A Study On The Fiduciary Duty Of Controlling Shareholders

In modern corporation law, the principle that company directors assume a fiduciary duty towards the company and the shareholders is already established, on the other hand controlling shareholders have no such fiduciary duty towards the company or the others shareholders, thus raising a problem. According to traditional theories of corporation law, the shareholders don't bear any responsibility apart from providing funds, also are the shares considered the shareholders' private property; even if the shareholders only bear in mind personal profit when exercising their voting power, it cannot be seen as a violation of the law. Because it is so, from the viewpoint of the controlling shareholders, if a conflict of interest occurs between them and the company and its minority shareholders, in line with their tendency of favoring their own gain, they unjustly abuse of their controlling power to oppress or limit the minority shareholders' legal rights. This is no exceptional phenomenon; also is it growing in intensity. If no further actions are taken to restrain controlling shareholders, companies' normal business activity could be heavily influenced.How to limit the controlling shareholders abuse of power has become one of the most important problems modern corporation law has been given to solve. In order to do so, the United States and Germany as well as other western countries impose to the controlling shareholders the fiduciary duty to protect the company and the minority shareholders' interest. The main reason for this is that the controlling shareholders are in a position to exercise their controlling influence onto the company and the other minority shareholders and making use of this influence to encroach on the company and the minority shareholders' interest, justifying they should be restrained by corporation law according to the principle of equal rights and responsibilities.The fiduciary duty of controlling shareholders is about considering the company and the minority shareholders interest too, not just their own. The duty requires that the controlling shareholders do not abuse of their superior position in pursuing their own interest and that they consider with self-restraint their profit in case of conflictswith the company and the minority shareholders, otherwise infringing the duty itself.Because the abuse of controlling power by the controlling shareholders is usually not visible, being covered up by the corporate entity, and also because the main actors concerned by corporate law are the directors, supervisors and other company managers, it is therefore hard to restrain efficiently controlling shareholders who don't assume any function in the company but who in substance exercise great influence on it. This is why it is primordial to acknowledge a new legal countermeasure that would be able to constrain the controlling shareholders who pull the strings behind the scene while avoiding all responsibilities. This research is about countermeasures to the abuse of controlling power by the controlling shareholders, definition and content of the fiduciary duty of controlling shareholders, its theoretical basis, its violations concrete manifestations and patterns, as well as its overall necessity. To introduce the fiduciary duty of controlling shareholders will not only help to solve internal company problems and conflicts of interest, but will also be favorable to the progressive development of the corporate system.