The Research Of Fiduciary Duty Of Controlling Stockholder

The fiduciary duty of controlling shareholders is a topic of focus for corporate law scholars,and Chinese scholars have long understood the fiduciary duty through the principle of good faith,thinking that the fiduciary duty of controlling shareholders is also equated with the duty of good faith.This paper first clarifies the nature of the fiduciary duty of controlling shareholders from the perspective of fiduciary law,then analyzes why controlling shareholders should have fiduciary duty and what the content of the fiduciary duty of controlling shareholders is,and finally reviews the obligations of controlling shareholders in China’s company law and makes suggestions for revision.First,the fiduciary duty is an equitable duty that requires the fiduciary to act for the benefit of the beneficiary and exclude the private interest of the fiduciary,it contains no conflict rule and no profit rule.The duty of good faith derived from the principle of good faith emphasizes on "no harm to the interests of the company and other shareholders",which cannot cover the idea of fiduciary duty.Both of the shadow director in Britain and controlling shareholder in U.S.undertake fiduciary duty rather than just duty of good faith.Thus,the nature of controlling shareholder’s fiduciary duty is the duty in fiduciary law,which is the embodiment of fiduciary duty in corporate field.In short,we should understand and explain the fiduciary duty of controlling shareholders through the fiduciary law directly.Secondly,whether a relationship of controlling shareholder(or shadow director)with the company(or other shareholders)is a fiduciary relationship is a problem that needs to be solved under fiduciary law,because the controlling shareholder does not have the general elements of a fiduciary relationship.In order to solve this problem,U.K.courts have been adopted the "reasonable expectation" standard in shadow director cases.Based on it,and combining the fiduciary power theory proposed by Miller and the "power and discretion" test in Frame,this paper concludes a better "power and discretion" test,that is,if the power held by one party is discretionary,aiming at the interests of the other party,able to affect the interests of the other party,and putting the other party in a vulnerable position,it is considered to meet the standard of "reasonable expectation",and the relationship of the parties can be identified as a fiduciary relationship.According to the "power and discretion" test,when the controlling shareholder uses its influence on the directors or officers to exercise the power of the company indirectly,he/she/it is in a fiduciary relationship with the company.When the controlling shareholder exercises its voting rights,he/she/it is in a fiduciary relationship with other shareholders.Third,the contents of fiduciary duty of controlling shareholders are no conflict rule and no profit rule.The no conflict rule includes ex ante approval procedure and entire fairness review,both of which highlight the protection of arm-length negotiation of the controlled company in conflict transaction.The no profit rule can function as an identification standard of corporate benefits.Under no profit rule,controlling shareholder is prohibited from usurping corporate opportunities,intangible property,future benefit and getting benefit in donation etc.,when controlling shareholder is exercising controlling power.Finally,in Chinese corporate law,duty of controlling shareholder focus on “no harm to company or other shareholders”,whose nature is duty of good faith.Thus,this paper recommends to stipulate the general principle of fiduciary in the General Principles Chapter of the Company Law,and to stipulate the no conflict/profit rule for controlling shareholder in specific chapters.