Controlling shareholders and their duties

Comparative corporate governance, 2021

We focus on the rules governing the duties of controlling shareholders to minority shareholders in three jurisdictions, the US, Germany and Italy. We argue that despite differences in the specific laws and enforcement mechanisms used to address the duties of controlling shareholders, functionally the principles and conceptual goals across these jurisdictions are quite similar. To support this argument, we examine controllers’ duties in a variety of situations that present universal conflicts in controlled companies—related party transactions, sale of a control stake and access to privileged information. We demonstrate that, irrespective of the specific rules and enforcement tools used in each of these situations, loyalty underpins the standards and rules for controllers’ conduct. Nevertheless, we recognize that differences among these jurisdictions in the involvement of the courts and in ex-ante versus ex-post legal regimes may impact the actual level of minority investor protection.