the Shareholder Rights Directive requires adequate protection of minority shareholders against self-dealing. Member States may subject related party transactions to a majority-of-minority vote, the approval of independent directors or judicial review. This paper discusses the efficiency of each of these mechanisms.